I cordially invite you to attend Morgan Stanley’s ~~2012~~2015 annual meeting of shareholders that will be held on Tuesday, May ~~15, 2012~~19, 2015, at our offices at 2000 Westchester Avenue, Purchase, New York. I hope that you will be able to attend.

At the annual meeting of shareholders, we will consider the items of business discussed in our proxy statement and review significant strategic developments and ~~other developments in~~ the ~~last~~Company’s overall progress over the past year.Your vote is very ~~important~~important.. Whether or not you plan to attend the meeting, please ~~vote~~submit a proxy promptly to ensure that your shares are ~~represented.~~represented and voted at the annual meeting.

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on May ~~15, 2012:~~19, 2015: Our Proxy Statement and our Annual Report on Form 10-K for the year ended December 31, ~~2011~~2014 are available free of charge on our website at www.morganstanley.com/~~2012ams.~~2015ams.

We are ~~sending you~~providing shareholders this proxy statement in connection with the solicitation of proxies by our Board of Directors for the ~~2012~~2015 annual meeting of shareholders. ~~We are mailing this proxy statement and the accompanying form of proxy to shareholders on or about April 6, 2012.~~ In this proxy statement, we refer to Morgan Stanley as the “Company,” “we,” “our” or “us” and the Board of Directors as the “Board.” ~~When we refer to 2009, 2010, or 2011, we mean the twelve-month period ending December 31 of the stated year.~~

OUR BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF ALL DIRECTOR NOMINEES.

Our Board currently consists of 15 directors, including two directors who are designated in accordance with the terms of the Investor Agreement between Morgan Stanley and Mitsubishi UFJ Financial Group, Inc. (MUFG), dated October 13, 2008, as amended and restated as of June 30, 2011 and October 3, 2013 (Investor Agreement), pursuant to which Morgan Stanley agreed to take all lawful action to cause two of MUFG’s senior officers or directors to become members of Morgan Stanley’s Board. MUFG has ~~13 directors.~~ designated Messrs. Masaaki Tanaka and Ryosuke Tamakoshi as its representative directors pursuant to the Investor Agreement, and each was elected by shareholders at the Company’s 2014 annual meeting of shareholders.

The Nominating and Governance Committee’s charter provides that the committee will actively seek and identify nominees for recommendation to the Board consistent with the criteria in the Morgan Stanley Corporate Governance Policies (Corporate Governance Policies), which provide that the Board values members who:

Combine a broad spectrum of experience and expertise with a reputation for integrity;

Have experience in positions with a high degree of responsibility;

Are leaders in the companies or institutions with which they are affiliated;

Can make contributions to the Board and management; and

Represent the interests of shareholders.

While the Board has not adopted a policy regarding diversity, the ~~Morgan Stanley~~ Corporate Governance Policies ~~(Corporate Governance Policies)~~ provide that the Board will take into account diversity of a director candidate’s perspectives, background and other relevant demographics. The Nominating and Governance Committee and Board may also determine specific skills and experience they are seeking in director candidates based on the needs of the Company at a specific time. In considering candidates for the Board, the Nominating and Governance Committee considers the entirety of each candidate’s credentials in the context of these criteria.

The Nominating and Governance Committee may also consider, and the Board has adopted a policy regarding, director candidates proposed by ~~shareholders (see “Corporate Governance Policies”).~~shareholders. The Nominating and Governance Committee may also retain and terminate, in its sole discretion, a third party to assist in identifying director candidates or in gathering information regarding a director candidate’s background and experience. Members of the Nominating and Governance Committee, the Independent Lead Director and other members of the Board interview potential director candidates as part of the selection process when evaluating new director candidates.

Pursuant to the terms of the Investor Agreement between Morgan Stanley and Mitsubishi UFJ Financial Group, Inc. (MUFG) dated October 13, 2008, as amended and restated as of June 30, 2011 (Investor Agreement), Morgan Stanley agreed to take all lawful action to cause two of MUFG’s senior officers or directors to become members of Morgan Stanley’s Board. In March 2011, MUFG designated Mr. Masaaki Tanaka as a representative director under the Investor Agreement, and Mr. Tanaka was elected by shareholders at the 2011 annual meeting of shareholders. MUFG designated Mr. Ryosuke Tamakoshi as its second representative director under the Investor Agreement, and Mr. Tamakoshi was elected by the Board on July 20, 2011.

When the Board nominates directors for election at an annual meeting, it evaluates the experience, qualifications, attributes and skills that an individual director candidate contributes to the Board as a whole to assist the Board in discharging its duties. As part of the ongoing process to evaluate these attributes, the Board performs an annual self-evaluation and ~~has adopted a~~the Board-approved Corporate Governance ~~Policy that provides~~Policies provide that the Board expects a director whose principal occupation or employer changes, who plans to join the board of directors or similar governing body of another public or private company or advisory board, or who experiences other changed circumstances that could diminish his or her effectiveness as a director or otherwise be detrimental to the Company, to advise and to offer to tender his or her resignation for consideration by the Board. In addition, the Board believes that a director candidate should not be nominated for election if the candidate would be 72 at the time of election.

The Company believes that an effective board consists of a diverse group of individuals who bring a variety of complementary skills. The Nominating and Governance Committee and Board regularly consider these skills in the broader context of the Board’s overall composition, with a view toward constituting a board that has the best skill set and experience to oversee the Company’s business. Our directors have a combined wealth of leadership experience derived from extensive service guiding large, complex organizations as executive leaders or board members and in government and academia and possess substantive knowledge and skills applicable to our business, including experience in the following areas:

The Nominating and Governance Committee regularly reviews the composition of the Board in light of the Company’s evolving business requirements and its assessment of the Board’s performance to ensure that the Board has the appropriate mix of skills needed for the broad set of challenges that it confronts.

The Board stands for election at each annual meeting of shareholders. Each director holds office until his or her successor has been duly elected and qualified or the director’s earlier resignation, death or removal.

The Board has nominated the 1314 director nominees below for election at the ~~2012~~2015 annual meeting of ~~shareholders~~shareholders. The Board believes that, in ~~accordance with~~totality, the ~~Corporate~~mix of qualifications, skills and attributes among the nominees enhances our Board’s effectiveness in light of the Company’s businesses, regulatory environment and long-term strategy.

O. Griffith Sexton retired from the Board effective November 1, 2014, and Howard J. Davies and C. Robert Kidder are not standing for re-election at the annual meeting of shareholders. The Board thanks Messrs. Davies, Kidder and Sexton for their dedicated service to Morgan Stanley. As part of the Board’s ongoing review of Board composition and succession planning, a member of the Board recommended Jami Miscik as a potential director candidate and an executive officer recommended Perry Traquina as a potential director candidate to the Nominating and Governance ~~Policies.~~ Committee. Upon the recommendation of the Nominating and Governance Committee, the Board unanimously elected Ms. Miscik as a director, effective November 1, 2014, and has nominated Mr. Traquina for election at the annual meeting of shareholders. The Board determined that Ms. Miscik’s extensive risk management and technology experience and Mr. Traquina’s extensive senior executive and risk management experience and market knowledge would contribute to the effective functioning of the Board.

Each nominee has indicated that he or she will serve if elected. We do not anticipate that any nominee will be unable or unwilling to stand for election, but if that happens, your proxy ~~will~~may be voted for another person nominated by the ~~Board. On March 30, 2012, James H. Hance, Jr. notified the Company that he will not stand for re-election at the annual meeting of shareholders.~~

~~The Nominating and Governance Committee’s third-party search firm and members of~~Board or the Board ~~recommended Mr. Klaus Kleinfeld as a potential director candidate~~may reduce the number of directors to ~~the Nominating and Governance Committee. The Board unanimously nominated Mr. Kleinfeld for election at the annual meeting of shareholders.~~be elected.

Our Board unanimously recommends athat you vote “FOR” the election of all director nominees. Proxies solicited by the Board will be voted “FOR” each nominee unless otherwise instructed.

Morgan Stanley is committed to ~~maintaining best-in-class~~best in class governance practices which are embodied in our Corporate Governance Policies available atwww.morganstanley.com/about/company/governance. The Board initially adopted the Corporate Governance Policies in 1995 and reviews and approves them annually to ensure they reflect evolving best practices and regulatory requirements, including the New York Stock Exchange (NYSE) corporate governance listing standards and best practices at Morgan Stanley. The governance practices highlighted below are reflected in the Corporate Governance Policies, bylaws and our committee charters, as applicable.

Our Board represents a tapestry of complementary skills, attributes and perspectives and includes individuals with financial services experience and a diverse international background.

Directors may not stand for election after the age of 72.

As part of its ongoing review of Board composition and succession planning, the Board has nominated or elected six new directors over the past three years who bring new skills and perspective to the Board. Upon election at the annual meeting, the average tenure of the members of the Board will be approximately five years.

Our Board has a majority of independent directors. Our Chairman is the only member of management who serves as a director.

Our Independent Lead Director is elected annually from and by the independent directors and has ~~implemented~~expansive duties set forth in our Corporate Governance Policies. The Independent Lead Director chairs regularly scheduled executive sessions without the ~~following:~~Chairman present. See “Board Leadership Structure and Role in Risk Oversight” herein.

The Independent Lead Director and Committee Chairs serve for approximately 3-5 years to provide for rotation of Board leadership and Committee Chairs while maintaining experienced leadership.

In accordance with the Board’s policy regarding periodic rotation of committee assignments, Mr. Glocer and Ms. Miscik joined the Audit Committee and Operations and Technology Committee, respectively, in 2015.

The Board oversees the Company’s strategy and annual business plans and the Company’s practices and procedures relating to culture, values and conduct.

Non-Employee Directors meet regularly with our primary regulator, the Federal Reserve, and other global regulators as requested.

Directors have complete and open access to senior members of management and other employees of the Company.

The director equity ownership requirement helps to align director and shareholder interests.

The Board, the Independent Lead Director and each committee have the right at any time to retain independent financial, legal or other advisors at the Company’s expense.

All directors are elected annually.

In uncontested director elections, directors are elected by a majority of votes cast.

Shareholders who own at least 25% of common stock have the ability to call a special meeting of ~~shareholders;~~shareholders.

NoThere are no supermajority vote requirements in our charter or ~~bylaws;~~bylaws.

~~All directors are elected annually by majority vote standard;~~We do not have a “poison pill” in effect.

~~Our Board has a majority of independent directors;~~

~~Our Board has financial services experience and a diverse international background;~~

~~Lead independent director is appointed, and reviewed annually, by the other independent directors; and~~

~~Board policy favors committee chair and lead director rotation.~~

~~Morgan Stanley has a corporate governance webpage at~~~~morganstanley.com/about/company/governance~~ ~~that includes the following:~~

~~Corporate Governance Policies~~ ~~(including our Director Independence Standards)~~

~~Code of Ethics and Business Conduct~~

~~Board Committee Charters~~

~~Policy Regarding Communication by Shareholders and Other Interested Parties with the Board of Directors~~

Shareholders and other interested parties may contact any of our Company’s directors (including the Lead Director or non-management directors) by writing to them at Morgan Stanley, Suite D, 1585 Broadway, New York, New York 10036. Such communications will be handled in accordance with the procedures approved by the Company’s independent directors.

~~Policy Regarding Director Candidates Recommended by Shareholders~~

Shareholders may submit recommendations for director candidates for consideration by the Nominating and Governance Committee at any time by sending the information set forth in the ~~policy~~Policy Regarding Director Candidates Recommended by Shareholders to the Nominating and Governance Committee, Morgan Stanley, Suite D, 1585 Broadway, New York, New York 10036. Under the policy, in order for director candidate recommendations to be considered for the ~~2013~~2016 annual meeting of shareholders, recommendations must be submitted in accordance with the policy by December ~~7, 2012.~~4, 2015.

~~Policy Regarding Corporate Political Contributions~~The Board conducts an annual evaluation of the performance and effectiveness of the Board, the Independent Lead Director and each of its standing committees.

The annual evaluation includes self-evaluations by each of these committees and the Board and an evaluation of the performance of the Independent Lead Director by the other independent directors led by the chair of the Nominating and Governance Committee.

This process may include one-on-one Board member interviews, written guidelines or such other means as the Nominating and Governance Committee determines appropriate, and may encompass such factors as duties and responsibilities, Board and committee structure, culture, process and execution or such other factors as determined appropriate.

The Nominating and Governance Committee ensures that results of such evaluations, including any suggestions to enhance the performance and effectiveness of the Independent Lead Director, the Board and its committees, are communicated to and discussed with the entire Board, the Independent Lead Director and each committee, as appropriate.

Corporate Political Activities Policy Statement.Over the last two years, the Board has enhanced its Corporate Political Activities Policy Statement to ensure transparency of the Company’s practices and procedures regarding political activities and oversight by senior management and the Board. Our Corporate Political Activities Policy Statement:

Addresses lobbying activities, which are managed by the Government Relations Department, which is overseen by a member of the Operating Committee of the Company who reports to the Chairman and CEO.

Addresses trade association participation and provides that Morgan Stanley informs its principal U.S. trade associations of our corporate policy prohibiting making U.S. political contributions and instructs such trade associations not to use payments made by Morgan Stanley for election-related activity at the federal, state or local levels.

Provides that principal U.S. trade association memberships and expenditures relating to such memberships are reviewed annually with the Government Relations Department and the Nominating and Governance Committee, and provides a link to examples of principal U.S. trade associations that the Company belongs to on the Company’s website.

Provides that the Nominating and Governance Committee of the Board has oversight responsibility for the Corporate Political Activities Policy ~~Regarding Shareholder Rights Plan~~Statement and the activities addressed by it.

Communication by Shareholders and Other Interested Parties with the Board of Directors.

Shareholders and other interested parties may contact any of our Company’s directors (including the Independent Lead Director or non-management directors) by writing to them at Morgan Stanley, Suite D, 1585 Broadway, New York, New York 10036.

Such communications will be handled in accordance with the procedures approved by the Company’s independent directors.

Additional Corporate Governance Information ~~Regarding~~Available on Corporate Governance Webpage.In addition to the ~~Integrity Hotline~~Corporate Governance Policies and other policies described above, our governance webpage includes the ~~Equity Ownership Commitment~~following:

Hard copies of ~~these~~the materials described above are available to any shareholder who requests them by writing to Morgan Stanley, Suite D, 1585 Broadway, New York, New York 10036.

The Board has determined that Messrs. Bostock, Bowles, Davies, Kidder, Kleinfeld and Nicolaisen, Ms. Olayan, Messrs. Owens and Sexton, and Ms. Tyson, and Mr. Hance, who is not standing for re-election, are independent in accordance with theadopted Director Independence Standards, ~~established under our Corporate Governance Policies.~~

~~To assist~~which are more stringent than the ~~Board with its determination, the standards follow New York Stock Exchange (NYSE)~~independence requirements outlined in NYSE rules in certain respects, and ~~establish guidelines as to employment and commercial~~delineate relationships that ~~affect~~are deemed to impair independence and categories of relationships that are not deemed material for purposes of director independence. ~~Ten of 13~~The Director Independence Standards, which are part of our Corporate Governance Policies available atwww.morganstanley.com/about/company/governance, provide that for a director to be considered independent, a director must meet the following categorical standards:

A. Current Relationships.A director will not be independent if: (i) the director is a current ~~directors are independent. Upon the election~~partner or current employee of Morgan Stanley’s internal or external auditor; (ii) an immediate family member of the director is a current ~~slate~~partner of Morgan Stanley’s internal or external auditor; (iii) an immediate family member of the director ~~nominees, 10~~(a) is a current employee of ~~our 13~~Morgan Stanley’s internal or external auditor and (b) personally works on Morgan Stanley’s audit; (iv) the director is a current employee, or an immediate family member of the director is a current executive officer, of an entity that has made payments to, or received payments from, Morgan Stanley for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million or 2% of such other company’s consolidated gross revenues; or (v) the director’s spouse, parent, sibling or child is currently employed by Morgan Stanley.

B. Relationships within Preceding Three Years. A director will not be independent if, within the preceding three years: (i) the director is or was an employee of Morgan Stanley; (ii) an immediate family member of the director is or was an executive officer of Morgan Stanley; (iii) the director or an immediate family member of the director (a) was a partner or employee of Morgan Stanley’s internal or external auditor and (b) personally worked on Morgan Stanley’s audit within that time; (iv) the director or an immediate family member of the director received more than $120,000 in direct compensation in any twelve-month period from Morgan Stanley, other than (a) director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service) and (b) compensation paid to an immediate family member of the director who is an employee (other than an executive officer) of Morgan Stanley; or (v) a present Morgan Stanley executive officer is or was on the compensation committee of the board of directors ~~will be independent.~~of a company that concurrently employed the Morgan Stanley director or an immediate family member of the director as an executive officer.

In addition to the provisions above, each of which must be fully satisfied with respect to each independent director, the Board must affirmatively determine that the director has no material relationship with Morgan Stanley. To assist the Board in this determination, it has adopted the following categorical standards of relationships that are not considered material for purposes of determining a director’s independence. Any determination of independence for a director that does not meet these categorical standards will be based upon all relevant facts and circumstances and the Board shall disclose the basis for such determination in the Company’s proxy statement.

The Board has determined that 11 of our 14 director nominees (Messrs. Bowles, Glocer, Herz, Kleinfeld, Ms. Miscik, Mr. Nicolaisen, Ms. Olayan, Messrs. Owens, Traquina, Dr. Tyson and Mr. Wilkins) are independent in accordance with the Board-approved Director Independence Standards established under our Corporate Governance Policies. The Board has also determined that Mr. Sexton, who retired from the Board during 2014, was independent during the time he served on the Board in 2014, and that Messrs. Davies and Kidder, who are not standing for election at the annual meeting of shareholders, are independent. Mr. Gorman, our Chairman and

CEO, and Messrs. Tanaka and Tamakoshi, who were designated pursuant to the Investor Agreement with MUFG, have not been determined independent.

To assess independence, the Board was provided with information about relationships between the independent directors (and their immediate family members and affiliated entities) and Morgan Stanley and its affiliates, including information about the director’s professional experience and affiliations. In making its determination as to the independent directors, the Board reviewed the categories of relationships between Morgan Stanley and the directors ~~including:~~described above and the following specific relationships under those Director Independence Standards:

In determining Mr. Bostock’s independence, the Board also considered the restructuring in January 2012 of the Company’s relationship with FrontPoint Partners LLC (FrontPoint), a former subsidiary within the Company’s Asset Management segment, of which Mr. Bostock’s son-in-law is Co-Chief Executive Officer and a significant equity owner. The Board considered that Mr. Bostock was not involved in any discussions or decisions regarding the restructuring; thatCommercial relationships (such as financial services offered by the Company ~~has ceased~~ to ~~have an equity interest in FrontPoint; Mr. Bostock’s son-in-law is no longer an employee of the Company as of March 1, 2011; and any future commercial activities with FrontPoint will be~~clients in the ordinary course of ~~business~~the Company’s business) in the last three years between Morgan Stanley and ~~on substantially~~entities where the ~~same terms as those prevailing at~~directors are employees or executive officers, or their immediate family members are executive officers (Messrs. Davies and Kleinfeld, Ms. Olayan and Dr. Tyson). In each case the ~~time for comparable services for unaffiliated third parties. The Board (other than Mr. Bostock) determined consistent~~fees the Company received were in compliance with the Director Independence Standards and NYSE rules, and ~~based upon~~did not exceed the ~~facts~~greater of $1 million or 2% of such other entity’s consolidated gross revenues in any of the last three years and ~~circumstances, that~~were considered immaterial.

Director’s utilization of Morgan Stanley products and services offered by the ~~relationship is immaterial~~Company as a client of the Company (such as Wealth Management brokerage accounts and investments in funds sponsored by the Company) in the ordinary course of the Company’s business on terms and conditions substantially similar to those provided to unaffiliated third parties (Messrs. Glocer, Herz, Kidder, Owens, Sexton, Dr. Tyson and Mr. ~~Bostock’s independence (see also “Certain Transactions” herein)~~Wilkins). In each case the provision of such products and services were in compliance with the Director Independence Standards and NYSE rules and were considered immaterial.

In determining Mr. Sexton’s independence, the Board (other than Mr. Sexton) considered that, as a former employee of the Company, ~~provides~~the Company provided Mr. Sexton with access to medical insurance, for which Mr. Sexton ~~pays~~paid the full cost, and determined, consistent with NYSE rules and based upon the facts and circumstances, that the relationship iswas immaterial to Mr. Sexton’s independence.

The ~~Company’s~~ Corporate Governance Policies state that directors are expected to attend annual meetings of shareholders. All ~~of the current~~15 directors who were on the Board at the time attended the ~~2011~~2014 annual meeting of shareholders. ~~One of the 13 directors on the Board of Directors at the time of the 2011 annual meeting of shareholders was not standing for re-election and did not attend the meeting.~~

Board Meetings.Our Board met 1516 times during ~~2011.~~2014. Each current director attended at least 75% of the total number of meetings of the Board and committees on which ~~the~~such director served that were held during ~~2011~~2014 while the director was a member. In addition to Board and committee meetings, our directors also discharge their duties through, among other things, informal group communications and discussions with the Independent Lead Director, Chairman of the Board and ~~Chief Executive Officer,~~CEO, members of senior management and others as appropriate regarding matters of interest.

The Company’s Corporate Governance Policies provide that non-management directors meet in executive sessions and that the Lead Director will preside over these executive sessions. The independent directors also meet in executive session at least once annually and the Lead Director presides over these executive sessions.

Committees.The Board’s standing committees, their membership and the number of meetings in ~~2011~~2014 are set forth below. Charters for each of our standing committees are available at our corporate governance ~~webpage.~~webpage atwww.morganstanley.com/about/company/governance.

All members of the Audit Committee, the ~~Compensation, Management Development and Succession~~CMDS Committee and the Nominating and Governance Committee satisfy the standards of independence applicable to members of such committees.

Each member of the CMDS Committee is a “non-employee director,” as defined in Section 16 of the Securities Exchange Act of 1934, and is an “outside director” as defined by Section 162(m) of the Internal Revenue Code.

The Board has determined that all members of the Audit Committee are independent and “financially literate” within the meaning of current NYSE rules and that the Chair and a majority of the members of the Audit Committee are “audit committee financial experts” within the meaning of current SEC rules.

All members of the Risk Committee and Operations and Technology Committee are non-employee directors and a majority of the members of such committees satisfy the independence requirements of the Company and the ~~NYSE. In addition,~~NYSE, and the ~~Board has determined that all members of the Audit~~Risk Committee ~~are “audit committee financial experts” within the meaning of current SEC rules.~~membership satisfies other applicable legal and regulatory criteria.

* The Operations and Technology Committee was established in 2011 and held its inaugural meeting in July 2011.

Board Leadership Structure. The Board is responsible for reviewing the Company’s leadership structure. As set forth in the Corporate Governance Policies, the Board believes that the Company and its shareholders are best served by maintaining the flexibility to have any individual serve as Chairman of the Board based on what is in the best interests of the Company at a given point in time, taking into consideration, among other things:

The composition of the Board;

The role of the Company’s ~~independent~~Independent Lead Director;

The Company’s strong corporate governance practices;

The ~~Chief Executive Officer’s (CEO)~~CEO’s working relationship with the Board; and

The challenges specific to the Company.

~~After a two-year transition period, Mr. Gorman assumed the additional role of Chairman of the Board, effective January 1, 2012, replacing John J. Mack as Chairman upon his retirement from the Board.~~ The Board has determined that the appointment of a strong ~~independent~~Independent Lead Director (as described below), together with a combined Chairman and CEO, ~~and Chairman, serves~~serve the best interests of the Company and its shareholders. By serving in both positions, the CEO and Chairman is able to draw on his detailed knowledge of the Company to provide the Board, in coordination with the Independent Lead Director, leadership in focusing its discussions and review of the Company’s strategy. In addition, a combined role of CEO and Chairman ensures that the Company

presents its message and strategy to shareholders, employees and ~~customers~~clients with a unified voice. The Board believes that it is in the best interest of the Company and its shareholders for Mr. Gorman to serve as Chairman and CEO at this time, considering the strong role of our ~~independent~~Independent Lead Director and other corporate governance practices providing independent oversight of management as set forth below.

Independent Lead Director. The Corporate Governance Policies provide for an independent and active Independent Lead Director that is appointed and reviewed annually by the independent directors with clearly defined leadership authority and responsibilities. Our Independent Lead Director, ~~C. Robert Kidder,~~Erskine B. Bowles, was appointed by our other independent directors and has responsibilities including:

Presiding at all meetings of the Board at which the Chairman is not present;

Having the authority to call, and lead, sessions composed only of non-management directors or independent directors;

Serving as liaison between the Chairman and the independent directors;

Advising the Chairman of the Board’s informational needs;

Approving the types and forms of information sent to the Board;

Approving Board meeting agendas and the schedule of Board meetings to assure that there is sufficient time for discussion of all agenda items and requesting, if necessary, the inclusion of additional agenda items; and

Making himself available, if requested by major shareholders, for consultation and direct communication.

Independent Oversight of Management.The Company’s corporate governance practices and policies ensure substantial independent oversight of management. For instance:

The Board has a majority of independent and non-management directors. ~~Ten out~~Twelve of the 1315 current directors and 11 of the 14 director nominees are independent as defined by the NYSE listing standards and the Company’s more stringent ~~Corporate Governance Policies~~Director Independence Standards. Fourteen of 15 current directors and ~~12 out~~13 of ~~the 13~~14 director nominees are non-management directors. All of the Company’s directors are elected annually.

The Board’s key standing committees are composed solely of non-management directors.The Audit Committee, the ~~Compensation, Management Development and Succession~~CMDS Committee, and the Nominating and Governance Committee are each composed solely of independent directors. The Operations and Technology Committee and Risk Committee consist of a majority of independent directors and include only non-management directors. The committees provide independent oversight of management.

The Board’s non-management directors meet regularly in executive session.The non-management directors meet regularly in executive session without management present and, consistent with the NYSE listing standards, at least annually, the independent directors meet in executive session. These sessions are chaired by the Independent Lead Director.

Board Role in Risk Oversight. Effective risk management is vital to the success of Morgan Stanley. The Board has oversight for the Company’s global enterprise risk management framework, which integrates the roles of the Company’s risk management functions into a holistic enterprise to facilitate the incorporation of risk assessment into decision-making processes across the Company, and is responsible for helping to ensure that the Company’s risks are managed in a sound manner. The Board regularly reviews the Company’s risks and the responsibilities of management and the Board committees ~~discussed below~~to assist the Board in its risk oversight.

The ~~Board established the~~ Risk Committee ~~which is comprised solely of non-management directors, to assist~~ assists the Board in the oversight of:

~~The Company’s risk governance structure;~~

~~The Company’s risk management and risk assessment guidelines and policies regarding market, credit and liquidity and funding risk;~~
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The Company’s global enterprise risk management framework;
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The major risk exposures of the Company, including market, credit, operational, liquidity, funding, reputational and franchise risk, against established risk measurement methodologies and the steps management has taken to monitor and control such exposures;

~~The Company’s risk tolerance, including risk tolerance levels and capital targets and limits;~~17

~~The Company’s capital, liquidity and funding; and~~

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The Company’s risk appetite statement, including risk limits and risk tolerance, which are reviewed and approved annually;

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The Company’s significant risk management and risk assessment guidelines and policies; and

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The performance of the Chief Risk Officer, who reports to the CEO and the Risk Committee.

~~The performance of~~In fulfilling its duties, the ~~Chief~~ Risk ~~Officer.~~Committee receives reports:

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From the Chief Risk Officer, Chief Financial Officer and Corporate Treasurer regarding major risk exposures of the Company, including market, credit, operational, liquidity, funding, reputational and franchise risk and capital;

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From the Head of Internal Audit on reviews of risk management, liquidity and capital functions;

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From the Company’s Strategic Transactions Committee; and

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Regarding significant reputational risk, franchise risk, new product risk, emerging risks and regulated matters relating to its authority.

The Risk Committee reports to the entire Board on a regular basis and the entire Board attends quarterly Risk Committee meetings.

TheAudit Committee ~~retains responsibility for~~ assists the Board and the Risk Committee in the oversight of ~~certain aspects of risk management, including review of~~ the major ~~franchise, reputational,~~ legal and compliance risk exposures of the Company and the steps management has taken to monitor and control such exposure, as well as, in coordination with the Risk Committee and the Operations and Technology Committee, guidelines and policies that govern the process for risk assessment and risk management.

TheOperations and Technology Committee has responsibility for oversight of ~~operational~~operations and technology risk. ~~The Audit Committee, Operations and Technology Committee, Risk Committee and Chief Risk Officer report to the entire Board on a regular basis.~~

~~As discussed under “Executive Compensation – Consideration of Risk Matters in Determining Compensation,” the Compensation, Management Development and Succession~~TheCMDS Committee works with the Chief Risk Officer and its independent compensation consultant to evaluate whether the Company’s compensation arrangements are consistent with the safety and soundness of the Company or encourage unnecessary or excessive risk-taking and whether any risks arising from the Company’s compensation arrangements are reasonably likely to have a material adverse effect on the Company. See “Executive Compensation – Consideration of Risk Matters in Determining Compensation.”

The committees report to the entire Board on a regular basis.

The Board has also authorized theFirm Risk Committee, a management committee appointed and chaired by the CEO that includes the most senior officers of the Company, including the Chief Risk Officer, Chief Legal Officer and Chief Financial Officer, to oversee the Company’s global enterprise risk management ~~structure.~~framework. The Firm Risk Committee’s responsibilities include oversight of the Company’s risk management principles, procedures and limits and the monitoring of capital levels and material market, credit, liquidity and funding, legal, compliance, operational, franchise and regulatory risk matters, and other risks, as appropriate, and the steps management has taken to monitor and manage such risks. The Company’s risk management is further discussed in Part II, Item 7A of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2011 (2011~~2014 (2014 Form 10-K).

Assessment of Leadership Structure and Risk Oversight.The Board has determined that its leadership structure is appropriate for the Company. Mr. Gorman’s role as CEO, his existing relationship with the Board, his understanding of Morgan Stanley’s businesses and strategy, and his professional experience and leadership skills uniquely position him to serve as Chairman and CEO, while the Company’s Independent Lead Director ~~Mr. Kidder, has proven~~

~~effective at enhancing~~position enhances the overall independent functioning of the Board. The Board believes that the combination of the Chairman and CEO, the Independent Lead Director and the Chairmen of the Audit, CMDS, Risk and Operations and Technology committees provide the appropriate leadership to help ensure effective risk oversight by the Board.

Director Compensation

The following table contains information with respect to the annual compensation (including deferred compensation) of our non-employee directors earned during ~~2011~~2014 with respect to his or her Board service.


Director⁽¹⁾	Fees Earned or Paid in Cash ($)⁽²⁾		Stock Awards ($)⁽³⁾⁽⁴⁾		Option Awards ($)⁽⁴⁾		Change in Pension Value and Nonqualified Deferred Compensation Earnings		All Other Compensation ($)		Total ($)		Fees Earned or Paid in Cash ($)⁽²⁾		Stock Awards ($)⁽³⁾⁽⁴⁾			Option Awards ($)		Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
Roy J. Bostock		95,000		250,000		—		—		—		345,000
Erskine B. Bowles		95,000		250,000		—		—		—		345,000		113,333		250,000			—		—		—		363,333
Howard J. Davies		112,917		250,000		—		—		—		362,917		115,000		250,000			—		—		—		365,000
James H. Hance, Jr.		102,917		250,000		—		—		—		352,917
Thomas H. Glocer														89,167		250,000			—		—		—		339,167
Robert H. Herz														98,750		250,000			—		—		—		348,750
C. Robert Kidder		125,000		250,000		—		—		—		375,000		97,500		250,000			—		—		—		347,500
Klaus Kleinfeld														85,000		250,000			—		—		—		335,000
Jami Miscik*														12,500		125,000			—		—		—		137,500
Donald T. Nicolaisen		117,917		250,000		—		—		—		367,917		106,250		250,000			—		—		—		356,250
Hutham S. Olayan		85,000		250,000		—		—		—		335,000		85,000		250,000			—		—		—		335,000
James W. Owens		77,917		333,333		—		—		—		411,250		105,000		250,000			—		—		—		355,000
O. Griffith Sexton⁽⁵⁾		87,083		250,000		—		—		—		337,083
O. Griffith Sexton*														70,833		250,000	⁽⁵⁾		—		—		—		320,833
Laura D. Tyson		95,000		250,000		—		—		—		345,000		85,000		250,000			—		—		—		335,000
Rayford Wilkins, Jr.														94,167		250,000			—		—		—		344,167

*	Mr. Sexton retired from the Board and Ms. Miscik joined the Board, in each case, effective November 1, 2014.

⁽¹⁾ Messrs. Gorman, Tamakoshi and Tanaka ~~and employee directors~~ received no compensation during ~~2011~~2014 for Board service. No compensation information is included in the table for Mr. Mack, the Company’s 2011 Chairman of the Board, pursuant to SEC rules, because in 2011 he was an executive officer of the Company, other than a named executive officer, who did not receive any additional compensation for his services as a director.

⁽²⁾ Represents the portion of the annual Board and Board committee retainers that was earned, whether paid in cash or deferred at the director’s election, during ~~2011. Mr. Owens joined the Board of Directors on January 1, 2011 and, accordingly, his Board and committee retainers were prorated for service as described below.~~2014. Cash retainers for service on the Board and a Board committee during the 2014 service period are paid semi-annually in arrears for the period beginning at the ~~2011~~2014 annual meeting of shareholders (May 13, 2014) and concluding at the ~~2012~~2015 annual meeting of shareholders ~~(the 2011 service period)~~(May 19, 2015). Amounts in the table represent ~~(i)~~ cash retainers earned for a portion of the ~~2010~~2013 service period (January 1, ~~2011~~2014 to May ~~18, 2011, the date of the 2011 annual meeting of shareholders) paid or deferred on May 18, 2011, (ii)~~13, 2014) and cash retainers earned for a portion of the ~~2011~~2014 service period (May 19, 2011 to November 18, 2011, the six-month anniversary of the 2011 annual meeting of shareholders) paid or deferred on November 18, 2011, and (iii) cash retainers earned for a portion of the 2011 service period (November 19, 201114, 2014 to December 31, ~~2011) payable on May 15, 2012, the date of the 2012 annual meeting of shareholders (or, if earlier, upon termination from the Board)~~2014).

The annual Board retainer for the ~~2011~~2014 service period for each director is $75,000. In addition, the Independent Lead Director, each of the Board committee chairs and each Board committee member receives additional annual retainers for the ~~2011~~2014 service period, as set forth in the following table. Retainers are prorated when a director joins the Board or a ~~Board~~ committee at any time other than at the annual meeting of shareholders, ~~(provided~~provided that no retainers are paid if the director is elected to the Board less than 60 days prior to the annual ~~meeting).~~meeting. Directors do not receive meeting fees.


Position		Retainer ($)
Independent Lead Director		30,000

Committee Chairs
Audit Committee		25,000
Compensation, Management Development and Succession Committee		20,000
Nominating and Governance Committee		20,000
Operations and Technology Committee*		20,000
Risk Committee		20,000

Committee Members		10,000

*	Effective August 1, 2014, the Operations and Technology Committee chair fee was increased from $10,000.

1619

Retainer
Lead Director (Mr. Kidder)
$ 30,000


Committee Chair

Audit Committee (Mr. Nicolaisen)*
$ 25,000
Compensation, Management Development and Succession Committee (Mr. Bowles)
$ 20,000
Nominating and Governance Committee (Dr. Tyson)
$ 20,000
Operations and Technology Committee (Mr. Nicolaisen)*
$ 10,000
Risk Committee (Mr. Davies)
$ 20,000

Committee Members

Audit Committee (Messrs. Davies, Hance and Sexton)*
$ 10,000
Compensation, Management Development and Succession Committee (Messrs. Kidder and Nicolaisen and Ms. Olayan)
$ 10,000
Nominating and Governance Committee (Messrs. Bostock, Kidder and Owens)
$ 10,000
Operations and Technology Committee (Messrs. Davies and Hance)*
$ 10,000
Risk Committee (Messrs. Bostock and Hance)
$ 10,000
* Effective as of May 17, 2011, Chair and member fees for the Audit Committee were each reduced by $5,000 and Chair and member fees of $10,000 were instituted for the Operations and Technology Committee.
Directors can elect to receive all or a portion of their retainers ~~for the 2011 service period~~ on a current basis in cash or shares of common stock or on a deferred basis ~~in stock units~~ under the Directors’ Equity Capital Accumulation Plan (DECAP)~~. Directors receive dividend equivalents on stock units that are paid~~ in the form of additional stock units. Messrs. Bostock, Davies, Hance, Kidder, Nicolaisen, Owens and Dr. Tyson received their retainers for the 2011 service period in cash on a current basis. Messrs. Bowles and Sexton and Ms. Olayan deferred their retainers for the 2011 service period into stock units (Elective Units).Elective Units. Elective Units are not subject to vesting or cancellation.

~~On May 18, 2011, the date of the 2011 annual meeting of shareholders, each of~~ Messrs. Bowles, Glocer and Sexton and ~~Ms.~~Mses. Olayan ~~received~~and Miscik deferred all or a ~~number~~portion of their retainers into Elective Units under DECAP. Elective Units in lieu of ~~the remaining 50% of his or her~~ cash retainers earned for the ~~2010~~second half of the 2013 service period ~~that began~~were granted in arrears on May ~~18, 2010, the date of the 2010 annual meeting of shareholders,~~13, 2014 and ~~payable on such date determined by dividing the dollar value of such cash retainers by $24.3936, the volume-weighted average price of the common stock on the grant date.~~
~~On November 18, 2011, the six-month anniversary of the date of the 2011 annual meeting of shareholders, each of Messrs. Bowles and Sexton and Ms. Olayan received a number of~~ Elective Units in lieu of ~~the first 50% of his or her~~ cash retainers earned for the ~~2011~~first half of the 2014 service period were granted in arrears on November 13, 2014, except that, for Mr. Sexton, such units were granted on November 1, 2014, the date of his retirement. The number of Elective Units granted on May 13, 2014 was based on $30.4180, the number of Elective Units granted on November 13, 2014 was based on $35.8046, and ~~payable~~the number of Elective Units granted on ~~such date determined by dividing the dollar value of such cash retainers by $14.2034,~~November 1, 2014 was based on $35.0071, which, in all cases, represents the volume-weighted average price of the common stock on the grant date.

⁽³⁾ Represents the aggregate grant date fair value, ~~of the annual stock unit award for the 2011 service period and, with respect to Mr. Owens, a prorated initial stock unit award, granted during 2011~~ determined in accordance with the applicable accounting guidance for equity-based ~~awards.~~awards, of the annual stock unit award for the 2014 service period and, with respect to Ms. Miscik, a prorated initial stock unit award granted during 2014. The aggregate grant date fair value of annual stock units granted on May ~~18, 2011 for the 2011 service period~~13, 2014 is based on ~~$24.3936,~~$30.4180, and the ~~volume-weighted average price of the common stock on the grant date. The~~ aggregate grant date fair value of the initial stock units granted to ~~Mr. Owens~~Ms. Miscik on ~~February~~December 1, ~~2011~~2014 is based on ~~$29.8294,~~$34.9252, which, in each case, represents the volume-weighted average price of the common stock on the grant date. For further information on the valuation of these stock units, see notes 2 and 2018 to the consolidated financial statements included in the ~~2011~~2014 Form 10-K.

Under DECAP, directors receive an equity award upon initial election to the Board (provided that they are elected to the Board no less than 60 days prior to the annual meeting and are not initially elected at the annual meeting) and an equity award annually thereafter on the date of the annual meeting of shareholders. The ~~dollar~~grant date fair value of the initial equity award is $250,000, prorated for service until the annual meeting. The ~~dollar~~grant date fair value of
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the annual equity award is $250,000. Initial and annual equity awards are granted 50% in the form of ~~50%~~ stock units that do not become payable until the director retires from the Board (Career Units) and 50% in the form of stock units payable on the first anniversary of grant (Current Units). Initial equity awards are fully vested upon grant. Annual equity awards are subject to monthly vesting until the one-year anniversary of the grant date. On May 18, 2011, the date of the 2011 annual meeting of shareholders, directors received their annual equity awards for the 2011 service period in the form of 10,248.59 stock units (determined by dividing $250,000 by $24.3936, and allocating 50% to Career Units and 50% to Current Units). With respect to Career Units, directors may elect to extend deferral beyond retirement from the Board, subject to specified limitations. With respect to Current Units, directors may choose to defer receipt of the shares underlying Current Units beyond the anniversary of grant and may choose the form of distribution (lump sum or installment payments).

⁽⁴⁾ The following table sets forth the aggregate number of shares underlying DECAP stock units ~~and stock options~~ outstanding at December 31, ~~2011. The number of units set forth in the following table is rounded to the nearest whole number of units.~~2014.

Name    Stock Units (#)    Stock Options (#)^(a)
Roy J. Bostock
   35,904       —
Erskine B. Bowles
   67,657       —
Howard J. Davies
   42,173       7,049
James H. Hance, Jr.
   18,732       —
C. Robert Kidder
   50,926       33,273
Donald T. Nicolaisen
   45,774       —
Hutham S. Olayan
   60,979       —
James W. Owens
   13,126       —
O. Griffith Sexton
   60,009       —
Laura D. Tyson
   25,459       25,847

     Name    ^(a)Stock Units (#)
Directors were awarded stock options annually under DECAP until February 8, 2005, at which point stock option awards were discontinued. As of December 31, 2011, the outstanding stock options had no intrinsic value because the exercise price of each stock option was greater than $15.13, the closing price of the Company’s common stock on December 30, 2011.Erskine B. Bowles
119,772
Howard J. Davies
52,034
Thomas H. Glocer
22,803
Robert H. Herz
21,349
C. Robert Kidder
69,687
Klaus Kleinfeld
22,465
Jami Miscik
3,579
Donald T. Nicolaisen
79,035
Hutham S. Olayan
111,084
James W. Owens
44,980
O. Griffith Sexton
—
Laura D. Tyson
43,413
Rayford Wilkins, Jr.
11,885

⁽⁵⁾ 4,122 unvested stock units representing approximately 50% of this stock unit award were cancelled without payment upon Mr. ~~Sexton was an advisory director of~~Sexton’s retirement from the Company from May 1995 until September 2008 and was a full-time Company employee prior to becoming an advisory director. The Company provides Mr. Sexton with access to medical insurance, for which he pays the full cost.Board.

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Related Person Transactions Policy

Our Board has adopted a written Related Person Transactions Policy (Policy) requiring the approval or ratification by the Nominating and Governance Committee of transactions (including material amendments or modifications to existing transactions), where the Company is a participant, the transaction exceeds $120,000 and a related person (directors or director nominees, executive officers, 5% shareholders and immediate family members of the foregoing) has a direct or indirect material interest. Under the Policy, in determining whether to approve or ratify such Related Person Transactions, the Nominating and Governance Committee considers all relevant facts and circumstances, including, but not limited to: the terms and commercial reasonableness of the transaction; the size of the transaction; the materiality to, and interest of, the related person and the Company in the transaction; whether the transaction would, or would be perceived to, present an improper conflict of interest for the related person; and, if the related person is an independent director, the impact on the director’s independence. Certain ~~Transactions~~transactions are not subject to the Policy, including compensation of executive officers approved by the CMDS Committee and ordinary course commercial or financial services transactions between the Company and an entity in which a related person has an interest if the transaction is made under terms and conditions and under circumstances substantially similar to those prevailing at the time for comparable transactions with unaffiliated third parties and the related person does not otherwise have a direct or indirect material interest in the transaction.

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Certain Transactions

Our subsidiaries may extend credit in the ordinary course of business to certain of our directors, officers and members of their immediate families. These extensions of credit may be in connection with margin loans, mortgage loans ~~credit card transactions, revolving lines of credit and~~or other extensions of credit by our subsidiaries. ~~The~~These extensions of credit are made in the ordinary course of business, on substantially the same terms, ~~and conditions,~~ including interest rates and collateral, ~~requirements,~~ as those prevailing at the time for comparable ~~transactions~~loans with ~~other~~ persons not related to the lender and do not involve more than the normal risk of collectability or present other unfavorable features.

Each of ~~CIC,~~ MUFG and State Street Corporation (State Street) beneficially owns 5% or more of the outstanding shares of Morgan Stanley common stock as reported under “Principal Shareholders.” During ~~2011,~~2014, we engaged in transactions in the ordinary course of business with each of ~~CIC,~~ MUFG and State Street and certain of their respective affiliates, including investment banking, financial advisory, sales and trading, derivatives, investment management, lending, securitization and other financial services transactions. Such transactions were on substantially the same terms as those prevailing at the time for comparable transactions with unrelated third parties.

As part of the global strategic alliance between MUFG and the Company, ~~on May 1, 2010,~~ the Company and MUFG formed a joint venture in Japan of their respective investment banking and securities businesses by forming two joint venture companies. MUFG contributed the investment banking, wholesale and retail securities businesses conducted in Japan by Mitsubishi UFJ Securities Co., Ltd. into one of the joint venture entities named Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. (MUMSS). The Company contributed the investment banking operations conducted in Japan by its subsidiary, Morgan Stanley MUFG Securities Co., Ltd. (MSMS), formerly known as Morgan Stanley Japan Securities Co., Ltd., into MUMSS (MSMS, together with MUMSS, the “Joint Venture”). MSMS ~~will continue~~has continued its sales and trading and capital markets business conducted in Japan. ~~Following the respective contributions to the Joint Venture and a cash payment of 23 billion yen ($247 million), from MUFG to the Company, the~~The Company owns a 40% economic interest in the Joint Venture and MUFG owns a 60% economic interest in the Joint Venture. The Company holds a 40% voting interest and MUFG holds a 60% voting interest in MUMSS, while the Company holds a 51% voting interest and MUFG holds a 49% voting interest in MSMS. Other initiatives that are part of the Company’s global strategic alliance with MUFG include a loan marketing joint venture in the Americas, business referral arrangements in Asia, Europe, the Middle East and Africa, referral agreements for commodities transactions and a secondment arrangement of personnel between MUFG and the Company for the purpose of sharing best practices and expertise.
On June 30, 2011, pursuant to the terms of a transaction agreement entered into on April 21, 2011 by the Company and MUFG, all the outstanding shares of Series B Non-Cumulative Non-Voting Perpetual Convertible Preferred Stock (Series B Preferred Stock) held by MUFG were converted into 385,464,097 shares of the Company’s common stock, including approximately 75 million shares resulting from the adjustment to the conversion ratio pursuant to the transaction agreement.

In December 2006, a son-in-law of Mr. Bostock became an employee in the Company’s Asset Management business segment due to the Company’s acquisition of FrontPoint. On March 1, 2011, the Company restructured its relationship with FrontPoint. As a result of the transaction, the Company ceased to control FrontPoint and Mr. Bostock’s son-in-law ceased to be an employee of the Company. As part of the restructuring, the Company held common and preferred equity interests in FrontPoint (representing in total not more than a 24.9% equity interest). Subsequently, in January 2012 the Company further restructured its relationship with FrontPoint by exchanging all its equity interest in FrontPoint (which is now 100% owned by FrontPoint management, including Mr. Bostock’s son-in-law) for revenue shares in remaining funds and a share of any future FrontPoint asset sale proceeds. The Company continues not to control FrontPoint after the most recent restructuring.
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Beneficial Ownership of Company Common Stock

Executive Equity Ownership Commitment

Members of the Company’s Operating Committee are subject to an Equity Ownership Commitment that requires them to retain ~~at least~~common stock and equity awards equal to 75% of common stock ~~and~~received from equity awards (less allowances for the payment of any option exercise price and taxes) ~~made~~granted to them ~~while they are~~for service on the Operating Committee. This commitment ties a portion of their net worth to the Company’s stock price and provides a continuing incentive for them to work towards superior long-term stock price performance. None of our executive officers currently have prearranged trading plans under SEC Rule 10b5-1. Executive officers also are prohibited from engaging in hedging strategies or selling short or trading derivatives involving Morgan Stanley securities.

Director ~~Career Stock Unit Holding~~Equity Ownership Requirement

As indicated under “Director Compensation,” our independent directors generally receive an equity award upon initial election to the Board and receive an annual equity award thereafter with a grant date fair value of $250,000 (prorated in the case of the initial award) as part of their director compensation. 50% of each equity award granted to our independent directors does not become payable until the director retires from the Board (and may be deferred beyond retirement at the director’s election), which fosters a long-term ownership view.

Stock Ownership of Executive Officers and Directors

We encourage our directors, executive officers and employees to own our common stock; owning our common stock aligns their interests with those of shareholders.

The following table sets forth the beneficial ownership of common stock as of February ~~29, 2012~~27, 2015 by our ~~Chief Executive Officer~~CEO and the other executive officers named in the ~~“2011~~“2014 Summary Compensation Table” ~~(the~~(our named executive officers or NEOs), directors and director nominees, and by all our directors and executive officers as of February ~~29, 2012,~~27, 2015, as a group. As of February ~~29, 2012,~~27, 2015, none of the common stock beneficially owned by our directors and NEOs was pledged.

Name    Shares⁽¹⁾
Underlying
Stock Units⁽²⁾

Subject to
Stock Options
Exercisable Within
60 Days
      Total⁽³⁾
NAMED EXECUTIVE OFFICERS

James P. Gorman
   507,967          606,952       1,159,703       2,274,622
Ruth Porat
   684,596          142,008       205,764       1,032,368
Gregory J. Fleming
   387,111          181,462       259,263       827,836
Colm Kelleher
   163,992          299,571       623,524       1,087,087
James A. Rosenthal
   160,490          120,389       370,687       651,566

DIRECTORS AND DIRECTOR NOMINEE

Erskine B. Bowles
   1,000          120,097       —       121,097
Howard J. Davies
   20,690          52,175       —       72,865
Thomas H. Glocer
   1,000          22,865       —       23,865
Robert H. Herz
   12,969          21,406       —       34,375
C. Robert Kidder
   89,675          69,875       —       159,550
Klaus Kleinfeld
   14,037          22,526       —       36,563
Jami Miscik
   —          3,588       —       3,588
Donald T. Nicolaisen
   —          79,249       —       79,249
Hutham S. Olayan
   8,000          111,385       —       119,385
James W. Owens
   10,194          45,101       —       55,295
Ryosuke Tamakoshi⁽⁴⁾
   —          —       —       —
Masaaki Tanaka⁽⁴⁾
   —          —       —       —
Perry M. Traquina⁽⁵⁾
   —          —       —       —
Laura D. Tyson
   26,377          43,531       —       69,908
Rayford Wilkins, Jr.
   3,608          11,917       —       15,525

ALL DIRECTORS AND EXECUTIVE OFFICERS AS OF FEBRUARY 27, 2015 AS A GROUP (22 PERSONS)    2,157,981          2,170,984       2,974,096       7,303,061

2022

   Common Stock Beneficially Owned as of February 29, 2012

Name    Shares⁽¹⁾    Underlying
Stock Units⁽²⁾
Subject to
Stock Options
Exercisable within
60 days
   Total⁽²⁾⁽³⁾
NAMED EXECUTIVE OFFICERS

James P. Gorman
   310,713       867,921       553,333       1,731,967
Ruth Porat
   474,683       355,366       115,857       945,906
Gregory J. Fleming
   123,098       419,682       20,224       563,004
Colm Kelleher
   53,486       440,062       268,202       761,750
Paul J. Taubman
   550,706       732,206       299,147       1,582,059

DIRECTORS

Roy J. Bostock
   43,572       35,998       —       79,570
Erskine B. Bowles
   1,000       67,833       —       68,833
Howard J. Davies
   9,260       42,283       7,049       58,592
James H. Hance, Jr.
   28,325       18,781       —       47,106
C. Robert Kidder
   70,452       51,059       33,273       154,784
Klaus Kleinfeld⁽⁴⁾
   —       —       —       —
Donald T. Nicolaisen
   4,704       41,176       —       45,880
Hutham S. Olayan
   8,000       61,138       —       69,138
James W. Owens
   5,000       13,160       —       18,160
O. Griffith Sexton
   633,934       60,165       —       694,099
Ryosuke Tamakoshi⁽⁵⁾
   —       —       —       —
Masaaki Tanaka⁽⁵⁾
   —       —       —       —
Laura D. Tyson
   32,154       25,525       25,847       83,526

ALL DIRECTORS AND EXECUTIVE OFFICERS AS OF FEBRUARY 29, 2012 AS A GROUP (20 PERSONS)    2,446,657       3,774,022       1,388,965       7,609,644
⁽¹⁾Each director, NEO and executive officer has sole voting and investment power with respect to his or her shares, except ~~as follows: Mr. Gorman’s beneficial ownership includes 200,000~~with respect to the following shares ~~held in a grantor retained annuity trust for~~owned indirectly through family trusts, the sole beneficiaries of which heare family members, and ~~his spouse are co-trustees, 600 shares held in a Uniform Gifts to Minors Act account for which~~custodial accounts: Mr. Gorman ~~is custodian and for~~– 36,958 shares, 1,400 shares of which he disclaims ~~beneficial ownership, and 500 shares held in a Uniform Transfer to Minors Act account for which Mr. Gorman’s spouse is custodian and for which he disclaims beneficial~~ ownership; Mr. ~~Taubman’s beneficial ownership includes 1,585 shares held by his spouse;~~Fleming – 104,550 shares; Mr. ~~Bostock’s beneficial ownership includes 1,775 shares held by his spouse;~~Rosenthal – 159,932 shares; and Mr. ~~Bowles’ beneficial ownership includes~~Bowles – 1,000 ~~shares held in a trust revocable by Mr. Bowles on 30 days’ notice.~~shares.

⁽²⁾ Shares of common stock held in a trust (Trust) corresponding to certain outstanding restricted stock units (RSUs). Directors and executive officers may direct the voting of the shares corresponding to ~~their~~such RSUs. Voting by executive officers is subject to the provisions of the Trust, as described in “Information ~~About~~about the Annual Meeting – How Do I Submit Voting Instructions for Shares Held in Employee Plans?”. Excludes long-term incentive program awards and performance stock units ~~(PSUs)~~ because executive officers may not direct the voting of ~~their PSUs.~~any shares corresponding to such awards prior to settlement of the award.

⁽³⁾ Each NEO and director beneficially owned less than 1% of the shares of common stock outstanding. All executive officers and directors as a group as of February ~~29, 2012~~27, 2015 beneficially owned less than 1% of the common stock outstanding.
⁽⁴⁾ Messrs. Tamakoshi and Tanaka were designated by MUFG and elected to the Board pursuant to the Investor Agreement. They are not compensated by Morgan Stanley for their service on the Board. See “Principal Shareholders” regarding MUFG’s beneficial ownership of Company common stock.

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⁽⁴⁾⁽⁵⁾ If elected to the Board at the ~~2012~~2015 annual meeting of shareholders, Mr. ~~Kleinfeld,~~Traquina, as a non-employee director, will receive an annual equity award under DECAP ~~in the amount~~with a grant date fair value of ~~$250,000.~~$250,000 on May 19, 2015. See “Director Compensation” for further details regarding our director compensation arrangements.
⁽⁵⁾ ~~Messrs. Tamakoshi and Tanaka were elected to the Board pursuant to the Investor Agreement. See “Principal Shareholders” regarding MUFG’s beneficial ownership of Company common stock.~~

Principal Shareholders

The following table contains information regarding the only persons we know of that beneficially own more than 5% of our common stock.

Shares of Common Stock
Beneficially Owned
Name and Address Number    Percent⁽¹⁾
China Investment Corporation (CIC)⁽²⁾
New Poly Plaza, No. 1 Chaoyangmen Beidajie
Dongcheng District, Beijing 100010,
People’s Republic of China

150,782,379       7.6 %
Mitsubishi UFJ Financial Group, Inc.⁽³⁾
7-1, Marunouchi 2-chome
Chiyoda-ku, Tokyo 100-8330, Japan

435,452,411       22.0 %
State Street Corporation (State Street)⁽⁴⁾
225 Franklin Street, Boston, MA 02110

165,720,173       8.4 %

Shares of Common Stock
Beneficially Owned
Name and Address Number       Percent⁽¹⁾

MUFG⁽²⁾
7-1, Marunouchi 2-chome
Chiyoda-ku, Tokyo 100-8330, Japan

435,269,905



22.1

State Street⁽³⁾
One Lincoln Street, Boston, MA 02111

147,766,059         7.5

⁽¹⁾ Percentages based upon the number of shares of common stock outstanding as of the record date, March ~~19, 2012,~~23, 2015, and the beneficial ownership of the principal shareholders as reported in SEC filings in notes ~~2-5~~2 and 3 below.

⁽²⁾ Based on the Schedule 13G filed on February 13, 2012 by CIC and Harvest Investment Corporation. The Schedule 13G discloses that CIC had shared dispositive and shared voting power with respect to all beneficially owned shares reported.
⁽³⁾ ~~Based on the~~ amended Schedule 13D dated October 3, 2013 filed ~~on July 1, 2011~~ by MUFG. The amended Schedule 13D discloses that MUFG had sole dispositive and sole voting power with respect to the beneficially owned shares reported, including ~~3,435,259~~3,252,753 shares held solely in a fiduciary capacity by certain affiliates of MUFG as the trustee of trust accounts or the manager of investment funds, other investment vehicles and managed accounts as of ~~May 31, 2011~~September 27, 2013 for which MUFG disclaims beneficial ownership.

⁽⁴⁾⁽³⁾ Based on the Schedule 13G ~~filed on~~dated February ~~13, 2012~~11, 2015 (as of December 31, 2014) by State Street and State Street Bank and Trust Company, each acting in various fiduciary and other capacities. The Schedule 13G discloses that State Street had shared dispositive power as to ~~165,720,173~~147,766,059 shares and shared voting power as to ~~165,299,432~~147,146,723 shares; and that ~~134,818,439~~79,324,972 shares beneficially owned by State Street Bank and Trust Company, a subsidiary of State Street, are held as trustee ~~and investment manager~~ on behalf of the Trust; and that State Street and State Street Bank and Trust Company disclaimed beneficial ownership of all shares reported in the Schedule 13G, except in their fiduciary capacity under the Employee Retirement Income Security Act of 1974. State Street Bank and Trust Company acts as a trustee for the Trust that holds shares of common stock underlying certain restricted stock units awarded to employees under ~~several~~various of the Company’s equity-based plans. ~~See “Information About the Annual Meeting.”~~

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Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires our directors and certain of our officers to file reports with the SEC indicating their holdings of, and transactions in, our equity securities. The Company believes that ~~during 2011,~~ our reporting persons complied with all Section 16(a) filing requirements during 2014, except that, ~~MUFG filed~~due to an administrative error on the part of the Company, a late Form 4 was filed on behalf of Paul C. Wirth, the Deputy Chief Financial Officer, to report the ~~conversion to~~withholding of 1,468 shares of common stock to satisfy taxes due upon the vesting of ~~all of its shares of Series B Preferred Stock that had previously been reported by MUFG in a timely manner in an amendment to its Schedule 13D.~~
restricted stock units.

22
Executive Compensation

Compensation Governance

The CMDS Committee currently consists of four (4) directors, including our Independent Lead Director, all of whom are independent members of the Board under the NYSE listing standards and the independence requirements of the Company. The CMDS Committee operates under a written charter adopted by the Board. The CMDS Committee is responsible for reviewing and approving annually all compensation awarded to the Company’s executive officers, including the NEOs. In addition, the CMDS Committee administers the Company’s equity incentive plans and cash-based nonqualified deferred compensation plans, including reviewing and approving ~~equity~~ grants to executive officers. Information on the CMDS Committee’s processes, procedures and analysis of NEO compensation for ~~2011~~2014 is addressed in the “Compensation Discussion and Analysis” (CD&A).

The CMDS Committee actively engages in its duties and follows procedures intended to ensure excellence in compensation governance, including those described below:

Retains its own independent compensation consultant to provide advice to the CMDS Committee on executive compensation ~~matters.~~matters and evaluates the independence of such consultant and other advisors as required by any applicable law, regulation or listing standard. The independent compensation consultant generally attends all CMDS Committee meetings, reports directly to the CMDS Committee Chair and ~~regularly~~ meets with the CMDS Committee without management present. In addition, the Chair of the CMDS Committee regularly ~~speaks~~engages with the CMDS Committee’s compensation consultant, without management present, outside of the CMDS Committee meetings.

Regularly reviews the competitive environment and the design and structure of the Company’s compensation programs to ensure that they are consistent with and support our compensation objectives.

Regularly reviews the Company’s achievements with respect to ~~predetermined performance priorities and strategic goals~~execution of long-term strategy and evaluates executive performance in light of such achievements.

Regularly reviews legislative and regulatory developments affecting compensation in the U.S. and globally.

Annually reviews the Company’s incentive compensation arrangements to help ensure that such arrangements are consistent with the safety and soundness of the Company and do not encourage excessive risk-taking, and are otherwise consistent with applicable related regulatory rules and guidance.

Grants senior executive annual incentive compensation after a comprehensive review and evaluation of Company, business unit and individual performance for the year, both on a year-over-year basis and as compared to our key competitors.

Oversees plans for management development and succession.

Regularly meets throughout the year and regularly meets in executive session without the presence of management or its compensation consultant.

Receives materials for meetings in advance, and the Chair of the CMDS Committee participates in pre-meetings with management to review the agendas and materials.

Regularly reports on its meetings to the Board.

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As mentioned above, to perform its duties, the CMDS Committee retains the services of a qualified and independent compensation consultant that possesses the necessary skill, experience and resources to meet the CMDS Committee’s needs and that has no relationship with the Company that would interfere with its ability to provide independent advice. The CMDS ~~Committee has selected Hay Group as its~~Committee’s compensation ~~consultant. Hay Group has also been retained by the Nominating and~~consultant, Pay Governance, Committee to provide consulting services on Board compensation. Other than the consulting services that it provides to the CMDS and Nominating and Governance Committees, Hay Group currently provides no services to the Company or its executive officers. Hay Group assists the CMDS Committee in collecting and evaluating external market data regarding executive compensation and performance and advises the CMDS Committee on developing trends and best practices in executive compensation and equity and incentive plan design.
Other than the aforementioned consulting services, Pay Governance does not provide other services to the Company or its executive officers. The Company has affirmatively determined that no conflict of interest has arisen in connection with the work of Pay Governance as compensation consultant for the CMDS Committee.

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The Company’s Human Resources department acts as a liaison between the CMDS Committee and ~~Hay Group~~its independent consultant and also prepares materials for the CMDS Committee’s use in making compensation decisions. Separately, the Human Resources department may itself engage third-party compensation consultants to assist in the development of compensation data and analyze potential compensation structures to inform and facilitate the CMDS Committee’s deliberations.

The principal compensation plans and arrangements applicable to our NEOs are described in the CD&A and the tables in the “Executive Compensation” section. The CMDS Committee may delegate the administration of ~~these~~ plans and arrangements as appropriate, including to executive officers of the Company and members of the Company’s Human Resources department. The CMDS Committee may also create subcommittees with authority to act on its behalf. Significant delegations made by the CMDS Committee include the following:

The CMDS Committee has delegated to the Equity Awards Committee (which consists of the ~~Chief Executive Officer)~~CEO) its authority to make special new hire and retention equity awards; however, this delegation of authority does not extend to awards to our executive officers and certain other senior executives of the Company. Awards granted by the Equity Awards Committee are subject to a share limit imposed by the CMDS Committee and ~~individual awards~~ are reported to the CMDS Committee on a regular basis.

The CMDS Committee has delegated to the Chief Operating Officer its authority to administer the Company’s cash-based nonqualified deferred compensation plans, including the Morgan Stanley Compensation Incentive Plan (discussed in the CD&A); however, the CMDS Committee has sole authority relating to grants of cash-based nonqualified deferred compensation plan awards to, or amendments to such awards held by, executive officers and certain other senior executives, material amendments to any such plans or awards, and the decision to implement certain of these plans in the future.

Our executive officers do not engage directly with the CMDS Committee in setting the amount or form of executive officer compensation. However, as discussed in the CD&A, as part of the annual performance review for our executive officers other than the ~~Chief Executive Officer,~~CEO, the CMDS Committee considers our ~~Chief Executive Officer’s~~CEO’s assessment of each executive officer’s individual performance, as well as the performance of the Company and our ~~Chief Executive Officer’s~~CEO’s compensation recommendations for each executive officer, other than himself.

Annual ~~year-end~~ equity and cash-based ~~long-term~~ incentive awards are typically granted by the CMDS Committee after the end of the year. This schedule coincides with the time when year-end financial results are available and the CMDS Committee can evaluate individual and Company performance as described in the CD&A. Special equity and cash-based ~~long-term~~ incentive awards are generally approved on a monthly basis; however, they may be granted at any time, as deemed necessary for new hires, promotions or recognition or retention purposes. We do not coordinate or time the release of material information around our grant dates in order to affect the value of compensation.

Consideration of Risk Matters in Determining Compensation

~~Beginning in 2009, the~~The CMDS Committee ~~has worked~~works with the Company’s Chief Risk Officer and the CMDS Committee’s independent compensation consultant to evaluate whether the Company’s compensation arrangements encourage unnecessary
25
or excessive risk-taking and whether risks arising from the Company’s compensation arrangements are reasonably likely to have a material adverse effect on the Company. Morgan Stanley is a financial institution that engages in significant trading and capital market activities that are subject to market and other risks. The Company employs risk management practices, including trading limits, marking-to-market positions, stress testing and employment of models. The Company believes in pay-for-performance and as a result also evaluates its compensation programs to recognize these risks.

In ~~2011,~~2014, the Chief Risk Officer ~~had a series of interactive and detailed working sessions~~met with representatives from the Company’s Human Resources ~~Financial Control Group~~ and Legal departments to evaluate each
24
compensation program across each of the Company’s major areas – Institutional Securities, ~~Asset~~Wealth Management, ~~Global Wealth~~Investment Management and Company/~~Infrastructure. These working sessions were intended~~Infrastructure – and to identify whether there were any material risks to the Company arising from such compensation programs, including those programs in which our NEOs participate. The review covered numerous programs, including ~~equity-~~equity and cash-based deferred compensation programs, discretionary bonus programs and performance-based formulaic bonus programs. The working group reviewed a number of factors, including the eligibility, form of payment, applicable performance measures, vesting, clawback ~~holdback~~ and cancellation provisions and governance and oversight aspects of each program.

In ~~2011,~~2014, the Chief Risk Officer concluded that Morgan Stanley’s current compensation programs do not incentivize employees to take unnecessary or excessive risk and that such programs do not create risks that are reasonably likely to have a material adverse effect on the Company. The following are among the factors considered in making his determination:

Our balance of fixed compensation and discretionary compensation;

Our balance between short-term and long-term incentives;

Our mandatory deferrals into both equity-based and cash-based ~~long-term~~ incentive programs;

The governance procedures followed in making compensation decisions, including our rigorous up-front risk adjustment process for assessing performance based on financial, capital and risk metrics;

The risk-mitigating features of our awards, such as cancellation ~~holdback~~ and clawback provisions; and

Our equity ~~retention requirements.~~ownership commitment.

The Chief Risk Officer ~~and the Global Head of Human Resources then~~ reviewed ~~these arrangements, along with the analyses and~~his findings ~~of the Chief Risk Officer,~~ with the CMDS Committee and its independent compensation consultant. Before compensation decisions for 2011 were approved, the Chief Risk Officer reviewed the final compensation programs pursuant to which 2011 compensation would be paid and confirmed his conclusions with the CMDS Committee. It is intended that the Chief Risk Officer will continue to evaluate any new incentive arrangements for the NEOs and material arrangements for other employees, report periodically to the CMDS Committee and be involved in the design and assessment of our incentive arrangements to the extent appropriate or required under applicable law.

In addition to the foregoing, together with senior management, the CMDS Committee ~~regularly reviews with the Chief Executive Officer, Chief Risk Officer and senior management~~oversees the Company’s controls regarding the year-end compensation process. These controls are structured to help eliminate incentives for excessive ~~risk taking~~risk-taking and have been designed to be consistent with the Federal Reserve Board’s principles for safety and soundness. ~~For 2011, such~~Such controls ~~included:~~include:

~~Redesigning~~Sizing the ~~process for sizing the year-end~~ incentive compensation pool to more fully consider risk-adjusted returns, compliance with risk limits and the market and competitive environment;

~~Implementing a new process to allocate~~Allocating the incentive compensation pool among ~~business areas to take into account~~businesses after consideration of the businesses’ returns on certain financial ~~capital~~ and ~~risk~~return on capital metrics;

For more senior-level employees, ~~generally increasing the level~~delivering a substantial portion of ~~year-end~~compensation in mandatory multi-year deferrals subject to ~~multi-year~~ clawback and cancellation provisions; and

~~As described more fully in the CD&A, expanding clawback provisions to apply to both deferred equity and deferred cash awards; increasing the accountability of~~Directing compensation managers ~~for executing~~to consider clawback and cancellation ~~provisions, with a focus on employee risk-taking;~~events and ~~implementing~~an employee’s risk management activities and outcomes in making compensation decisions, and undertaking a rigorous review process by the independent control functions ofto identify potential clawback and cancellation situations. ~~Clawback provisions provide for the forfeiture of an award upon, among other things, the employee’s violation of the Company’s risk policies and standards.~~

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Compensation Discussion and Analysis

This CD&A describes how the CMDS Committee considered the Company’s compensation objectives and approach; its business strategy and Company and individual performance against this strategy; and the other material factors that guide our executive compensation program, to arrive at 2011 compensation decisions for our NEOs: Mr. Gorman, our CEO, Ms. Porat, our Chief Financial Officer, Mr. Fleming, our President of Asset Management and Global Wealth Management, and Messrs. Kelleher and Taubman, our Co-Presidents of Institutional Securities. The CD&A is comprised of ~~four~~the following sections:

   Page:

I.      Executive Summary
26
~~II.     Compensation Objectives and Strategy~~
   27
~~III.~~II.     Compensation ~~Program for 2011~~
28
~~IV.   2011 Compensation Process~~Objectives and ~~Decisions~~Strategy
   32
III.   Framework for Making Compensation Decisions
32
IV.   Compensation Decisions and Program
37
V.     Notes to the Compensation Discussion and Analysis
40

I. Executive Summary

~~In recent years, Morgan Stanley has made significant changes~~The Compensation, Management Development and Succession (CMDS) Committee of the Board is responsible for the pay structure and decisions that are outlined in this CD&A. The CMDS Committee considers multiple factors to ~~our~~ensure that the compensation program is highly motivating, competitive, and shareholder-aligned and reflects best practices in corporate governance, risk management and regulatory principles. The CMDS Committee, with the advice of its independent compensation consultant, Pay Governance, places performance at the forefront of the executive compensation ~~program~~program. This performance orientation is demonstrated in ~~response to~~ the ~~lasting impact~~structure of executive compensation, the ~~global financial crisis on the industry. For 2011, Morgan Stanley has continued to refine the way we pay our executives, consistent with global regulatory principles, evolving best practices~~performance results that drive compensation decisions, and the Company’s risk policies – and reflecting shareholder input, the Company’s performance and the broader economic environment – so that a significantly greater portion of total compensation is “at-risk,” subject to clawback and tied to long-term Company performance. We believe these changes advance our goals of delivering pay-for-performance, attracting and retaining top talent and encouraging responsible risk-taking in a way that is aligned with the long-term interests of the Company’s shareholders. Furthermore, ourresulting executive compensation decisions for ~~2011 demonstrate our focus~~the CEO, James Gorman, and the other NEOs.
I.A.  2014 Performance Highlights
In its assessment of 2014 results, the CMDS Committee considered the improvement in the Company’s business results relative to 2013 and continued progress on ~~long-term profitability and our commitment to balancing adequate~~important strategic priorities, which resulted in industry leading shareholder returns for ~~shareholders with appropriate rewards~~the second consecutive year. On February 25, 2015, following the CMDS Committee’s assessment of Morgan Stanley’s 2014 performance for compensation purposes in January 2015, legal reserves were increased by $2.8 billion for legacy (pre-2008) residential mortgage matters (the “subsequent event”)⁽¹⁾. The CMDS Committee subsequently determined that its 2014 compensation decisions for the CEO and other NEOs should not change. Section III.B contains more details about Company performance; see also Section V. “Notes to ~~retain~~the Compensation Discussion and ~~motivate top talent throughout economic cycles.~~Analysis.”

In 2011, Morgan Stanley made significant progress by addressing a number of outstanding strategic and legacy issues – including the conversion of MUFG’s preferred investment into common stock and the comprehensive settlement with MBIA – and achieved market share gains across our institutional businesses, as well as significant net flows into our Global Wealth Management and Asset Management platforms. While the Company made progress toward many of our key performance priorities, the Company did not fully meet all of our priorities for the year – which is reflected in the 2011 compensation decisions.Business Results⁽²⁾⁽³⁾

Pay-for-performance continues to be the core of our compensation program: our executives are held accountable for the Company’s performance as their total compensation is directly impacted by this performance and a significant component of executive compensation is tied to specific performance metrics over a three-year performance period. Consistent with our pay-for-performance philosophy, the Company implemented the following changes to our 2011 compensation:
~~We reduced Mr. Gorman’s compensation for 2011 by 25% from 2010 to $10,500,000, reflecting the fact that the Company did not fully meet certain 2011 performance priorities.~~
We paid no cash bonus to members of the Company’s Operating Committee (for 2011, our eight most senior executives, including the NEOs) and instead delivered 100% of year-end compensation in deferred long-term incentive awards subject to market and cancellation risk over a three-year period.
We redesigned our “at-risk” performance stock unit program, which only delivers value if the Company meets specific performance targets after three years, to further moderate risk-taking incentives while continuing to incent performance.
We expanded our “clawback” provisions to apply to all long-term incentive compensation and enhanced our processes for preventing, investigating and addressing circumstances (such as poor risk outcomes, significant losses and improper employee behavior) that could require clawback or cancellation of previously awarded compensation, as well as adjustments to current year compensation.
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Furthermore, and consistent with our long-standing objective of aligning executive compensation with shareholder interests, for 2011 we continued to deliver a significant portion of the NEOs’ incentive compensation in equity awards. In addition, all NEOs must retain 75% of the after-tax shares they receive as compensation and are prohibited from hedging any shares of Company common stock. As a result, each of our NEOs is one of our long-term shareholders with the same interests as our other shareholders. The NEOs’ beneficial ownership of Company common stock as of February 29, 2012 is set forth in the table “Stock Ownership of Executive Officers and Directors.”
These measures build upon previous years’ efforts to refine our compensation program. For example, in 2010, we reduced Mr. Gorman’s compensation as CEO from 2009 levels when he served as Co-President and increased the portion of year-end compensation delivered in deferred long-term incentive awards instead of cash bonus. In 2009, we introduced a multi-year performance program and increased our focus on up-front risk adjustment of compensation. In 2008, Morgan Stanley was the first major U.S. bank to enact “clawback” provisions and we continue to enhance these provisions.
~~II.~~ ~~Compensation Objectives and Strategy~~
~~Morgan Stanley’s executive compensation program is designed to achieve four key objectives:~~

•
~~Deliver Pay-for-Performance.~~    ~~The core of our executive compensation program emphasizes variable incentive compensation that is clearly linked~~Net revenues and income from continuing operations applicable to ~~Company and individual performance. This approach encourages executives to balance increasing financial performance and shareholder value over~~Morgan Stanley excluding the ~~year with achievement~~impact of the ~~Company’s long-term strategic priorities. It is also designed to reward superior individual performance~~subsequent event increased in 2014 from 2013, both as reported and ~~promote a shared long-term view among our executive team.~~excluding the impact of Debt Valuation Adjustment (DVA)⁽⁴⁾
Return on average common equity (return on equity or ROE) excluding the impact of the subsequent event showed improvement from the prior year, both as reported and excluding the impact of DVA
Overall business performance continued to be strong:
^¡
Continued top rankings in advisory and equity underwriting within Investment Banking – #1 in global IPOs and #2 in global announced M&A⁽⁵⁾

• ^¡
~~Attract~~Equity Sales and ~~Retain Top Talent.~~    ~~The Company competes for talent globally with investment banks, commercial banks, brokerage firms, hedge funds and other companies offering financial services, and~~Trading remains a top franchise in the ~~Company’s ability to sustain or improve its position~~industry – #1 in this highly competitive environment depends substantially on its ability to continue to attract and retain the most highly qualified employees. To serve as one reference point in determining compensation, the CMDS Committee monitors competitive pay levels and structures within the industry. As part of the Company’s effort to be competitive in retaining top talent, our long-term incentive awards include payment, cancellation and clawback provisions to protect the Company’s interests and to encourage executives not to leave the Company for a competitor.revenue wallet share⁽⁵⁾

• ^¡
~~Align Executive Compensation~~Performance below expectations in Fixed Income and Commodities Sales and Trading with ~~Shareholders’ Interests.~~    ~~The Company delivers a significant portion of long-term incentive compensation~~plans for improvement in equity awards to align employee interests with those of shareholders. The CMDS Committee believes that linking incentive compensation to Company results over the year and delivering it primarily as deferred long-term incentive awards that are subject to market and cancellation risk over the course of several years helps motivate executives to achieve financial and strategic goals. In addition, members of the Company’s Operating Committee (our most senior executives), including the NEOs, are required to retain at least 75% of the after-tax shares they receive as compensation. Executives are also prohibited from engaging in hedging strategies, selling short or trading derivatives with Company securities. These policies tie a significant portion of our executive officers’ compensation directly to the Company’s stock price.ROE

• ^¡
~~Mitigate Excessive Risk-taking.~~    ~~The CMDS Committee is advised by the Company’s Chief Risk Officer~~Wealth Management pre-tax margin⁽⁶⁾ increased in 2014 from 2013, reflecting continued improvement through revenue growth and ~~the CMDS Committee’s independent compensation consultant~~cost discipline
^¡
Investment Management continued to ~~help ensure that the structure~~have good performance with increased average assets under management and design of compensation arrangements do not encourage unnecessary or excessive risk-taking that threatens the Company’s interests or gives rise to risk that could have a material adverse effect on the Company. The CMDS Committee, together with the Chief Risk Officer, evaluated Morgan Stanley’s current compensation programs and considered the Chief Risk Officer’s determination that such programs do not encourage such behavior, due in part to: (i) our balance of fixed compensation and discretionary compensation; (ii) our balance between short-term and long-term incentives; (iii) our mandatory deferrals into both equity-based and cash-based long-term incentive programs; (iv) the procedures followed in making incentivenet positive flows

27

compensation decisions, including our rigorous up-front risk adjustment process for assessing performance, based on financial, capital and risk metrics; (v) the risk-mitigating features of our awards, such as cancellation, holdback and clawback provisions; and (vi) our equity retention requirements. The CMDS Committee, along with its consultant and the Chief Risk Officer, will continue to review the Company’s compensation programs to ensure they are consistent with evolving best practices, applicable legal and regulatory standards and the Company’s risk policies.
Summary of Company Results

$ Millions
As Reported      Excluding DVA⁽⁴⁾
2013    2014      2013    2014
Net Revenues⁽⁷⁾
$ 32,493       $ 34,275         $ 33,174       $ 33,624
Income from Continuing Operations Applicable to Morgan Stanley⁽⁷⁾
$ 2,975       $ 3,481         $ 3,427       $ 3,063
Return on Equity⁽⁷⁾
4%       5%         5%       4%
Income from Continuing Operations Applicable to Morgan Stanley, excluding the Subsequent Event⁽¹⁾⁽⁸⁾
   $ 6,151            $ 5,733
Return on Equity, excluding the Subsequent Event⁽⁹⁾
   9%            8%
Strategic Execution
Morgan Stanley continued to execute its strategy and made progress on the key strategic objectives that were expressed as part of the strategic update at the beginning of 2014

~~III.~~ ~~Compensation Program for 2011~~
A.Strategic Objective
~~Compensation Program Highlights.~~
•
~~Mr. Gorman’s compensation for 2011 was down 25% from 2010.~~    Despite the progress the Company achieved in executing its strategy in 2011 under his leadership, Mr. Gorman’s compensation for 2011 was 25% below the level of the prior year, reflecting the fact that the Company did not fully meet certain financial priorities for the year. Compensation for the remaining members of the Operating Committee was also down significantly on average from 2010 levels.2014 Progress
•
Continue to improve Wealth Management margins through cost discipline and revenue growth
~~Members~~Increased Wealth Management pretax margin⁽⁶⁾ from 18% in 2013 to 20% in 2014⁽⁷⁾
On track to achieve stated goal of ~~the Company’s Operating Committee, including each NEO, received no cash bonus~~22-25% by year-end 2015
Improve Fixed Income and Commodities ROE: risk-weighted assets (RWAs) reductions and strategic solution for ~~2011. Instead, 100% of year-end compensation was paid with deferred long-term incentive awards, which are subject to market and cancellation risk over a three-year period.~~    Members of the Operating Committee in 2011 received 100% of their year-end compensation in deferred long-term incentive awards. Deferred compensation for the NEOs was comprised of “at-risk” PSUs, RSUs and deferred cash-based awards under the Morgan Stanley Compensation Incentive Program (MSCIP). A meaningful portion of the 2011 year-end compensation for NEOs was paid in equity, further aligning a significant portion of their compensation with shareholders’ interests by tying it directly to the Company’s stock price. These long-term incentive awards continue to be subject to the Company’s cancellation and clawback provisions, as described below, over a three-year period.Commodities
•
~~We redesigned our “at-risk” PSUs program~~Reduced Basel III RWAs⁽¹⁰⁾ in Fixed Income and Commodities from $280 billion at year-end 2012 to ~~further moderate risk-taking incentives while continuing~~$210 billion at year-end 2013 and $188 billion at year-end 2014 (excluding lending)
On track to ~~incent performance~~.    ~~For the third consecutive year, the Company granted 20%~~achieve year-end 2015 target of ~~each NEO’s 2011 year-end~~<$180 billion
Sold/divested TransMontaigne Inc. and CanTerm Canadian Terminals. Committed to selling Global Oil Merchanting business
Additional expense reductions and improvement in expense ratios
Non-compensation efficiency ratio (adjusted non-compensation expenses / net revenue) improved from 30% in 2013 to 29% in 2014⁽¹¹⁾
Institutional Securities incentive compensation in “at-risk” PSUs that deliver value only if the Company, after the full three-year performance period, achieves objective performance goals with respect to return on average common shareholders’ equity (ROE) and relative total shareholder return (TSR). In order to better align the PSU program for 2011 with principles of balanced risk-taking, the maximum payout has been reduced from two times the target award to 1.5 times the target award to provide for a less leveraged payout range and the performance target for the average ROE portion of the award was reduced to better reflect the current operating environment. In addition, the TSR portion of the award was modified to provide for a comparison to an industry index rather than a small group of peer companies. By reducing the payout leverage, setting a challenging but achievable goal and removing the volatility of a small peer group, the program is more balanced and less likely to encourage executives to take excessive riskrestructured in order to ~~achieve payouts.~~reduce compensation to net revenue ratio to 39% or less starting in 2015
•
Progress regarding Morgan Stanley-specific growth opportunities: most notably, the U.S. Bank
~~We expanded our “clawback” provisions~~Combined U.S. Bank assets increased 21%, from $125 billion at year-end 2013 to ~~apply~~$151 billion at year-end 2014
Combined U.S. Bank loan balances grew 70%, from $35.0 billion at year-end 2013 to ~~all long-term incentive compensation.~~    ~~In 2008, Morgan Stanley implemented a clawback for a substantial portion of~~$59.6 billion at year-end compensation. For 2011, the clawback was expanded to apply to each NEO’s RSUs, in addition to each NEO’s PSUs and deferred cash-based awards. The clawback can be triggered with respect to RSUs, PSUs and deferred cash-based awards if an individual’s act or omission (including with respect to direct supervisory responsibilities) causes a restatement of the Company’s consolidated financial results or constitutes a violation of the Company’s risk policies and standards, whether such action results in a favorable or unfavorable impact to the Company’s consolidated financial results. The PSUs are also subject to clawback following payment if the CMDS Committee determines that the payout was based on materially inaccurate financial statements or other performance metric criteria. The deferred cash-based awards are also subject to clawback if an individual’s act or omission causes, or is reasonably expected to cause, a substantial financial loss on a trading strategy, investment, commitment or other holding originating either in the current year or in any prior year and such trading strategy, investment, commitment or other holding was a factor in his or her award determination. In addition to these clawback provisions, our long-term incentive awards provide for cancellation if the2014⁽¹²⁾

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employee engages in conduct that constitutes “cause” (defined as any act or omission that constitutes a breach of obligations to the Company, which includes, among other things, failure to comply with our compliance, ethics or risk management standards and failure or refusal to perform satisfactorily any duties reasonably required, including supervisory or management duties).
•
Strategic Objective

We enhanced our processes for preventing, investigating and addressing circumstances such as poor risk outcomes, significant losses and improper employee behavior that could require clawback or cancellation of previously awarded compensation, as well as adjustments to current year compensation.    In 2011, the Company’s independent control functions implemented an enhanced, robust review process for identifying and evaluating situations occurring throughout the course of the year that could require clawback or cancellation of previously awarded compensation, as well as adjustments to current year compensation. Clawbacks of previously awarded compensation are reviewed with a committee of senior management quarterly and reported to the CMDS Committee on a regular basis. In addition, the CMDS Committee adopted a global incentive compensation discretion policy that sets forth standards for exercise of managerial discretion in year-end incentive compensation decisions and specifically provides that all managers must consider whether an employee effectively managed and supervised the risk control practices of his or her employee reports during the performance year.2014 Progress
Steadily increase capital return to shareholders
Increased payout ratio from 24% in 2013 to 30% in 2014

B. ~~“At-Risk” Performance-Based Compensation Program.~~    ~~In 2009,~~
Received a non-objection from the CMDS Committee, in response to shareholder feedback, approved an “at-risk” PSU program under the Company’s 2007 Equity Incentive Compensation Plan. Like the PSU programs approved by the CMDS Committee for 2009 and 2010, the 2011 PSU program ties a meaningful portion of each NEO’s compensation to the Company’s long-term financial performance and reinforces the NEOs’ accountabilityFederal Reserve for the Company’s ~~future financial~~2014 capital plan to repurchase up to $1 billion of common stock through 1Q 2015 and ~~strategic goals by linking~~increase the ~~ultimate payout~~quarterly common stock dividend from $0.05 to ~~two core financial metrics~~$0.10 beginning in 2Q 2014
Achieve returns that meet and exceed cost of capital Improved ROE excluding the ~~Company – return on average common shareholders’ equity~~impact of DVA⁽⁴⁾ and ~~relative total shareholder return over a three-year performance period.~~the subsequent event⁽¹⁾⁽⁹⁾ from 5% in 2013 to 8% in 2014, making strong progress toward 10% and higher goal

~~Under~~Shareholder Returns
Morgan Stanley shareholders benefited in 2014 from progress against strategic goals, strong business results and effective execution
^¡         Stock price increased from $31.36 to $38.80 during 2014
^¡         Total shareholder return (TSR)⁽¹³⁾ on an absolute basis was 25%, substantially outperforming the average of our five U.S. peers and nine global peers
I.B.  Executive Compensation Structure and Target CEO Compensation Range
Our executive compensation program rewards achievement of Morgan Stanley’s financial and strategic objectives, in addition to individual performance. The ultimate pay opportunities for the CEO and other NEOs are based on the CMDS Committee’s judgment, which is informed by consultation with the full Board and an assessment of the Company’s business results, strategic execution and shareholder returns described in this CD&A.
Pay opportunity in a given year is delivered in a combination of fixed compensation (generally, base salary), cash bonus, deferred cash, restricted stock units (RSUs) and a long-term incentive program ~~PSUs granted~~(LTIP) award in ~~2012 for 2011~~the form of performance ~~will vest and convert to shares of Company common~~ stock ~~in 2015 only if the Company achieves predetermined performance goals over the three-year performance period. Participants will receive no~~units. A significant portion of the ~~award if~~pay opportunity is deferred, awarded in equity, subject to future stock price performance and cancellation and clawback and, in the ~~minimum~~case of LTIP awards, subject to future achievement of specified financial targets. Sections IV.B and IV.C contain more detail about the elements of our compensation program.
In 2014, the CMDS Committee, in consultation with its independent compensation consultant, established a target range for the CEO pay opportunity of $23 million or more for superior performance ~~goals are not met. The amounts granted~~to $13 million or less for performance substantially below expectations. This target range is reviewed annually and serves as a guideline for the CMDS Committee. To inform its decision-making with respect to the ~~NEOs – which constituted 20% of their 2011 year-end incentive compensation – are provided below under Section IV.C “2011 Compensation Decisions.”~~
~~The 2011 “at-risk” PSUs are tied directly to the Company’s long-term core financial metrics – specifically:~~
1. ~~One-half of the target PSU award is based on the Company’s average ROE over the three-year performance period.~~    ~~The number of “at-risk” PSUs ultimately earned will be determined by multiplying one-half of the target award by a multiplier as follows:~~

MS AVERAGE ROE*    Multiplier
12% or more
   1.50
10%
   1.00
6%
   0.50
Less than 6%
   0.00
* If ROE is between two of the thresholds noted in the table, the number of PSUs earned will be determined by straight-line interpolation between the two thresholds. ROE, for this purpose, excludes (a) the impact of the fluctuation in the Company’s credit spreads and other credit factors (“Debt-Related Credit Spreads”) on certain of the Company’s borrowings that are accounted for at fair value, (b) gains or losses associated with the sale of specified businesses, (c) specified goodwill impairments, (d) any gain or loss, including accruals, associated with specified legal settlements relating to business activities conducted prior to January 1, 2011, and (e) specified cumulative catch-up adjustments resulting from changes in accounting principles that are not applied on a full retrospective basis.appropriate target range,

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2. ~~The other half of the award is based on the Company’s TSR over the three-year period (MS TSR) relative to the TSR of the S&P Financial Sectors Index over the three-year period (Index Group TSR).~~    ~~The number of “at-risk” PSUs ultimately earned will be determined by comparing the MS TSR to the Index Group TSR and multiplying one-half of the target award by a multiplier as follows:~~
MS TSR vs. Index Group TSR* ~~Multiplier~~
~~Above~~
~~Up to 1.50~~
~~Equal~~
~~1.00~~
~~Below~~
~~Down to 0.00~~
* Each 1% difference (positive or negative) in MS TSR as compared to the Index Group TSR results in a corresponding 1% (positive or negative) adjustment to the multiplier of 1.00.
~~The “at-risk” PSUs remain subject to cancellation upon certain events until conversion. If, after payment of the PSUs,~~ the CMDS Committee ~~determines~~considers compensation information for peer companies as described in Section III.A under “Benchmarking Target CEO Pay.” The 2014 CEO pay opportunity was evaluated based on the CMDS Committee’s assessment of Morgan Stanley’s performance and Mr. Gorman’s individual performance as described in Section I.C.
I.C.  2014 CEO Performance and Compensation Decision
Our strong business results, strategic execution and shareholder returns are reflected in the 2014 pay decisions for the CEO and other NEOs. 2014 CEO compensation was based on the CMDS Committee’s assessment of Morgan Stanley’s performance and shareholder returns as strong, with room for continued progress, and Mr. Gorman’s individual performance as exceeding expectations. The CMDS Committee has applied a consistent approach to align pay with performance and determined that Company and individual performance warranted a pay opportunity for Mr. Gorman of $22.5 million for 2014.
Similar to the ~~performance certified by~~process for determining CEO compensation, the CMDS Committee weighed the Company’s overall business performance, performance for shareholders and progress toward strategic objectives to establish compensation for the remaining NEOs. Section III.B contains more details about individual NEO performance and Section IV.A contains the 2014 compensation decisions for each NEO.
I.D.  2014 CEO Compensation Elements
Mr. Gorman’s pay opportunity was ~~based on materially inaccurate financial statements, then such number~~delivered in a combination of ~~shares (or~~base salary, cash ~~equivalent if~~bonus, deferred cash, deferred equity, and LTIP award, as outlined in the ~~shares were transferred) will be~~chart below. A significant portion of the pay opportunity for Mr. Gorman is deferred, awarded in equity and subject to ~~clawback by the Company.~~future-oriented performance goals. We believe this approach to executive compensation is consistent with shareholder alignment, executive motivation, best practices, and regulatory principles.

C. ~~Compensation Program Components and Design.~~    The following chart provides a brief summary of the principal elements of the Company’s executive compensation program for 2011.*
On December 1, 2014, the CMDS Committee approved a change in the compensation structure that reduced the average deferral of discretionary incentive compensation from an approximate 80% to an approximate baseline of
~~Compensation Element~~ ~~Description~~ ~~Other Features and Comments~~
~~1. Base Salary~~
~~An executive’s base salary reflects the executive’s experience and level of responsibility and is intended to be competitive with salaries for comparable positions at competitors.~~ Base salaries are reviewed periodically and subject to change, for, among other reasons, a change in the executive’s responsibilities or competitive market environment. The CMDS Committee reviewed the NEOs’ base salaries in January 2012 and made no changes from 2011 levels.
~~2. Incentive Compensation~~
~~Mix of Cash and Long-Term Incentives~~
For 2011, incentive compensation consisted of equity and MSCIP long-term incentive awards. NEOs received no cash bonus and instead received 100% of year-end incentive compensation in a mix of PSUs, RSUs and MSCIP deferred cash-based awards. In determining the 2011 deferral for long-term incentive awards, the CMDS Committee considered a number of factors, including the business environment, the Company’s pay-for-performance philosophy and global regulatory principles. As a result, the portion of compensation that was awarded to NEOs on a deferred basis was increased to 100%.
~~a.     Equity Awards – PSUs~~
“At-risk” PSUs awarded to NEOs vest and pay out after a three-year performance period, with the number of PSUs ultimately earned determined by the Company’s performance against predetermined goals. PSUs accumulate dividend equivalents that are paid only to the extent the underlying units convert to shares. PSUs do not provide for voting rights before they convert to shares.
With the exception of Mr. Fleming’s award, 2011 year-end RSUs are considered vested upon grant; however, these RSUs are subject to cancellation provisions, including upon termination of employment if the NEO leaves the Company to join a competitor.
2011 PSUs and MSCIP awards are subject to vesting and, until vested, are generally cancelable upon termination of employment other than by the Company without cause. As a result, the cost of leaving the Company to go to a competitor can be significant to an NEO. Similarly, a competitor who wants to recruit the NEO would incur a significant cost if it were to agree to replace the NEO’s canceled awards.

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50% (with more highly compensated employees continuing to be subject to higher deferral levels). With its business strategy in place and greater financial stability, the Company was in a position to change the level of deferrals. We believe the Company’s new deferral levels are more consistent with deferral levels at our global peers and remain at the high end of historical deferral levels of our U.S. peers. This change in Morgan Stanley’s deferral approach affects employees who received discretionary deferred compensation, including the CEO and the other NEOs – whose deferral levels, however, remain well above the average with Mr. Gorman’s deferral level at 72%.
*
~~Compensation Element~~ ~~Description~~ ~~Other Features and Comments~~
~~b.     Equity Awards –RSUs~~
~~RSUs align employee interests with those~~The CEO pay opportunity of ~~shareholders and convert to shares, and cancellation provisions lift, over~~$22.5 million is the ~~three years following grant. NEOs receive dividend equivalents with respect~~amount the CMDS Committee awarded to the ~~RSUs~~CEO in early 2015 for 2014 performance. This amount differs from, but is not a replacement for, the disclosure required in the ~~form of additional RSUs, which are subject to the same vesting, cancellation and payment provisions as the RSUs to which dividend equivalents relate. RSUs provide for voting rights.~~ ~~In addition to competition, other cancellation events for 2011 awards include clawback, conduct constituting cause, disclosure of proprietary information and solicitation of employees or clients.~~
~~c.      MSCIP Deferred Cash-Based Awards~~
These deferred cash-based awards offer participants the ability to notionally invest their awards in certain reference investments. MSCIP awards are payable, and cancellation provisions lift, over the two years following grant. Participants are unsecured general creditors of the Company with respect to their MSCIP balances.
~~3. Voluntary Deferred Compensation Programs~~
Historically, the Company offered voluntary programs intended to provide employees with financial planning opportunities generally consistent with those offered by competitors. No Company contributions were made to these programs. Participants are unsecured general creditors of the Company with respect to their balances. The Company did not offer voluntary deferred compensation programs to the NEOs for 2011. The programs in which the NEOs participate with respect to prior year compensation are described under the “2011 Nonqualified Deferred“2014 Summary Compensation Table.”
~~4. Pension and Retirement~~
With the exception of Mr. Kelleher, who is identified as “Code Staff” and whose deferred compensation structure is prescribed by the remuneration code of the U.K. Prudential Regulatory Authority, the NEOs received their 2014 compensation in the same form as described in the chart above. Section IV.A contains the 2014 compensation decisions for each NEO.
I.E.  “Say on Pay” Vote in 2014 and Shareholder Engagement
Morgan Stanley is committed to open and ongoing communication with our shareholders, and takes the opportunity to engage with shareholders to understand their perspective and provide information about Morgan Stanley’s programs, performance assessment, and decision-making process. Morgan Stanley holds an advisory vote on executive compensation (“Say on Pay”) each year.
A substantial majority (92%) of the votes cast at the May 2014 annual meeting of shareholders were in favor of the “Say on Pay” proposal. In anticipation of the 2015 “Say on Pay” vote, Company management solicited feedback from shareholders and from proxy advisory firms on the Company’s 2014 compensation program, and conveyed the feedback received and the results of the 2014 “Say on Pay” vote to the CMDS Committee.
Our current retirement and savings plans serve an important role in attracting and retaining senior executives. Company-provided retirement benefits in the U.S. include tax-qualified 401(k) plans and a frozen pension plan (the Employees Retirement Plan (ERP)) for eligible employees hired before July 1, 2007. Effective after December 31, 2010, no further benefit accruals will occur under the ERP. Long-serving NEOs may also be eligible to participate in the Company’s global Supplemental Executive Retirement and Excess Plan (SEREP).
The SEREP was originally intended to compensate for the limitations imposed by the Internal Revenue Service on qualified pension plan benefits and eligible pay. When it was determined that SEREP benefits were no longer needed to remain competitive, the SEREP was generally closed to new participants.
~~Company contributions to savings plans for NEOs are disclosed in the “2011 Summary Compensation Table.” Pension arrangements for NEOs are described under the “2011 Pension Benefits Table.”~~
~~5. Health and Insurance Benefits~~
~~All NEOs are eligible to participate in Company-sponsored health and insurance benefit programs available in the relevant jurisdiction.In the U.S., higher-paid employees pay more to participate in the Company’s medical plan.~~

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~~Compensation Element~~ ~~Description~~ ~~Other Features and Comments~~
~~6. Personal Benefits~~
~~The Company provides limited personal benefits to certain of our NEOs. We believe these benefits are necessary for competitive reasons.~~
The Company’s Board-approved policy authorizes the Chief Executive Officer to use the Company’s aircraft. For personal travel, Mr. Gorman entered into an aircraft time-share agreement with the Company as of January 1, 2010 and, since entering into such agreement, has fully reimbursed the Company for the incremental cost of his personal use of the Company’s aircraft.
~~Personal benefits provided to NEOs are discussed under the “2011 Summary Compensation Table.”~~
~~7. Severance~~
~~NEOs are not contractually entitled to cash severance payments upon termination of employment.~~ ~~Upon retirement, NEOs may be eligible to participate in retiree medical coverage under the Morgan Stanley Medical Plan on the same basis as other retired employees.~~
* Mr. Kelleher is consideredThe CMDS Committee will continue to ~~be “Code Staff” as defined by~~factor shareholder feedback, including the ~~U.K. Financial Services Authority (FSA) for 2011~~“Say on Pay” vote results, into its consideration of executive compensation structure and ~~accordingly, his long-term incentive compensation awards differ from those granted to other NEOs as prescribed by the FSA and as described in Section IV.C.~~determination of NEO pay levels.

~~IV.~~II. ~~2011~~ Compensation ~~Process~~Objectives and Strategy
Morgan Stanley is committed to responsible and effective compensation programs. The CMDS Committee continually evaluates the Company’s compensation programs with a view toward balancing the following key objectives, all of which support shareholders’ interests:
Deliver Pay for Sustainable Performance.    Our executive compensation program emphasizes discretionary variable annual performance compensation and long-term incentive compensation (LTIP awards) with specific financial targets. Variable annual performance compensation and long-term incentive compensation are adjusted year-over-year to appropriately reward annual achievement of the Company’s financial and strategic objectives. In addition, long-term incentive compensation serves shareholders’ interests by conditioning payment upon future performance that executes on the Company’s long-term business strategy. The structure of the Company’s compensation program balances the objectives of delivering returns for shareholders and providing appropriate rewards to motivate superior individual performance.
Align Executive Compensation with Shareholders’ Interests.    The Company delivers a significant portion of incentive compensation in deferred equity awards to align employee interests with those of shareholders. The CMDS Committee believes that linking compensation amounts to performance and delivering a significant portion of annual and long-term incentives as deferred equity awards that are impacted, up or down, by future stock price performance and are subject to cancellation and clawback over a multi-year period, help motivate executives to achieve financial and strategic goals. In addition, members of the Operating Committee, which includes all of the NEOs, are required to retain shares and equity awards at least equal to 75% of the after-tax shares they receive as compensation for service on the Operating Committee. Executives are also prohibited from engaging in hedging strategies, selling short or trading derivatives with Company securities. These policies tie a significant portion of our executive officers’ compensation directly to the Company’s stock price. Our executives also do not engage in pre-established written plans for trading in Company securities, commonly referred to as “Rule 10b5-1 programs.”
Attract and Retain Top Talent.    The Company competes for talent globally with investment banks, commercial banks, brokerage firms, hedge funds and other companies offering financial services, and the Company’s ability to sustain or improve its position in this highly competitive environment depends substantially on our ability to continue to attract and retain the most qualified employees. In support of our recruitment and retention objectives, we continually monitor competitive pay levels and we structure our incentive awards to include vesting, deferred payment, and cancellation and clawback provisions that protect the Company’s interests.
Mitigate Excessive Risk-Taking.    The CMDS Committee is committed to responsible and effective compensation programs that mitigate excessive risk-taking by employees. The CMDS Committee is advised by the Company’s Chief Risk Officer and the CMDS Committee’s independent compensation consultant to help ensure that the structure and design of compensation arrangements disincentivize unnecessary or excessive risk-taking that threatens the Company’s interests or gives rise to risk that could have a material adverse effect on the Company. The Chief Risk Officer evaluated Morgan Stanley’s current compensation programs and determined that such programs do not encourage such behavior, due in part to (i) our balance of fixed compensation and variable compensation; (ii) our balance between short-term and long-term incentives; (iii) our mandatory deferrals into both equity-based and cash-based incentive programs; (iv) the governance procedures followed in making compensation decisions; (v) the risk-mitigating features of our awards, such as cancellation and clawback provisions; and (vi) our equity ownership commitment. (See also “Compensation Governance – Consideration of Risk Management in Determining Compensation.”)
III. Framework for Making Compensation Decisions
III.A. Factors Considered in 2014 Compensation Decisions

The ~~2011 incentive~~2014 compensation of the NEOs was determined at the discretion of the CMDS Committee after consideration of Company business results and strategic performance ~~against priorities established by the Committee at the beginning of the year,~~and individual performance, as well as compensation expense considerations, competitor compensation data, relative pay considerations and such other considerations set forth in Section IV.A. The pre-established performance priorities are non-formulaic in nature, do not require specific performance targets or preset goals to be met prior to the awarding of compensation and are not assigned any specific weighting. To the extent the performance priorities were a factor in the CMDS Committee’s determination of compensation of the CEO and other NEOs, they are discussed in Section IV.B below.
A. ~~Factors Considered in 2011 Compensation Decisions~~
~~Performance Priorities and Metrics.~~    At the beginning of 2011, in consultation with the full Board, the CMDS Committee approved specific performance priorities representing qualitative and/or quantitative measures in five key areas: (1) Company financial performance; (2) business development; (3) financial and operating risk management; (4) international businesses and alliance with MUFG; and (5) culture and stakeholder engagement.
1. ~~Company financial performance.~~    ~~The CMDS Committee approved the following Company-wide financial performance priorities, which reflected the measures primarily focused upon in light of the then-current market conditions:~~
~~Absolute returns, as measured by return on equity;~~
~~Relative returns, as measured by return on equity and total shareholder return relative to a comparison group;~~
~~Capital strength, as measured by the Company’s Tier 1 capital ratio; and~~
~~Credit rating, as measured by the current rating assigned by the major rating agencies and outlook.~~
For 2011, the Company’s comparison group for purposes of setting the financial performance priorities included: Bank of America Corp., Barclays Plc, Citigroup Inc., Credit Suisse Group, Deutsche Bank AG, Goldman Sachs Group Inc., JPMorgan Chase & Co., UBS AG and Wells Fargo & Company.
2.
~~Business development.~~    ~~Priorities were approved for each primary business unit related to business development, client franchise and products. For Institutional Securities, it was the attainment of top~~

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rankings in advisory and equity underwriting, and market-share improvement for both Fixed Income and Equity Sales and Trading. For the Global Wealth Management Group, it was the continued integration of the Morgan Stanley Smith Barney (MSSB) joint venture as measured by the technology platform conversion, pre-tax profit margin, net new assets and net fee-based asset flows. For Asset Management, it was the continued refocusing of the business around core strengths, performance against investment benchmarks, and net new flows.
competitor compensation data and, with respect to the CEO, benchmarking data, and other considerations set forth below.
3. ~~Financial and operating risk management.~~    Priorities included the further strengthening of risk management and controls, compliance with risk policies and execution on internal initiatives. The Committee also set objectives for investments in IT projects and processes that helped the Company improve productivity, manage risks and control costs.
4. ~~International businesses and MUFG alliance.~~    For the growth of the Company’s international businesses, a 2011 priority was progress in increasing the international revenue mix. With respect to the Company’s alliance with MUFG, priorities included executing on the Japan securities joint venture and growing non-Japan activities, as measured by market share in advisory and securities underwriting businesses.
5. ~~Culture and stakeholder engagement.~~    The 2011 objectives for the Company’s culture and stakeholder engagement related to the development of a strong leadership team that embodies the “One Firm” Morgan Stanley culture, as measured by a Board assessment of its leadership and the culture it set for the Company, and the Company’s efforts to strengthen external relationships with key constituencies, as measured by a Board assessment of the Company’s reputation and its relationship and constructive dialogues with its clients, shareholders and regulators.

~~Compensation Expense Considerations.~~    Company and Individual Performance Review.~~Prior to~~    To inform its use of discretion in determining ~~individual~~ NEO ~~incentive~~ compensation for 2014, the CMDS Committee ~~reviewed~~evaluates Company and considered the relationship between Company performance, total compensation expense (which includes fixed compensation costs such as base salaries, benefits and commissions) and incentive compensation as a subset of overall compensation expense.individual performance. The CMDS Committee ~~approved an incentive~~does not utilize formulaic or non-formulaic financial performance goals or targets, and performance metrics are not assigned any specific weighting for purposes of determining the compensation ~~program for 2011 that met~~awarded to the ~~Committee’s objective of balancing adequate returns for shareholders with appropriate rewards to retain~~CEO or other NEOs. As market conditions and ~~motivate top talent.~~
~~Market Data~~the macroeconomic environment impact the financial services industry and ~~Review.~~    ~~The CMDS Committee uses comparison groups to understand market practices and trends and to evaluate the competitiveness of our compensation programs. Throughout the~~can change dramatically during a year, the CMDS Committee ~~reviewed analyses~~assesses financial performance at the end of ~~our competitors’ pay levels, including historical compensation data obtained from analyses~~the year in light of ~~public filings~~the most recent facts and ~~compensation surveys conducted by consultants~~circumstances.
For 2014, the CMDS Committee evaluated Company performance against a number of financial and market metrics on an ~~unattributed~~absolute basis and ~~compensation plan design. Our~~relative to a comparison group ~~consists~~comprised of ~~companies that either directly compete with us for business and/or talent or are global organizations with scope, size or other characteristics similar to the Company’s.~~ Bank of America Corp., Barclays Plc, Citigroup Inc., Credit Suisse Group, Deutsche Bank AG, Goldman Sachs Group Inc., JPMorgan Chase & Co., UBS AG, and Wells Fargo & Company ~~are the~~(Comparison Group). Our Comparison Group consists of companies that ~~we consider~~either directly compete with us for ~~purposes~~business and/or talent or are global organizations with scope, size or other characteristics similar to those of the Company. No single financial or market metric controlled compensation decisions; rather, competitor data were used to help the CMDS Committee better understand Company performance.
Performance Priorities.    The CMDS Committee and the full Board review performance priorities at the beginning of each year to guide their evaluation of Company and individual performance throughout the year. To inform its use of discretion in determining NEO compensation for 2014, the ~~CEO, CFO~~CMDS Committee reviewed performance priorities in the following areas:
Financial performance
Business performance and ~~other functional heads~~development for each primary business unit
The strategic alliance with MUFG
Financial and operational risk controls
Operations and technology & data infrastructure
Firm compensation and development
Board assessment of risk culture, leadership, strategy and reputation
These performance priorities are a directional assessment made at the beginning of the year and their attainment or non-attainment does not correspond to any specific compensation decision.
Market Data and Review.    The Company uses the Comparison Group to understand market practices and trends and to evaluate the competitiveness of our ~~business.~~compensation programs and inform its discretionary compensation decisions. Throughout the year, the CMDS Committee reviewed analyses of our competitors’ pay levels, including historical compensation data obtained from public filings and compensation surveys conducted by consultants on an unattributed basis, as well as compensation plan design. The market compensation information considered by the CMDS Committee is either prepared or validated by its independent compensation consultant.
Benchmarking Target CEO Pay.    The CMDS Committee, ~~does not~~in consultation with its independent compensation consultant, established a target ~~NEO~~range for 2014 compensation ~~at a certain~~for the CEO of $23 million or more for superior performance to $13 million or less for performance substantially below expectations. To inform its decision-making with respect to the appropriate target range, ~~compared to any comparison group. Rather,~~ the CMDS Committee ~~uses this information~~reviewed 2013 compensation levels for the following two sample groups, which are intended to ~~better understand~~reflect institutions of similar size, scope and complexity: (i) the ~~market~~13 financial companies in the S&P 100 (AIG, Allstate, American Express, Bank of New York Mellon, Capital One Financial, MasterCard, MetLife, US Bancorp and ~~to inform our focus on pay-for-performance.~~the five U.S. companies within the Comparison Group) and (ii) the five U.S. companies within the Comparison Group. The CMDS Committee ~~also reviews~~then utilized the range of results as a benchmark from which to set a target range for 2014 compensation for the CEO.
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Input and ~~discusses trends regarding~~Recommendations from the CEO, Independent Directors and CMDS Committee’s Independent Consultant.    At the end of the year, Mr. Gorman presented the CMDS Committee with accomplishments, performance assessments and compensation recommendations for each NEO other than himself. The CMDS Committee reviewed these recommendations with the CMDS Committee’s independent compensation consultant to assess whether they were reasonable compared with the market for executive talent and met in executive session to discuss the performance of our CEO and the other NEOs and to determine their compensation. In addition, the CMDS Committee reviewed proposed CEO incentive compensation with ~~its~~the full Board (other than Mr. Gorman) in executive session.
Compensation Expense Considerations.    Prior to determining individual NEO incentive compensation, ~~consultant.~~the CMDS Committee reviewed and considered the relationship between Company performance, total compensation expense (which includes fixed compensation costs such as base salaries, allowances, benefits, and commissions) and incentive compensation as a subset of overall compensation expense. This furthers the balancing of the objectives of delivering returns for shareholders and providing appropriate rewards to motivate superior individual performance.
Global Regulatory Principles.    The Company’s compensation practices are subject to oversight by our regulators in the U.S. and internationally. Throughout 2014, senior management briefed the CMDS Committee on relevant regulatory developments, including with regard to the mix of incentive compensation and the portion of compensation that should be deferred for certain populations, as well as principles of balanced risk-taking. For example, the Company is subject to the Federal Reserve’s guidance that is designed to help ensure that incentive compensation paid by banking organizations does not encourage imprudent risk-taking that threatens the organizations’ safety and soundness. The Company is also subject to the current and pending compensation-related provisions of the Dodd-Frank Act and the remuneration code of the U.K. Prudential Regulatory Authority which prescribes the deferred compensation structure for certain employees who are identified as “Code Staff.”

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Relative Pay Considerations.We place importance on the pay relationships among members of our Operating Committee because we view our Operating Committee members as highly talented executives capable of rotating among the leadership positions of our businesses and key functions. Our goal is always to be in a position to appoint our most senior executives from within our Company and to incent our people to aspire to senior executive roles. At year-end, the CMDS Committee reviewed the relative differences between the compensation for the CEO and other NEOs and between the NEOs and other members of the Operating Committee. ~~Consideration is also given to the year-over-year change in compensation for the CEO and NEOs relative to changes in the aggregate bonus pool and other executives in similar business areas.~~

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~~Input~~Clawback Policies and ~~Recommendations from~~Procedures. In 2008, Morgan Stanley implemented a clawback for a substantial portion of incentive compensation, and in the ~~Chief Executive Officer, Independent Directors~~years since, we have expanded the application of the clawback to cover all incentive compensation awards and ~~CMDS Committee’s Independent Consultant.~~ ~~All~~a broad scope of ~~our NEOs participated in our “360 degree” feedback process as part of their individual performance evaluations. Our Global Head of~~employee behavior. (See Section IV.B “2014 Annual Compensation Program Details.”) The Company’s independent control functions (the Internal Audit, Legal, Risk, Human Resources ~~discussed with the CMDS Committee the results of this~~and Finance departments) take part in an enhanced, formalized review process for ~~our CEO,~~identifying and evaluating situations occurring throughout the course of the year that could require clawback or cancellation of previously awarded compensation, as well as ~~Mr. Gorman’s business~~adjustments to current year compensation. Clawbacks of previously awarded compensation are reviewed quarterly with a committee of senior management and ~~individual accomplishments during the year. At the end of the year, Mr. Gorman presented~~reported to the CMDS Committee with a performance assessment and compensation recommendations for each NEO other than himself. The CMDS Committee reviewed these recommendations with the Committee’s independent compensation consultant to assess whether they were reasonable compared with the market for executive talent and met in executive session to discuss the performance of our CEO and the other NEOs and to determine their year-end compensation.Committee. In addition, the CMDS Committee ~~considered input on NEO compensation from the other independent directors.~~

~~Global Regulatory Principles.~~ The Company’s compensation practices are subject to oversight by our regulators in the U.S. and internationally. Throughout 2011, senior management briefed the CMDS Committee on relevant regulatory developments in respect of compensation, including with regard to the mix of long-term incentive compensation and the portion of compensationadopted a policy that ~~should be deferred~~sets forth standards for certain populations, as well as principles of balanced risk-taking. For example, the Board of Governors of the U.S. Federal Reserve System (the Federal Reserve), together with other U.S. federal banking regulators, issued final guidance in June 2010 to help ensure that incentive compensation paid by banking organizations does not encourage imprudent risk-taking that threatens the safety and soundness of the organization, and in 2011 the Federal Reserve continued to develop its policies on compensation during its ongoing review of incentive compensation policies and practices of the Company and other banking organizations. In addition, the FSA prescribed the deferred compensation structure, including minimum deferral rates and the portion of incentive compensation granted as equity awards, for certain executives and employees working in the U.K, including Mr. Kelleher.

~~“Say on Pay” Vote in 2011.~~ ~~As previously disclosed, at the 2011 annual meeting of shareholders, in alignment with the recommendations of the Board, a significant majority of our shareholders who voted~~managers on the ~~matter approved, by advisory resolution, the~~use of discretion when making annual compensation ~~of the Company’s executives as disclosed in the Company’s 2011 proxy statement (the 2011 “say on pay” vote)~~decisions and approved an advisory vote to hold an annual advisory vote on the compensation of executives as disclosed in the proxy statement. The CMDS Committee believes that an annual advisory vote on executive compensation is consistent with our long-standing practice of seeking the views of,considerations for assessing risk management and engaging in discussions with, our shareholders on corporate governance matters and our executive compensation philosophy, policies and practices. In that regard, and in anticipation of the 2011 “say on pay” vote, Company management solicited feedback from our shareholders and from proxy advisory services on the Company’s 2010 compensation program and conveyed the feedback received to the CMDS Committee. Following the 2011 annual meeting of shareholders, the CMDS Committee considered the results of the 2011 “say on pay” vote, as well as the insights gained from our dialogue with shareholders, in determining 2011 compensation. The changes to the 2011 compensation program described in Sections I and III.A of this CD&A reflect the CMDS Committee’s evaluation of the vote results and dialogue, as well as the CMDS Committee’s and the Company’s ongoing efforts to improve our executive compensation program and the quality of our executive compensation disclosures.outcomes.

Tax ~~Deductibility under Section 162(m) of the Internal Revenue Code.~~ Deductibility.Section 162(m) of the Internal Revenue Code (Section 162(m)) limits the tax deductibility of compensation for certain executive officers (other than the ~~Chief Financial Officer)~~CFO) that is more than $1 million, unless the compensation qualifies as “performance-based.” To qualify as “performance-based” compensation, the award must be based on objective, pre-established performance criteria approved by shareholders or otherwise qualify as “performance-based” under Section 162(m). While our policy, in general, is to ~~preserve~~maximize the tax deductibility of compensation ~~for~~paid to executive officers covered under Section 162(m), the CMDS Committee nevertheless may authorize awards or payments that might not be tax deductible if it believes they are in the best interests of the Company and its shareholders and individuals may receive non-deductible payments resulting from awards made prior to becoming an executive officer. To qualify as “performance-based” compensation, the award must be based on objective, pre-established performance criteria approved by shareholders. ~~This formula imposes a cap of 0.5% of our adjusted pre-tax earnings on “performance-based” compensation paid to designated executives who may be subject to the Section 162(m) limit.~~

B.III.B.

Evaluating Company and Individual Performance*

The CMDS Committee ~~evaluated 2011~~considered the factors described below in determining compensation for our NEOs: Mr. Gorman, the CEO; Ms. Porat, the Chief Financial Officer; Mr. Fleming, the President of Wealth Management and Investment Management; Mr. Kelleher, the President of Institutional Securities; and Mr. Rosenthal, the Chief Operating Officer.

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Company Financial Performance.^(1)(2)(3) Management reviewed the Company’s estimated 2014 financial performance with the CMDS Committee in December 2014, and the CMDS Committee assessed full-year financial results before finalizing compensation decisions in January 2015. The results below for the Company and Institutional Securities are shown both inclusive and exclusive of the impact of the subsequent event⁽¹⁾. The results considered by the CMDS Committee in January 2015 for compensation purposes were exclusive of the impact of the subsequent event.

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Company-wide. Morgan Stanley’s TSR⁽¹³⁾ was 25% for 2014 and the Company reported improved financial performance over 2013. The Company reported net revenues of $34.3 billion and income from continuing operations applicable to Morgan Stanley of $3.5 billion, or $1.61 per diluted share for 2014. Excluding the impact of DVA and the subsequent event, revenues were $33.6 billion⁽⁷⁾ and income from continuing operations applicable to Morgan Stanley was $5.7 billion⁽⁸⁾, or $2.74 per diluted share⁽¹⁴⁾.

•

Institutional Securities. Institutional Securities reported a pre-tax loss from continuing operations of $(58) million in 2014, compared with pre-tax income of $946 million in the prior year. Excluding the impact of DVA⁽⁴⁾and the subsequent event, pre-tax income from continuing operations was $2.1 billion⁽¹⁵⁾, compared with $1.6 billion⁽¹⁵⁾ in 2013. Results were driven by strong performance in its top ranked Institutional Equities and Investment Banking businesses⁽⁵⁾, partially offset by lower revenues in Fixed Income and Commodities. In 2014, our Japan securities joint venture with MUFG continued to be successful, achieving the #1 rank in M&A and cross border M&A in Japan league tables⁽⁵⁾.

•

Wealth Management. Wealth Management reported pre-tax income from continuing operations of $3.0 billion compared with $2.6 billion in the prior year, and a pre-tax margin⁽⁶⁾ of 20% compared with 18%⁽⁷⁾ in 2013. Higher margins reflected increased deposits and asset optimization, higher equity markets, and expense controls.

•

Investment Management. Investment Management reported pre-tax income from continuing operations of $664 million in 2014 compared with $1.0 billion in the prior year, and a pre-tax margin⁽⁶⁾ of 24% compared with 33%⁽⁷⁾ in 2013. These results reflect higher average assets under management offset by lower gains on investments in the Merchant Banking and Real Estate businesses and the absence of a carried interest catch-up that occurred in the prior year.

Strategic Execution. During 2014, the Company achieved several milestones in connection with its overall strategy to enhance shareholder returns:

•

Achievement of top-three ranking globally in Announced Mergers and Acquisitions and Equity underwriting⁽⁵⁾, and the top ranking in Equities Sales and Trading wallet share⁽⁵⁾

•

Reduction of Basel III RWAs⁽¹⁰⁾ in the Fixed Income and Commodities business, on track to achieve our target, with an overall reduction from approximately $280 billion at year-end 2012 and $210 billion at year-end 2013 to $188 billion at year-end 2014 (excluding lending) and continuing to improve capital efficiency

Progress toward a ~~year-over-year basis~~strategic solution for the Commodities franchise, with ~~respect~~the sale of TransMontaigne and CanTerm Canadian Terminals and commitment to ~~financial~~explore strategic options for the Global Oil Merchanting business

•

Increase in Wealth Management pre-tax margins⁽⁶⁾ from 18% in 2013 to 20%⁽⁷⁾ in 2014

Continued execution of bank strategy to support growth in net interest income and lending growth in Wealth Management and Institutional Securities, with increased bank assets and loan balances in 2014 over the prior year

•

Reduction in the non-compensation efficiency ratio (adjusted non-compensation expenses / net revenue)⁽¹¹⁾

Doubling of the quarterly common stock dividend and share repurchase program over the prior year

As a result of these and other ~~factors, including~~actions, Morgan Stanley’s overall 2014 performance was significantly improved as reflected by TSR of 25%⁽¹³⁾, and the Company entered 2015 well positioned strategically and with strong capital and liquidity. While ROE improved, it was still below expectation, and management has articulated a clear path to ROE improvement. These results, as well as the performance ~~priorities established earlier~~indicated above, are reflected in the ~~year. The~~ CMDS ~~Committee specifically considered the following factors in determining NEO incentive compensation:~~Committee’s pay decisions.

•

~~Company Financial Performance~~. In December 2011, management reviewed the Company’s year-over-year estimated financial performance for 2011 with the CMDS Committee. Before finalizing compensation decisions, the CMDS Committee reviewed the Company’s final financial results, including the following:

The Company had net revenues for 2011 of $32.4 billion, up 3% from 2010, and income from continuing operations of $1.26 per diluted share. Excluding the impact of the Company’s Debt-Related Credit Spreads on borrowings that are accounted for at fair value, revenues were $28.7 billion, down 11%. Operating results were adversely impacted by strategic actions that the Company undertook over the course of the year to strengthen capital and liquidity. These included the conversion of MUFG’s preferred shares into common stock, which resulted in a negative adjustment in the calculation of basic and fully diluted earnings per share of approximately $1.7 billion, as well as a comprehensive settlement with MBIA that resulted in a pre-tax loss of $1.7 billion.

As a result of the aforementioned strategic actions undertaken by the Company, Morgan Stanley significantly enhanced its common equity, liquidity and capital levels. As of December 31, the Company’s Tier 1 capital ratio under Basel I was 16.6% and its Tier 1 common ratio was 13.0%.

The Institutional Securities Business reported net revenues of $17.2 billion, up 6% from 2010. Investment Banking net revenues were $4.2 billion, down 2% from 2010, as lower underwriting revenues were partially offset by increased advisory revenues, yet the Company maintained its leading positions in several important areas. Net revenues in Equity Sales and Trading were $6.8 billion, up 40% from 2010 reflecting, among other things, strength in derivatives, our electronic platform and positive revenue of $619 million related to the impact of the widening of the Company’s Debt-Related Credit Spreads on borrowings that are accounted for at fair value. Fixed Income and commodities sales and trading net revenues were $7.5 billion, up 27% from 2010 reflecting, among other things, high levels of market volatility and client activity in interest rate and currency products and positive revenues of $3.1 billion related to the impact of the widening of the Company’s Debt-Related Credit Spreads on borrowings that are accounted for at fair value, partly offset by the impact of a stressed credit environment and the loss related to the MBIA settlement.

The Global Wealth Management Group delivered net revenues of $13.4 billion, up 6% from 2010 – driven by higher asset management and net interest revenues. Pre-tax profit margin increased modestly to 10% from 9% a year earlier. Net fee-based asset flows were $42.5 billion, up 30% from 2010, and net new assets increased by $36 billion.

The Asset Management business had net revenues of $1.9 billion, down from $2.7 billion in 2010, as higher results in Traditional Asset Management were offset by lower gains on principal investments in the Merchant Banking and Real Estate Investing business. Assets under management or supervision were $287 billion, up 6% from 2010, and 75% of our Long-Only strategies outperformed their benchmarks on a 3-, 5- and 10-year basis.

The Company’s return on average common equity from continuing operations was 3.9%, which was below the ROE performance priority for 2011 and was an important performance measure considered by the CMDS Committee.

* A detailed analysis of the Company’s financial and operational performance for 2011 is contained in the Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of the 2011 Form 10-K. Pre-tax profit margin and the pro forma Tier 1 common ratio under the proposed Basel III capital framework are non-GAAP financial measures that the Company considers useful measures for the Company and investors to assess operating performance and capital adequacy. For further information regarding these measures, please see pages 49, 50 and 53 of the 2011 Form 10-K.

•

~~Chief Executive Officer~~CEO and Other NEO Performance. In ~~addition to~~determining the ~~Company’s financial~~annual performance outlined above as well as progress against the other performance priorities identified in Section IV.A, the CMDS Committee’s evaluation of Mr. Gorman’s performance as Chief Executive Officer included his 2011 accomplishments, which consistedcompensation of the ~~following:~~

~~Strengthening the Institutional Securities Business:~~ ~~Mr. Gorman’s focus on reinforcing the Company’s leadership in Investment Banking was evidenced by revenue share gains~~CEO and top-tier positions on industry league tables in global completed and announced M&A, global IPOs and global Equity underwriting. Mr. Gorman also continued to execute on the Company’s strategic plan to build out the Sales and Trading business by realizing revenue share gains in both Equity and Fixed Income. In addition, Mr. Gorman continued to focus on internal initiatives to strengthen relationships and services for clients.

~~Driving Final Stages of the Integration of MSSB:~~ Under Mr. Gorman’s leadership, the Company continued to advance the integration of MSSB, which included the initial rollout of a new technology platform. The integration of all 17,000 U.S. financial advisors onto a single operating platform is an important step in our plan to ensure that all clients are offered our full range of capabilities, improve margins, increase productivity and reduce costs. Additionally, the Global Wealth Management Group realized the highest net managed money flows since the inception of the MSSB joint venture.

~~Continued Repositioning and Revitalization of Asset Management to Drive Performance:~~ Mr. Gorman continued to refocus Asset Management on realizing the competitive advantages within its institutional businesses. During 2011 Asset Management attracted positive net flows of $25.8 billion and delivered solid investment performance to its clients.

~~Executing key strategic actions to strengthen capital and liquidity and position the Company for Basel III:~~ Under Mr. Gorman’s leadership, the Company effected a conversion of MUFG’s Series B preferred stock to common shares, which resulted in an increase in the Company’s Tier 1 common ratio. Mr. Gorman also fulfilled a key priority through a comprehensive settlement with MBIA, which terminated outstanding credit default swap protection purchased from MBIA on commercial mortgage backed securities – thereby reducing risk-weighted assets and increasing the Company’s 2012 pro forma Tier 1 common ratio under the proposed Basel III capital framework. The Company also increased its global liquidity reserve to $182 billion at year-end.

~~Deepening the Company’s Strategic Alliance with MUFG:~~ ~~Mr. Gorman strengthened the Company’s relationship with MUFG, negotiating the conversion of MUFG’s preferred stake into common equity and enhancing the loan marketing joint venture.~~

~~Fostering Employee Engagement and Affirming Company Values:~~ Mr. Gorman communicated with employees at all levels of the organization on a regular basis to discuss the Company’s views and strategy on a variety of business matters. Under Mr. Gorman’s leadership, the Company redoubled its commitment to expressing a cohesive vision of the Company’s values and culture to the global workforce. Mr. Gorman also completed a successful transition to Chairman of the Board of Directors upon the retirement of John Mack.

~~Positioning the Company’s Businesses for Regulatory Developments:~~ Mr. Gorman continued to pursue a strategy of positioning the Company for financial regulatory developments. Mr. Gorman continued to pursue a model consistent with the legislative changes emanating from the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), including reallocating capital and the balance sheet away from proprietary businesses and reinvesting in client businesses, which will help position the Company to deliver more predictable, higher-quality revenues in the new regulatory environment.

•

~~Other Executive Performance~~. ~~In determining the compensation of~~ other NEOs, the CMDS Committee weighed the Company’s overall financial performance, progress toward strategic objectives, and, as applicable, business unit ~~performance, and evaluated each NEO’s~~performance. In addition, the Committee also considered the following individual ~~contributions to the Company’s progress against the other performance priorities identified in Section IV.A, as described below:~~contributions:

~~Ms. Porat, Executive Vice President~~Mr. Gorman’s continued outstanding leadership of the Company, including his efforts in articulating and ~~Chief Financial Officer:~~ ~~The CMDS Committee evaluated Ms. Porat’s role in improving financial controls~~executing a Company-wide strategy to enhance profitability, share price and managing related operational risk. The Committee also assessed Ms. Porat’s leadership in further enhancing the Company’s liquidity position, diversifying funding, advancing its strong capital positionmarket capitalization; maintaining sound risk management and ~~driving expense management through the Office of Re-engineering. Additionally, the CMDS Committee evaluated Ms. Porat’s regular communications with investors, regulators~~controls; and ~~analysts throughout the year to explain the Company’s business initiatives~~promoting cultural cohesion and ~~strategy.~~engagement among employees.

~~Mr. Fleming, Executive Vice President~~Ms. Porat’s execution of an efficient liquidity and ~~President of Asset Management~~funding program; driving successful capital management processes; working closely with global and ~~Global Wealth Management:~~ ~~The Committee considered progress made~~U.S. regulators, investors, counterparties and rating agencies; and her leadership with respect to initiatives for talent globally, with particular focus on women throughout the continuing integration of the MSSB joint venture, which is on track for completion in 2012. Under Mr. Fleming, the business proceeded on pace with the integration of a new technology platform for financial advisors, and increased fee-based asset flows and net new assets – both the highest since the inception of the joint venture. Within Asset Management, the CMDS Committee assessed Mr. Fleming’s role in delivering solid investment performance and increasing flows while repositioning the business around key strengths.Company.

Mr. ~~Kelleher, Executive Vice President~~Fleming’s strong business results for Wealth Management and ~~Co-President~~Investment Management, including increased profit before tax, continued margin improvement and investment performance, transition of the merchant banking/real estate fund business model in light of the Volcker Rule, efforts to increase collaboration with Institutional ~~Securities:~~ ~~The CMDS Committee evaluated~~ Securities, and his leadership in improving morale across the businesses.

Mr. Kelleher’s ~~role in building a~~ strong ~~management team in the~~business results for Investment Banking and Equities Sales ~~and~~& Trading business, including efforts to enhance ROE of Fixed Income and Commodities, increase collaboration with Wealth Management and position Institutional Securities for regulatory changes, and reduced Fixed Income Basel III RWAs ahead of previously determined targets, as well as ~~expanding client relationship initiatives. Additionally, the Committee considered~~ Mr. Kelleher’s successful management of his global role, ~~in increasing the Company’s presence in Europe~~global regulatory obligations, and the business’s efficient use of capital and balance sheet. Under Mr. Kelleher’s leadership, Equity Sales and Trading had a very strong year, driven by revenue share gains in cash financing and derivatives; Fixed Income Sales and Trading also increased revenue share (excluding DVA and the impact of the MBIA settlement), with contributions from focus areas such as interest rates and currencies.client interactions across many jurisdictions.

Mr. ~~Taubman, Executive Vice President~~Rosenthal’s role in advising the Board of Directors and ~~Co-President~~Operating Committee on the Company’s strategic and cost reduction initiatives; leadership of ~~Institutional Securities:~~ ~~The CMDS Committee considered the strong performance~~several support functions including Operations and Technology and Data; chairing of the ~~Investment Banking business under Mr. Taubman’s leadership, including gains in revenue share~~Financial Holding Company Governance Committee that coordinates important cross-functional operational improvement and ~~continued strength~~regulatory initiatives; and becoming chairman of the Investment Banking franchise, as evidenced by the Company ranking #1 in global completed M&A, #2 in global IPOs, global Equity and global announced M&A in 2011.* The Company continues to be the underwriter of choice for equity and initial public offerings and has established a leading market position in acquisition finance. The Committee also considered Mr. Taubman’s leadership role in the joint venture with MUFG and his continuing efforts to strengthen client relationships.Company’s U.S. bank subsidiaries.

C.	~~2011 Compensation Decisions~~

The CMDS Committee’s compensation awards for the NEOs for 2011 are set forth in the following table. The CMDS Committee granted 2011 incentive compensation for the NEOs in a mix of PSUs, RSUs and MSCIP deferred cash-based awards that is weighted toward equity, consistent with our long-standing objective of aligning executive compensation with shareholder interests. For Mr. Gorman, 72% of the incentive compensation was delivered in equity-based awards and 28% of the incentive compensation was delivered in MSCIP awards. For each other NEO, other than Mr. Kelleher, 60% of the incentive compensation was delivered in equity-based awards and 40% of the incentive compensation was delivered in MSCIP awards. For Mr. Kelleher, as prescribed by the FSA, 50% of the incentive compensation was delivered in equity awards and 50% of the incentive compensation was delivered in MSCIP awards.

*	~~Source: Thomson Reuters – for the period of January 1, 2011 to December 31, 2011 as of January 3, 2012.~~

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IV.

Compensation Decisions and Program

IV.A. Compensation

Decisions

The table below shows how the CMDS Committee viewed its compensation decisions for ~~2011~~2014 for the NEOs. This view differs from, but is not a replacement for, the disclosure required in the ~~“2011~~“2014 Summary Compensation Table.”

Mr. Gorman Ms. Porat Mr. Fleming Mr. Kelleher Mr. Taubman
Fixed cash compensation:

Base salary
$ 800,000    $ 750,000    $ 750,000    $ 785,910 ⁽¹⁾ $ 750,000
Annual incentive award:

Cash bonus
$ 0    $ 0    $ 0    $ 0    $ 0
Long-term incentive award:⁽²⁾

PSUs⁽³⁾⁽⁴⁾
$ 1,940,000    $ 1,600,000    $ 1,700,000    $ 1,692,818    $ 1,700,000
RSUs⁽⁴⁾⁽⁵⁾
$ 5,044,000    $ 3,200,000    $ 3,400,000    $ 2,539,227    $ 3,400,000
MSCIP award⁽⁶⁾
$ 2,716,000    $ 3,200,000    $ 3,400,000    $ 4,232,045    $ 3,400,000

Total Reward:
$ 10,500,000    $ 8,750,000    $ 9,250,000    $ 9,250,000    $ 9,250,000


	Mr. Gorman		Ms. Porat		Mr. Fleming		Mr. Kelleher		Mr. Rosenthal
Base Salary^(a)	$	1,500,000	$	1,000,000	$	1,000,000	$	6,795,386	$	1,000,000
Cash Bonus^(a)	$	4,697,500	$	2,897,500	$	3,497,500	$	383,418	$	2,597,500
Deferred Equity Award^(b)	$	4,422,675	$	2,198,675	$	2,906,675	$	2,579,119	$	1,844,675
Deferred Cash-based Award^(c)	$	5,379,825	$	3,003,825	$	3,795,825	$	1,442,077	$	2,607,825


2014 Compensation Total:	$	16,000,000	$	9,100,000	$	11,200,000	$	11,200,000	$	8,050,000

2015-2017 LTIP Award:^(d)	$	6,500,000	$	3,900,000	$	4,800,000	$	4,800,000	$	3,450,000

Comprehensive Pay Opportunity:	$	22,500,000	$	13,000,000	$	16,000,000	$	16,000,000	$	11,500,000
Supplemental Award:^(a)							$	2,000,000

⁽¹⁾ ~~Mr. Kelleher’s base salary was £490,000 and was converted to U.S. dollars using the 2011 average of daily spot rates of £1 to $1.6039.~~
^(a)
Mr. Kelleher’s base salary amount includes his 2014 base salary of £625,000 and his 2014 fixed allowances of £3,500,000 (for purposes of the table, such amounts were converted to U.S. dollars using the 2014 average of daily spot rates of £1 to $1.6474). Section IV.B contains more details about Mr. Kelleher’s fixed allowances. Mr. Kelleher’s cash bonus was paid in British pounds sterling in the amount of £232,746 (such amount was converted from U.S. dollars using the 2014 average of daily spot rates of $1 to £0.607). Mr. Kelleher received a supplemental award, consisting of an award of 28,915 RSUs with a grant value of $1 million and a deferred cash-based award under the Morgan Stanley Compensation Incentive Plan (MSCIP) with a grant value of $1 million, in recognition of his continued contributions and commitment to the Company during 2014, as demonstrated in his successful execution of his global role, management of global regulatory obligations, and regular client interactions across many jurisdictions. The supplemental award is scheduled to vest and convert to stock or be paid, as applicable, in three annual installments.

⁽²⁾ Mr. Kelleher’s long-term incentive compensation awards differ from those granted to other NEOs as prescribed by the FSA. Among other differences described in the notes below, the long-term incentive awards granted to Mr. Kelleher include a malus provision that allows for cancellation or reduction of his award if the Company or the relevant business unit suffers a material failure of risk management.

⁽³⁾ PSUs only deliver value if the Company meets specific performance goals, including ROE and relative TSR, over the three-year performance period. PSUs granted for 2011 performance are payable in, and subject to cancellation until, January 2015. These values reflect the number calculated by multiplying the target number of PSUs awarded by $18.159,
^(b)
Mr. Gorman received 127,883 RSUs, Ms. Porat received 63,575 RSUs, Mr. Fleming received 84,048 RSUs, Mr. Kelleher received 74,576 RSUs, and Mr. Rosenthal received 53,339 RSUs (in each case, calculated using the volume-weighted average price of Company common stock of $34.5835 on January 21, 2015, the grant date). The RSUs are scheduled to vest and convert to shares of Company common stock (and cancellation provisions lift) on January 22, 2018, except that 41,698 of Mr. Kelleher’s RSUs are scheduled to vest and convert to shares of Company common stock in three annual installments and 32,878 of Mr. Kelleher’s RSUs are scheduled to vest and convert to shares of Company common stock in July 2015 (in each case, as prescribed by the U.K. Prudential Regulatory Authority).

^(c)

Deferred cash-based awards under the MSCIP are scheduled to vest and distribute (and cancellation provisions lift) on January 23, 2017, except that Mr. Kelleher’s award is scheduled to vest and distribute (and cancellation provisions lift) in three annual installments (as prescribed by the U.K. Prudential Regulatory Authority).

^(d)

The target number of performance stock units underlying the LTIP award granted to Mr. Gorman is 187,950 stock units, to Ms. Porat is 112,770 stock units, to Mr. Fleming is 138,794 stock units, to Mr. Kelleher is 138,794 stock units, and to Mr. Rosenthal is 99,758 stock units (in each case, calculated using the volume-weighted average price of Company common stock of $34.5835 on January 21, 2015, the grant date).

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IV.B. 2014 Annual Compensation Program Details

The following chart provides a brief summary of the principal elements of the Company’s 2014 annual compensation program for our NEOs. Each NEO receives a base salary and is eligible to receive discretionary annual performance compensation for prior-year performance. Annual performance compensation is intended to reward NEOs for achievement of the Company’s financial and strategic objectives over the prior year and is delivered in a mix of a cash bonus, a deferred equity award and a deferred cash-based award.


	Purpose	Features
Base Salary*	An executive’s base salary reflects the executive’s experience and level of responsibility and is intended to be competitive with salaries for comparable positions at competitors.	Base salaries are reviewed periodically and are subject to change for, among other reasons, a change in responsibilities or the competitive environment.
Cash Bonus	Paying a portion of compensation in cash bonus is aligned with competitive pay approaches.	The portion of cash bonus for 2014 reflects the change in deferral approach and is more consistent with practice among the Comparison Group. Higher compensated employees continue to be subject to higher deferral levels.
Deferred Equity Award – RSUs	Equity awards support retention objectives and link realized value to shareholder returns. The terms of the awards serve to mitigate excessive risk-taking. Equity incentive compensation awards were granted in the form of RSUs.	Awards are cancelable upon termination of employment other than by the Company without cause or by the NEO with 12 months’ advance notice. Awards are subject to cancellation for competition, cause (i.e., any act or omission that constitutes a breach of obligation to the Company, including failure to comply with internal compliance, ethics or risk management standards and failure or refusal to perform duties satisfactorily, including supervisory and management duties), disclosure of proprietary information and solicitation of employees or clients.
Deferred Cash-Based Award – MSCIP	Deferred cash-based awards support retention objectives and mitigate excessive risk-taking. The awards provide a cash incentive with a rate of return based upon notional reference investments.	Awards are subject to clawback if an employee’s act or omission (including with respect to direct supervisory responsibilities) causes a restatement of the Company’s consolidated financial results, constitutes a violation of the Company’s global risk management principles, policies and standards, or causes a loss of revenue associated with a position on which the employee was paid and the employee operated outside of internal control policies. Awards to Operating Committee members (including NEOs) are also subject to clawback if the CMDS Committee determines that the Operating Committee member had significant responsibility for a material adverse outcome for the Company or any of its businesses or functions.

Mr. Kelleher is identified as “Code Staff” under the remuneration code of the U.K. Prudential Regulatory Authority and, therefore, also receives fixed compensation in the form of allowances based on his specific roles and responsibilities within the Company. Mr. Kelleher’s fixed allowances are payable annually in cash and/or in shares of Company common stock at the end of the relevant year, subject to specified terms and conditions. For 2014, Mr. Kelleher’s fixed allowances were paid in cash. Allowances will be reviewed at least annually and are subject to change for, among other reasons, a change in roles and responsibilities and the regulatory environment.

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IV.C. 2015-2017 Long-Term Incentive Program Details

For the past five years, the Company has granted a substantial portion of compensation to key executives in the form of a long-term incentive award that delivers value only if the Company achieves objective performance goals. The LTIP was introduced by the Company in 2013 and builds upon the performance stock unit program of previous years. The LTIP ties a meaningful portion of each executive’s compensation to the Company’s long-term financial performance and reinforces the executive’s accountability for the achievement of the Company’s future financial and strategic goals by directly linking the ultimate realizable award value to prospective performance against core financial measures over a forward-looking three-year period.

Award Terms. The LTIP awards will vest and convert to shares of the Company’s common stock onin 2018 only if the ~~grant date,~~Company achieves predetermined performance goals with respect to ROE and relative TSR, as set forth below, over the period beginning January ~~20, 2012.~~

⁽⁴⁾ ~~The following table lists the~~1, 2015 and ending December 31, 2017. While each key executive was awarded a target number of ~~PSUs and~~performance stock units, the actual number of ~~RSUs granted~~units earned could vary from as few as zero, if performance goals are not met, to ~~each NEO:~~as much as 1.5 times target, if performance goals are meaningfully exceeded. No participant will receive any portion of the LTIP award if the threshold performance goals are not met.

Mr. Gorman Ms. Porat Mr. Fleming Mr. Kelleher Mr. Taubman
Target PSUs
106,834.08 88,110.58 93,617.49 93,221.98 93,617.49
RSUs
277,768 176,221 187,234 139,832 187,234

⁽⁵⁾ With the exception of Mr. Fleming’s award, which was considered vested on February 8, 2012 (the date on which he became retirement-eligible under the award terms), the 2011 RSUs granted to the NEOs are considered vested upon grant. With the exception of Mr. Kelleher’s award, the RSUs areThe LTIP awards remain subject to cancellation ~~provisions~~upon certain events until ~~they are scheduled to convert~~conversion to shares ~~on February 2, 2014 for 50%~~of Company common stock. If, after conversion of the ~~award and February 2, 2015 for~~LTIP awards, the ~~remainder of~~CMDS Committee determines that the ~~award. Mr. Kelleher’s RSU award is scheduled to be distributed in three equal annual installments~~performance certified by the CMDS Committee was based on ~~each of February 2, 2013, 2014 and 2015, and~~materially inaccurate financial statements, then the ~~distributed~~ shares delivered will be subject to ~~transfer restrictions for an additional six months following distribution.~~clawback by the Company.

Performance Goals. One-half of the target LTIP award is earned based on the Company’s average ROE over the three-year performance period (MS Average ROE). The other half of the target LTIP award is earned based on the Company’s TSR over the three-year period (MS TSR) relative to the TSR of the S&P 500 Financials Index over the three-year period (Index Group TSR). The number of ~~RSUs awarded was~~stock units ultimately earned will be determined by ~~dividing the dollar value~~multiplying each half of the target award by ~~$18.159,~~a multiplier as follows:


MS Average ROE*	Multiplier	Relative TSR**	Multiplier
11.5% or more	1.50	25% or more	1.50
10%	1.00	0%	1.00
5%	0.50	-50%	0.50
Less than 5%	0.00	Less than -50%	0.00

MS Average ROE, for this purpose, excludes (a) the impact of DVA, (b) certain gains or losses associated with the sale of specified businesses, (c) specified goodwill impairments, (d) certain gains or losses associated with specified legal settlements relating to business activities conducted prior to January 1, 2011 and (e) specified cumulative catch-up adjustments resulting from changes in, or application of a new, accounting rule that are not applied on a full retrospective basis. If MS Average ROE is between two of the thresholds noted in the table, the number of stock units earned will be determined by straight-line interpolation between the two thresholds.

Relative TSR is determined by subtracting the Index Group TSR from the MS TSR; however, if performance for the period is negative, the multiplier may not exceed 1.00. If Relative TSR is between two of the thresholds noted in the table, the number of stock units earned will be determined by straight-line interpolation between the two thresholds.

IV.D. Additional Compensation and Benefits Details.

Health and Insurance Benefits. All NEOs are eligible to participate in Company-sponsored health and insurance benefit programs available in the ~~volume-weighted average price~~relevant jurisdiction to similarly situated employees. In the U.S., higher compensated employees pay more to participate in the Company’s medical plan. NEOs are also eligible to participate in Morgan Stanley’s Executive Health Program under which each NEO is eligible to receive Company-funded access to a private primary care physician offering on-call services and an annual executive health care assessment. Upon retirement, NEOs may be eligible to participate in retiree medical coverage under the Morgan Stanley Medical Plan on the same basis as other retired employees.

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Personal Benefits. The Company provides limited personal benefits to certain of the NEOs for competitive and security reasons. The Company’s Board-approved policy authorizes the CEO to use the Company’s aircraft. As of January 1, 2010, Mr. Gorman entered into an aircraft time-share agreement with the Company permitting him to reimburse the Company for the incremental cost of his personal use of the Company’s aircraft. Personal benefits provided to NEOs are discussed under the “2014 Summary Compensation Table.”

Pension and Retirement. Company-provided retirement benefits in the U.S. include a tax-qualified 401(k) plan and a frozen tax-qualified pension plan (the Employees Retirement Plan (ERP)). Certain NEOs may also be eligible to participate in the Company’s frozen Supplemental Executive Retirement and Excess Plan (SEREP). The SEREP was originally intended to compensate for the limitations imposed under the ERP and Internal Revenue Code. No NEO is awarded with credited service in excess of his/her actual service under the ERP or SEREP. In 2014, the SEREP was amended to cease further benefit accruals.

Severance. NEOs are not contractually entitled to cash severance payments upon termination of employment.

Share Usage. Morgan Stanley pays a significant portion of incentive compensation as deferred equity awards, which aligns the interests of the Company’s employees with those of its shareholders. The Company strives to maximize employee and shareholder alignment through the use of deferred equity awards, while minimizing dilution. Since 2009, the Company has requested approval of additional shares to cover only one year of grant needs. In 2014, after a year in which the Company’s stock price increased substantially, the Company expected to have sufficient shares for grants to be made over the next year and, therefore, did not request shareholder approval for additional shares at the 2014 annual meeting of shareholders. The Company has evaluated, as it does annually, whether to return to shareholders to request approval of additional shares at the 2015 annual meeting of shareholders and has determined to request 25 million shares to cover one year of grant needs – this is less than the 47 million shares the Company has repurchased since 2013. In addition, the Company has an active share repurchase program and is authorized by the Board to repurchase up to an additional $3.1 billion of common ~~stock~~shares of the Company (85 million shares based on the ~~grant date, January 20, 2012,~~March 23, 2015 closing price of $36.31) through the end of the second quarter of 2016.

Change-in-Control Tax Gross-Up. NEOs are not contractually entitled to any golden parachute excise tax protection upon a change-in-control of Morgan Stanley.

V.	Notes to the Compensation Discussion and Analysis

The following notes are an integral part of the Company’s financial and ~~rounding down~~operating performance described in this CD&A:

⁽¹⁾

On February 25, 2015, the Company reached an agreement in principle with the United States Department of Justice, Civil Division and the U.S. Attorney’s Office for the Northern District of California, Civil Division (collectively, the Civil Division) to pay $2.6 billion to resolve certain claims that the Civil Division indicated it intended to bring against the Company related to legacy residential mortgage matters. In connection with the resolution of this matter, the Company, subsequent to the announcement of the Company’s 2014 earnings on January 20, 2015, increased previously established legal reserves for this settlement and other legacy residential mortgage matters by $2.8 billion, which increased Other expenses for the year ended December 31, 2014. The subsequent event decreased income from continuing operations by $2.7 billion and diluted earnings per share from continuing operations by $1.35 for the year ended December 31, 2014.

⁽²⁾

A detailed analysis of the Company’s financial and operational performance for 2014 is contained in the Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 (2014 Form 10-K).

⁽³⁾

The information provided herein may include certain non-GAAP financial measures. The reconciliation of such measures to the comparable GAAP figures are included in the 2014 Form 10-K or herein.

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⁽⁴⁾

DVA represents the change in fair value of certain of the Company’s long-term and short-term borrowings outstanding resulting from the fluctuation in the Company’s credit spreads and other credit factors. The Company believes that most investors assess its results exclusive of DVA.

⁽⁵⁾

The Company’s capital markets rankings (other than Japan) are reported by Thomson Reuters as of January 16, 2015 for the period of January 1, 2014 to December 31, 2014. For Japan, capital market rankings are reported by Thomson Reuters (on a Japanese fiscal year basis) as of January 5, 2015 for the nine month period of April 1, 2014 to December 31, 2014. Equity Sales and Trading wallet share is based on the sum of the reported revenues for the equity sales and trading businesses of Morgan Stanley and the companies within the Comparison Group, excluding Wells Fargo & Company; where applicable, the reported revenues exclude DVA.

⁽⁶⁾

Pre-tax margin is calculated as income (loss) from continuing operations before taxes as a percentage of net revenues.

⁽⁷⁾

Company net revenues excluding the impact of DVA, income from continuing operations applicable to Morgan Stanley excluding the impact of DVA, earnings per diluted share from continuing operations excluding the impact of DVA, pre-tax margin, return on equity from continuing operations, and return on equity from continuing operations excluding the impact of DVA are non-GAAP financial measures that the Company considers useful measures for investors to assess operating performance. For further information regarding these measures, see pages 57-61 of the 2014 Form 10-K.

⁽⁸⁾

Income from continuing operations applicable to Morgan Stanley excluding the impact of the subsequent event is a non-GAAP financial measure that the Company considers useful for investors to assess operating performance. The reconciliation of income from continuing operations applicable to Morgan Stanley from a non-GAAP to GAAP basis is as follows (amounts are presented in millions):


	2013 ($)		2014 ($)
Income from continuing operations applicable to MS, excluding subsequent event – Non-GAAP		2,975		6,151
Subsequent event impact		—		(2,670	)
Income from continuing operations applicable to MS – GAAP		2,975		3,481

Additionally, the reconciliation of income from continuing operations applicable to Morgan Stanley, excluding DVA (a current non-GAAP measure utilized by the Company – see note 7 above), to the ~~nearest whole number. Fractional shares were paid~~same measure also excluding the impact of the subsequent event (another non-GAAP measure) is as follows (amounts are presented in ~~cash to the NEOs.~~millions):


	2013 ($)		2014 ($)
Income from continuing operations applicable to MS, excluding DVA and subsequent event – Non-GAAP		3,427		5,733
Subsequent event impact		—		(2,670	)
Income from continuing operations applicable to MS, excluding DVA – Non-GAAP		3,427		3,063

⁽⁹⁾

To determine the return on equity from continuing operations excluding the impact of the subsequent event and the return on equity from continuing operations excluding the impact of DVA and the subsequent event, all non-GAAP measures, both the numerators and denominators, were adjusted to exclude the impact of the subsequent event. The impact on both return on equity measures was approximately 400 basis points.

⁽¹⁰⁾

The Company calculated its Basel III RWAs under the U.S. Basel III Advanced Approach final rules.

⁽¹¹⁾

Non-compensation efficiency ratio is calculated as adjusted non-compensation expenses, divided by net revenues excluding the impact of DVA. The non-compensation efficiency ratio is a non-GAAP financial measure that the Company considers to be a useful measure for investors to assess period to period operating performance. Adjusted non-compensation expenses are calculated as non-compensation expenses, less certain

⁽⁶⁾ With the exception of Mr. Kelleher’s award, the 2011 MSCIP award is scheduled to vest and be distributed, and cancellation provisions lift, according to the following schedule: 50% on November 30, 2012 and the remaining balance on November 30, 2013. Mr. Kelleher’s 2011 MSCIP award is considered vested upon grant and is scheduled to be distributed, and cancellation provisions are scheduled to lift, according to the following schedule: 1/3 on February 2, 2013, 1/2 of the remaining balance on February 2, 2014 and the remaining balance on February 2, 2015.

38 LOGO

legal and other expenses. The reconciliation of adjusted non-compensation expenses (non-GAAP) to reported non-compensation expenses (GAAP) is as follows (amounts are presented in millions):


	2013 ($)		2014 ($)
Adjusted non-compensation expenses – Non-GAAP		9,791		9,847
Increase in legal expenses, 2013 and 2014, respectively, over 2012 baseline		1,554		3,013
Investments/impairments/write-offs		313		—
Non-compensation expenses – GAAP		11,658		12,860

⁽¹²⁾

U.S. Bank loan balances include loans held for investment and loans held for sale and exclude loans at fair value, which are included in trading assets in the Company’s consolidated statements of financial condition.

⁽¹³⁾

TSR is the change in share price over a period of time plus the dividends paid during such period, expressed as a percentage of the share price at the beginning of such period.

⁽¹⁴⁾

Earnings per diluted share from continuing operations excluding the impact of DVA and the subsequent event is a non-GAAP financial measure that the Company considers useful for investors to assess operating performance. The reconciliation of earnings per diluted share from continuing operations applicable to Morgan Stanley from a non-GAAP to GAAP basis is as follows (based on average diluted shares of 1.97 billion):


	2014 ($)
Earnings per diluted share from continuing operations, excluding DVA and subsequent event – Non-GAAP		2.74
DVA impact		0.22
Subsequent event impact		(1.35	)
Earnings per diluted share from continuing operations – GAAP		1.61

⁽¹⁵⁾

Institutional Securities income (loss) from continuing operations before taxes excluding the impact of DVA and the subsequent event is a non-GAAP financial measure that the Company considers useful for investors to assess operating performance. The reconciliation of income (loss) from continuing operations before taxes from a non-GAAP to GAAP basis is as follows (amounts are presented in millions):


	2013 ($)			2014 ($)
Income from continuing operations before taxes, excluding DVA and subsequent event – Non-GAAP		1,627			2,089
DVA impact		(681	)		651
Subsequent event impact		—			(2,798	)
Income (loss) from continuing operations before taxes – GAAP		946			(58	)

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Compensation, Management Development and Succession Committee Report

We, the Compensation, Management Development and Succession Committee of the Board of Directors of Morgan Stanley, have reviewed and discussed with management the Compensation Discussion and Analysis contained in this proxy statement. Based on such review and discussions, we have recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2011~~2014 filed with the SEC.

Respectfully submitted,

Donald T. Nicolaisen, Chair

Erskine B. Bowles ~~Chair~~

C. Robert Kidder

~~Donald T. Nicolaisen~~

Hutham S. Olayan

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~~2011~~2014 Summary Compensation Table

The following table summarizes the compensation of our named executive officers in the format specified by the SEC. Our NEOs are our Chief Executive Officer, Chief Financial Officer and the three other most highly compensated executive officers as determined by their total compensation for the year ended December 31, ~~2011~~2014 set forth in the table below, excluding, in accordance with SEC rules, the amount in the column captioned “Change in Pension Value and Nonqualified Deferred Compensation Earnings.”

Pursuant to SEC rules, the following table is required to include for a particular year only those stock awards and option awards grantedduring the year, rather than awards grantedafter year-end that were awarded for performance in that year. ~~Our year-end~~Through 2014, our annual equity awards relating to performance in a year are made shortly after year-end. Therefore, compensation in the table includes not only non-equity compensation ~~earned~~awarded for services in the applicable year but, in the case of stock awards and option awards ~~compensation earned for performance in prior years but~~ granted in the years reported in the ~~table.~~table, compensation awarded for performance in prior years and forward-looking performance-based compensation.A summary of the CMDS Committee’s decisions on the compensation awarded to our NEOs for ~~2011~~2014 performance (which, in accordance with SEC rules, are in large part not reflected in the Summary Compensation Table) can be found in the CD&A.

Name and Principal
Position Year⁽¹⁾
Salary
($)⁽²⁾

Bonus
($)⁽³⁾

Stock
Awards
($)⁽⁴⁾⁽⁵⁾

Option
Awards
($)⁽⁵⁾

Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)⁽⁶⁾

All Other
Compensation
($)⁽⁷⁾
Total ($)
James P. Gorman 2011    800,000    2,716,011    5,942,777    3,499,996    13,272    9,800    12,981,856
President and Chief 2010    800,000    3,880,000    10,167,949    —      331,688    6,100    15,185,737
Executive Officer

2009    734,247    5,706,301    —      —      49,372    6,100    6,496,020
Ruth Porat 2011    750,000    3,200,003    5,667,083    1,499,993    265,285    14,927    11,397,291
Executive Vice President and
Chief Financial Officer

2010    750,000    3,700,000    6,911,340    —      342,985    6,100    11,710,425
Gregory J. Fleming* 2011    750,000    3,400,018    5,360,760    499,992    —      —      10,010,770
Executive Vice President and President of Asset Management
and Global Wealth Management

2010    673,558 ⁽⁸⁾ 3,500,000    9,000,000    —      —      75,000    13,248,558
Colm Kelleher 2011    785,910 ⁽⁹⁾ 4,232,063    6,275,274    1,499,993    257,217    754,852    13,805,309
Executive Vice President and
Co-President of Institutional
Securities

2010    757,316    4,097,074    6,737,046    —      539,527    1,231,667    13,362,630
2009    628,476    6,400,365    —      —      56,821    2,411,959    9,497,621

Paul J. Taubman 2011    750,000    3,400,018    6,279,760    1,499,993    686,726    13,116    12,629,613
Executive Vice President and Co-President of Institutional Securities


Name and Principal Position	Year⁽¹⁾		Salary ($)⁽²⁾			Bonus ($)⁽³⁾			Stock Awards ($)⁽⁴⁾⁽⁵⁾		Option Awards ($)⁽⁵⁾		Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)⁽⁶⁾		All Other Compensation ($)⁽⁷⁾		Total ($)
James P. Gorman		2014		1,500,000			10,077,325			11,241,190		—		195,398		256,131		23,270,044
Chairman and		2013		1,500,000			5,408,000			4,349,344		2,624,999		497,893		28,327		14,408,563
Chief Executive Officer		2012		800,000			2,575,000			6,984,208		—		292,454		20,552		10,672,214

Ruth Porat*		2014		1,000,000			5,901,325			7,476,460		—		388,313		16,746		14,782,844
Executive Vice		2013		1,000,000			3,623,000			5,439,519		—		25,307		16,103		10,103,929
President and		2012		750,000			2,250,000			4,800,178		—		278,030		15,497		8,093,705
Chief Financial Officer

Gregory J. Fleming		2014		1,000,000			7,293,325			9,147,181		—		—		—		17,440,506
Executive Vice		2013		1,000,000			4,473,000			3,479,475		2,425,000		—		—		11,377,475
President and President of Wealth Management and Investment Management		2012		750,000			2,425,000			5,100,174		—		—		—		8,275,174

Colm Kelleher		2014		6,795,386	⁽⁸⁾		2,825,495	⁽⁹⁾		9,348,854		—		735,935		317,127		20,022,797
Executive Vice		2013		978,102			4,293,225			3,479,475		2,411,665		792,321		385,313		12,340,101
President and President of Institutional Securities		2012		776,661			2,411,670			4,232,218		—		576,399		279,045		8,275,993

James A. Rosenthal		2014		1,000,000			5,205,325			6,474,027		—		12,384		10,400		12,702,136
Executive Vice President		2013		1,000,000			3,113,000			3,189,519		2,024,997		—		10,200		9,337,716
and Chief Operating Officer

*	On March 24, 2015, the Company announced that Ms. Porat would leave the Company on April 30, 2015.

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* Effective January 13, 2011, Mr. Fleming became President of the Global Wealth Management Group in addition to his being Executive Vice President and President of Asset Management.

⁽¹⁾For ~~Ms. Porat and~~ Mr. ~~Fleming,~~Rosenthal, compensation is not shown for ~~2009~~2012 because ~~they were not executive officers during that period. For Mr. Taubman, compensation is not shown for 2009 or 2010 because he was not an executive officer in 2009 and~~ he was not a NEO in ~~2010.~~2012.

⁽²⁾Includes any elective deferrals to the Company’s employee benefit plans.

⁽³⁾ ~~The NEOs received no~~Includes any elective deferrals to the Company’s employee benefit plans. For 2014, includes 2014 annual cash bonus ~~for 2011. For 2011, represents deferred cash~~amounts paid in February 2015 and amounts awarded in January ~~2012~~2015 under MSCIP for performance in 2011 and cash paid in January 2012 in lieu of a grant of a fractional RSU (with such cash payment equal to: $11 for Mr. Gorman; $3 for Ms. Porat; and $18 for each of Messrs. Fleming, Kelleher and Taubman). 2014:


Name	2014 Cash Bonus ($)	2014 MSCIP Award ($)	Total ($)
James P. Gorman	4,697,500	5,379,825	10,077,325
Ruth Porat	2,897,500	3,003,825	5,901,325
Gregory J. Fleming	3,497,500	3,795,825	7,293,325
Colm Kelleher	383,418	2,442,077	2,825,495
James A. Rosenthal	2,597,500	2,607,825	5,205,325

With the exception of Mr. Kelleher’s award, the ~~2011~~2014 MSCIP awards are scheduled to vest and be distributed on January 23, 2017. Mr. Kelleher’s 2014 MSCIP award is scheduled to vest and be distributed according to the following ~~schedule: 50% on November 30, 2012 and~~schedule as prescribed by the ~~remaining balance on November 30, 2013. Mr. Kelleher’s 2011 MSCIP award is scheduled to be distributed according to the following schedule:~~U.K. Prudential Regulatory Authority: 1/3 on ~~February 2, 2013,~~January 25, 2016, 1/2 of the remaining balance on ~~February 2, 2014~~January 23, 2017, and the remaining balance on ~~February 2, 2015. 2011~~January 22, 2018. 2014 MSCIP awards are subject to cancellation and clawback. For further details on 2014 MSCIP awards, see the CD&A.

⁽⁴⁾ For ~~2011,~~2014, consists of RSUs granted on January 21, ~~2011~~2014 for performance in ~~2010~~2013 and ~~PSUs~~forward-looking 2014 LTIP awards granted on January 21, ~~2011 for performance in 2010 that are subject to~~2014, the realizable value of which is dependent entirely on the satisfaction of predetermined performance goals over a three-year performance period. For further details on 2013 RSUs and 2014 LTIP awards, see “2014 Grants of Plan-Based Awards Table.”

⁽⁵⁾Represents aggregate grant date fair value of awards granted during the applicable period determined in accordance with the applicable accounting guidance for equity-based awards. Therefore, values disclosed in the table include the values of awards granted during the applicable period for service during the prior ~~year’s service.~~year, as well as forward-looking performance-based compensation. NEOs do not realize the value of equity-based awards until the awards are settled or exercised. The actual value that a NEO will realize from these awards is determined by future Company performance and share price, and may be higher or lower than the amounts indicated in the table.

The following table lists the aggregate grant date fair value of stock unit awards granted to the NEOs during ~~2011.~~2014. The aggregate grant date fair value of RSUs included in the table is based on the volume-weighted average price of the common stock on the grant date, as determined in accordance with applicable accounting guidance for equity-based awards. The aggregate grant date fair value of ~~PSUs~~2014 LTIP awards included in the table is based on the volume-weighted average price of common stock on the grant date as well as the probable outcome of the performance conditions as of the grant date ~~consistent~~as determined in accordance with ~~the estimate of aggregate compensation cost to be recognized over the service period determined as of the grant date under the~~ applicable accounting guidance for equity-based awards. The value of the ~~PSUs~~2014 LTIP awards on the grant date, based on the volume-weighted average price of the common stock on the grant date and assuming that the highest level of performance conditions will be achieved, is ~~$3,880,000~~$9,000,000 for Mr. Gorman; ~~$3,700,000~~$6,000,000 for Ms. Porat; ~~$3,500,000~~$7,250,000 for Messrs. Fleming and Kelleher; and $5,250,000 for Mr. ~~Fleming; $4,097,073 for Mr. Kelleher; and $4,100,000 for Mr. Taubman.~~Rosenthal.


	Stock Unit Awards Granted During 2011 for Performance in 2010 ($)			Stock Unit Awards Granted During 2014 ($)
Name	RSUs	PSUs	Total	2013 RSUs	2014 LTIP Awards	Total
James P. Gorman	3,879,978	2,062,799	5,942,777	5,092,000	6,149,190	11,241,190
Ruth Porat	3,699,981	1,967,102	5,667,083	3,377,000	4,099,460	7,476,460
Gregory J. Fleming	3,499,988	1,860,772	5,360,760	4,193,667	4,953,514	9,147,181
Colm Kelleher	4,097,068	2,178,206	6,275,274	4,395,340	4,953,514	9,348,854
Paul J. Taubman	4,099,998	2,179,762	6,279,760
James A. Rosenthal				2,887,000	3,587,028	6,474,027

The aggregate grant date fair value of the stock options granted to the NEOs during 2011 is based on the Black-Scholes value of a stock option on the grant date, as determined in accordance with applicable accounting guidance for equity-based awards. For further information on the valuation of the Company’s RSUs ~~PSUs~~ and ~~stock options,~~LTIP awards, see notes 2 and 2018 to the consolidated financial statements included in the ~~2011~~2014 Form 10-K.

4045

⁽⁶⁾The following table lists the change in pension value and the amount of any above-market earnings on nonqualified deferred compensation plans for the NEOs for ~~2011.~~2014.


Name	2011 Change in Pension Value ($)^(a)	2011 Above-Market Earnings on Nonqualified Deferred Compensation ($)^(b)	Total ($)	2014 Change in Pension Value ($)^(a)	2014 Above-Market Earnings on Nonqualified Deferred Compensation ($)^(b)
James P. Gorman	13,272	—	13,272	18,374	177,024
Ruth Porat	244,678	20,607	265,285	380,596	7,717
Gregory J. Fleming	—	—	—	—	—
Colm Kelleher	257,217	—	257,217	458,966	276,969
Paul J. Taubman	673,936	12,790	686,726
James A. Rosenthal				—	12,384

^(a)

The ~~“2011~~“2014 Change in Pension Value” equals the aggregate increase from December 31, ~~2010~~2013 to December 31, ~~2011~~2014 in the actuarially determined present value of the accumulated benefit under the Company-sponsored defined benefit pension plans during the measurement period. ~~Employees~~NEOs experienced an increase in the present value of their accumulated benefits from December 31, ~~2010~~2013 to December 31, ~~2011~~2014 primarily due to a decrease in the discount rates described below and in the ~~case~~Company’s adoption of ~~Mr. Taubman, changes in base salary and the effect of an additional year of credited service in the SEREP.~~a new mortality table. The present values at December 31, ~~2011~~2014 are based on ~~Pension Protection Act (PPA) generational annuitant~~the RP-2014 mortality tables projected generationally with Scale MP-2014 and discount rates of ~~4.65%~~4.07% for the ERP, ~~4.66%~~3.83% for the Excess Plan component and ~~4.54%~~3.80% for the SERP component of the SEREP. The present values at December 31, ~~2010~~2013 are based on ~~PPA~~Pension Protection Act generational annuitant mortality tables and discount rates of ~~5.59%~~4.91% for the ERP, ~~5.54%~~4.68% for the Excess Plan component and ~~5.32%~~4.59% for the SERP component of the SEREP. Present values are determined using an interest-only discount before retirement. Post-retirement discounts are based on interest and mortality. For each plan, the assumed benefit commencement date is the earliest age at which the NEO can receive unreduced benefits under that plan or current age, if greater. Mr. Fleming ~~does~~and Mr. Rosenthal do not have ~~a value~~values shown because ~~he is~~they are not eligible for any of the Company-sponsored defined benefit plans.

^(b)

The “Above-Market Earnings on Nonqualified Deferred Compensation” for ~~2011~~2014 equals the aggregate increase, if any, in the value of the NEOs’ accounts under the Company’s nonqualified deferred compensation plans at December 31, ~~2011~~2014 (without giving effect to any distributions made during ~~2011)~~2014) from December 31, ~~2010~~2013 that are attributable to above-market earnings. Such amounts do not reflect the overall performance of the NEOs’ accounts since the grant date of the applicable award, which in some cases may reflect a loss. Above-market earnings represent the difference between market interest rates determined pursuant to SEC rules and the earnings credited on deferred compensation.

⁽⁷⁾The “All Other Compensation” column for ~~2011~~2014 includes (a) contributions made by the Company under our ~~qualified~~ defined contribution plans with respect to such period and (b) perquisites and other personal benefits, as detailed below. Perquisites are valued based on the aggregate incremental cost to the Company. Any of the perquisites and other personal benefits listed below but not separately quantified do not individually exceed the greater of $25,000 or 10% of the total amount of all perquisites received by the NEO. In addition, our NEOs may participate on the same terms and conditions as other investors in investment funds that we may form and manage primarily for client investment, except that we may waive or lower applicable fees and charges for our employees.

^(a)

~~For each of~~ Mr. Gorman, Ms. Porat and Mr. ~~Taubman, the Company’s 401(k) matching contribution of $9,800 for 2011 was allocated to the Morgan Stanley Stock Fund. Ms. Porat and Mr. Taubman~~Rosenthal each received a ~~transition~~matching contribution in the Company’s 401(k) Plan (401(k) Plan) for ~~2011~~2014 of ~~$5,127 and $3,316, respectively. The Company~~$10,400. Ms. Porat received a pension transition contribution toin the ~~Morgan Stanley U.K. Group Pension~~401(k) Plan for ~~Mr. Kelleher during 2011 totaled £33,000 ($52,929). The amount~~2014 of ~~British pounds sterling was converted~~$6,346. All 401(k) Company contributions were allocated according to ~~U.S. dollars using the 2011 average of daily spot rates of £1 to $1.6039.~~each NEO’s investment direction on file.

^(b)

~~Prior~~Mr. Gorman’s amounts include $237,968 related to ~~his repatriation from New York~~use of the Company’s aircraft, as well as costs related to ~~London in May 2011, Mr. Kelleher was covered by Morgan Stanley’s overseas assignment policy, which is designed to eliminate any financial detriment or gain~~use of a Company-furnished car and meals. The value of use of the Company’s aircraft

4146

~~from~~reflects the ~~overseas assignment.~~incremental cost to the Company of one emergency round trip flight to Australia due to a death in Mr. Gorman’s family. The Company imputed income to Mr. Gorman for this flight and did not provide a tax gross-up for such imputed income. The value of use of the Company’s aircraft includes variable costs incurred in connection with personal flight activity, and does not include fixed costs of leasing and operating the Company aircraft. The value was calculated for 2014 based on the incremental cost of personal travel, including: landing, parking and flight planning expenses; crew travel expenses; supplies and catering; aircraft fuel and oil expenses per hour of flight; maintenance, parts and external labor per hour of flight; and customs, foreign permits and similar fees. Mr. Kelleher’s amounts include: (a) $522,850 related to his overseas assignment and his entitlements under the policy, including housing expenses, expatriate equalization payments related to taxes, financial advisory and tax planning services, reimbursement for educational costs and cost-of-living adjustments, (b) $165,560include $205,887 related to housing and ~~other~~$75,611 for tax preparation services arising from his former expatriate assignment, as well as amounts associated with costs related to medical benefits, ~~following his repatriation and (c) the costs relating to~~ use of a car ~~service.~~service, and meals.

⁽⁸⁾Mr. Fleming’s annualized base salary of $750,000 for 2010 was prorated for service from February 8, 2010, his employment commencement date, in accordance with his employment offer letter with the Company, dated February 3, 2010.

⁽⁹⁾For 2014, Mr. Kelleher’s base salary was ~~£490,000 for 2011.~~£625,000 and his fixed allowances were £3,500,000. For further details on Mr. Kelleher’s 2014 fixed allowances, see the “Compensation Discussion and Analysis.” The amount of British pounds sterling was converted to U.S. dollars using the ~~2011~~2014 average of daily spot rates of £1 to ~~$1.6039.~~$1.6474.

⁽⁹⁾ Mr. Kelleher’s ~~base salary~~2014 cash bonus paid in February 2015 was ~~also £490,000 for 2010 and 2009. Differences~~$383,418, which was paid in ~~base salary reported~~British pounds sterling in the ~~table are due~~amount of £232,746. The amount of U.S. dollars was converted to ~~currency fluctuations.~~British pounds sterling using the 2014 average of daily spot rates of $1 to £0.6070.

~~2011~~2014 Grants of Plan-Based Awards Table⁽¹⁾

The following table sets forth information with respect to ~~the~~ RSUs ~~PSUs and stock options~~ granted to the NEOs in January ~~2011~~2014 for ~~2010 performance. The table does not include equity~~2013 performance and 2014 LTIP awards granted ~~to our NEOs~~ in January ~~2012~~2014 for ~~performance in 2011.~~

Name
Grant Date
(mm/dd/
yyyy)
Estimated Future Payouts
Under
Equity Incentive Plan
Awards⁽²⁾
All Other Stock
Awards: Number of
Shares of Stock or
Units
(#)⁽³⁾

All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)⁽⁴⁾

Exercise or Base
Price of
Option Awards
($/Sh)⁽⁵⁾

Grant Date
Fair
Value of
Stock
and
Option
Awards
($)⁽⁶⁾

Threshold
(#)

Target
(#)
Maximum
(#)
James P. Gorman
1/21/2011 0 64,904.87 129,809.74           —             —             —              2,062,799
1/21/2011 —             —             —   129,809           —             —              3,879,978

1/21/2011

—             —             —             —   424,731 30.01             3,499,996
Ruth Porat
1/21/2011 0 61,893.82 123,787.64           —             —             —              1,967,102
1/21/2011 —             —             —   123,787           —             —              3,699,981

1/21/2011

—             —             —             —   182,027 30.01             1,499,993
Gregory J. Fleming
1/21/2011 0 58,548.21 117,096.42           —             —             —              1,860,772
1/21/2011 —             —             —   117,096           —             —              3,499,988

1/21/2011

—             —             —             —   60,675 30.01             499,992
Colm Kelleher
1/21/2011 0 68,536.08 137,072.16           —             —             —              2,178,206
1/21/2011 —             —             —   137,072           —             —              4,097,068

1/21/2011

—             —             —             —   182,027 30.01             1,499,993
Paul J. Taubman
1/21/2011 0 68,585.04 137,170.08           —             —             —              2,179,762
1/21/2011 —             —             —   137,170           —             —              4,099,998

1/21/2011

—              —              —              —   182,027 30.01            1,499,993

⁽¹⁾The PSU awards included in this table are also disclosed in the “Stock Awards” column of the “2011 Summary Compensation Table” and the “2011 Outstanding Equity Awards at Fiscal Year-End Table.” The RSU awards included in this table are also disclosed in the “Stock Awards” column of the “2011 Summary Compensation Table” and, except with respect to Mr. Fleming, the “2011 Option Exercises and Stock Vested Table” and the “2011 Nonqualified Deferred Compensation Table.” With respect to Mr. Fleming, the RSU award included in this table is also disclosed in the “2011 Outstanding Equity Awards at Fiscal Year-End Table.” The stock option awards included in this table are also disclosed in the “Option Awards” column of the “2011 Summary Compensation Table” and the “2011 Outstanding Equity Awards at Fiscal Year-End Table.” The PSUs and RSUs were granted under the Morgan Stanley 2007 Equity Incentive Compensation Plan. The stock options were granted under the Morgan Stanley Employees’ Equity Accumulation Plan.

⁽²⁾The PSUs are scheduled to vest and convert to shares in 2014 only if the Company satisfies predetermined performance goals over the three-year performance period that began on January 1, 2011 and ends on

December 31, 2013. One-half of the target PSU award will be based on the Company’s ROE over the three-year performance period. The other half of the award will be based on the Company’s TSR relative to the TSR of the members of the Comparison Group (Bank of America Corp., Barclays Plc, Citigroup Inc., Credit Suisse Group, Deutsche Bank AG, Goldman Sachs Group Inc., JPMorgan Chase & Co., UBS AG and Wells Fargo & Company) over the three-year period.

~~The number of “at-risk” PSUs ultimately earned will be determined by multiplying one-half of the target award by the multipliers according to the following grids:~~

MS ROE*    Multiplier
18% or more    2.00
12%    1.00
less than 7.5%    0.00

If ROE is between two of the thresholds noted above, the number of PSUs earned will be determined by straight-line interpolation between the two thresholds. ROE, for this purpose, excludes the impact of the fluctuation in the Company’s Debt-Related Credit Spreads on certain of the Company’s borrowings that are accounted for at fair value. The return for each of the first, second and third years during the three-year performance period are weighted 20%, 30% and 50%, respectively.

MS TSR Rank*    Multiplier
1    2.00
5    1.00
9 or 10    0.00

If the TSR rank is between two of the thresholds noted above, the number of PSUs earned will be determined by straight-line interpolation between the two thresholds. If the composition of the Comparison Group is affected by a corporate event, the grid will be adjusted based on the number of members of the Comparison Group remaining at the end of the performance period.

Each NEO is entitled to receive cash dividend equivalents on the PSUs, subject to the same vesting, cancellation and payment provisions as the underlying PSUs. NEOs may not direct the vote of the shares underlying the PSUs. The PSUs are subject to cancellation if a cancellation event occurs at any time prior to the scheduled conversion date. If, after payment of the PSUs, the CMDS Committee determines that the performance certified by the CMDS Committee was based on materially inaccurate financial statements or other performance metric criteria, then such number of shares (or cash equivalent if the shares were transferred) shall be subject to clawback by the Company. For further details on cancellation of awards, see “Potential Payments Upon Termination or Change-in-Control.”

⁽³⁾The RSUs are scheduled to convert to shares according to the following schedule: 50% on February 2, 2013 and 50% on February 2, 2014, and each NEO other than Mr. Fleming is retirement-eligible under the award terms at grant and, therefore, the awards are considered vested at grant. Mr. Fleming is retirement-eligible under the award terms as of February 8, 2012.forward-looking performance. All RSUs and 2014 LTIP awards are subject to cancellation if a cancellation event occurs at any time prior to the scheduled conversion date. For further details on cancellation of awards, see “Potential Payments Upon Termination or Change-in-Control.”


Name	Grant Date (mm/dd/ yyyy)	Approval Date (mm/dd/ yyyy)	Estimated Future Payouts Under Equity Incentive Plan Awards⁽²⁾			All Other Stock Awards: Number of Shares of Stock or Units (#)⁽³⁾	All Other Option Awards: Number of Securities Underlying Options (#)		Exercise or Base Price of Option Awards ($/Sh)	Grant Date Fair Value of Stock and Option Awards ($)⁽⁴⁾
Name	Grant Date (mm/dd/ yyyy)	Approval Date (mm/dd/ yyyy)	Threshold (#)	Target (#)	Maximum (#)				Exercise or Base Price of Option Awards ($/Sh)	Grant Date Fair Value of Stock and Option Awards ($)⁽⁴⁾
James P. Gorman	1/21/2014	1/13/2014	—	182,883	274,325	—		—	—	6,149,190
	1/21/2014	1/13/2014	—	—	—	155,207		—	—	5,092,000
Ruth Porat	1/21/2014	1/13/2014	—	121,922	182,883	—		—	—	4,099,460
	1/21/2014	1/13/2014	—	—	—	102,933		—	—	3,377,000
Gregory J. Fleming	1/21/2014	1/13/2014	—	147,323	220,984	—		—	—	4,953,514
Gregory J. Fleming	1/21/2014	1/13/2014	—	—	—	127,825		—	—	4,193,667
Colm Kelleher	1/21/2014	1/13/2014	—	147,323	220,984	—		—	—	4,953,514
	1/21/2014	1/13/2014	—	—	—	133,972		—	—	4,395,340
James A. Rosenthal	1/21/2014	1/13/2014	—	106,682	160,023	—		—	—	3,587,028
James A. Rosenthal	1/21/2014	1/13/2014	—	—	—	87,997		—	—	2,887,000

⁽¹⁾ The 2014 LTIP awards included in this table are also disclosed in the “Stock Awards” column of the “2014 Summary Compensation Table” and the “2014 Outstanding Equity Awards at Fiscal Year-End Table.” The RSU awards included in this table are also disclosed in the “Stock Awards” column of the “2014 Summary Compensation Table,” the “2014 Option Exercises and Stock Vested Table” and, other than Mr. Kelleher’s Stock Bonus Award (described in note 3 below), the “2014 Nonqualified Deferred Compensation Table.” The 2014 LTIP awards and RSUs were granted under the Morgan Stanley 2007 Equity Incentive Compensation Plan.

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⁽²⁾The 2014 LTIP awards are scheduled to vest and convert to shares in 2017 only if the Company satisfies predetermined performance goals over the three-year performance period consisting of 2014, 2015 and 2016. One-half of the target 2014 LTIP award is earned based on the Company’s average ROE over the three-year performance period (MS Average ROE). The other half of the target 2014 LTIP award is earned based on the Company’s TSR over the three-year period (MS TSR) relative to the TSR of the S&P 500 Financials Index over the three-year period (Index Group TSR). The number of stock units ultimately earned will be determined by multiplying each half of the target award by a multiplier as follows:


MS Average ROE*	Multiplier	Relative TSR**	Multiplier
11.5% or more	1.50	25% or more	1.50
10%	1.00	0%	1.00
5%	0.50	-50%	0.50
Less than 5%	0.00	Less than -50%	0.00

If MS Average ROE is between two of the thresholds noted in the table, the number of stock units earned will be determined by straight-line interpolation between the two thresholds. MS Average ROE, for this purpose, excludes (a) the impact of DVA, (b) certain gains or losses associated with the sale of specified businesses, (c) specified goodwill impairments, (d) certain gains or losses associated with specified legal settlements relating to business activities conducted prior to January 1, 2011, and (e) specified cumulative catch-up adjustments resulting from changes in accounting principles that are not applied on a full retrospective basis.

Relative TSR will be determined by subtracting the Index Group TSR from the MS TSR. In no event may the multiplier exceed 1.00 if MS TSR for the performance period is negative. If Relative TSR is between two of the thresholds noted in the table, the number of stock units earned will be determined by straight-line interpolation between the two thresholds.

Each NEO is entitled to receive cash dividend equivalents on the ~~RSUs,~~2014 LTIP awards, subject to the same vesting, cancellation and payment provisions as the underlying award.

⁽³⁾With the exception of Mr. Kelleher’s awards, the RSUs ~~and may direct~~are scheduled to convert to shares according to the ~~vote of the shares underlying the RSUs. Effective as~~following schedule: 25% on each of January ~~1, 2012,~~26, 2015 and January 25, 2016, and the remaining 50% on January 23, 2017. Mr. Kelleher’s RSUs are scheduled to convert to shares in ~~lieu~~three equal installments on each of ~~cash dividend equivalents,~~January 26, 2015, January 25, 2016 and January 23, 2017, except that 5,820 of Mr. Kelleher’s RSUs (the Stock Bonus Award) vested and converted to shares on July 21, 2014 as prescribed by the U.K. Prudential Regulatory Authority. With the exception of Mr. Kelleher’s Stock Bonus Award, the NEOs ~~will~~are retirement-eligible under the award terms at grant and, therefore, the awards are considered vested at grant for purposes of this proxy statement. The NEOs are entitled to receive dividend equivalents in the form of additional RSUs, subject to the same vesting, cancellation and payment provisions as the underlying RSUs.

⁽⁴⁾The stock options become exercisable in three equal annual installments on each of February 2, 2012, 2013 and 2014 and expire on the seventh anniversary of grant. Each NEO other than Mr. Fleming is retirement-eligible under the award terms as of the anniversary of the grant date and, therefore, the awards were considered vested on such date. Mr. Fleming is retirement-eligible under the award terms as of February 8, 2012. All stock options are subject to cancellation if a cancellation event occurs at any time prior to the scheduled exercisability date. For further details on cancellation of awards, see “Potential Payments Upon Termination or Change-in-Control.”

⁽⁵⁾~~The stock options were granted with an exercise price equal to $30.01, the closing price of the Company’s common stock on the grant date.~~

⁽⁶⁾Represents the aggregate grant date fair value, in accordance with the applicable accounting guidance for equity-based awards, of the RSUs ~~PSUs~~ and ~~stock options.~~2014 LTIP awards. The aggregate grant date fair value of the RSUs granted on January 21, ~~2011~~2014 is based on ~~$29.8899,~~$32.8077, the volume-weighted average price of the common stock on the grant date. The aggregate grant date fair value of ~~the stock options granted on January 21, 2011~~2014 LTIP awards is based on the ~~Black-Scholes value~~volume-weighted average price of athe common stock ~~option~~ on the grant date as ~~determined in accordance with applicable accounting guidance for equity-based awards. The aggregate grant date fair value of PSUs is based on~~well as the probable outcome of the performance conditions as of January 21, ~~2011, consistent~~2014, as determined in accordance with ~~the estimate of aggregate compensation cost to be recognized over the service period determined as of such date under the~~ applicable accounting guidance for equity-based awards. NEOs do not realize the value of equity-based awards until the awards are ~~settled or exercised.~~settled. The actual value that a NEO will realize from these awards is determined by future Company performance and share price, and may be higher or lower than the amounts indicated in the table. In particular, with respect to the ~~PSUs,~~2014 LTIP awards, a NEO may ultimately earn up to ~~two~~1.5 times the target number of performance units (maximum), or nothing (threshold), based on the Company’s performance over the three-year performance period. ~~Based on the Company’s actual performance through December 31, 2011, a NEO would have earned only 12.5% of the target number of units.~~ For further information on the valuation of the Company’s RSUs ~~PSUs~~ and ~~stock options,~~LTIP awards, see notes 2 and 2018 to the consolidated financial statements included in the ~~2011~~2014 Form 10-K.

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~~2011~~2014 Outstanding Equity Awards at Fiscal Year-End Table

The following table discloses the number of shares covered by unexercised stock options and unvested ~~RSUs and PSUs~~stock awards held by our NEOs on December 31, ~~2011. With the exception of Mr. Fleming, as~~2014. As of December 31, ~~2011,~~2014, each NEO is retirement-eligible under his or her RSU award terms and, therefore, all of his or her outstanding RSU awards are considered vested and, in accordance with SEC rules, are not included in this table. Outstanding vested ~~RSUs~~stock awards held by the NEOs on December 31, ~~2011~~2014 are disclosed in the ~~“2011~~“2014 Nonqualified Deferred Compensation Table.”As of December 31, 2011, the stock options held by the NEOs had no intrinsic value because the exercise price of each stock option was greater than $15.13, the closing price of the Company’s common stock on December 30, 2011.

Option Awards Stock Awards
Name
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable⁽¹⁾⁽²⁾

Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
⁽¹⁾
Option
Exercise
Price
($)⁽²⁾
Option
Expiration
Date
(mm/dd/
yyyy)
Number
of Shares
or Units
of Stock
That
Have Not
Vested
(#)⁽³⁾ Market
Value of
Shares
or
Units of
Stock
That
Have
Not
Vested
($)⁽³⁾ Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have
Not
Vested
(#)⁽⁴⁾ Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
($)⁽⁴⁾
James P. Gorman
354,986    —      51.7552    2/17/2016    —      —      162,200.34    2,454,091
56,772    —      66.7260    12/12/2016
—      424,731    30.0100    1/21/2018

Total

411,758    424,731    162,200.34    2,454,091
Ruth Porat
13,466    —      48.5345    1/2/2012    —      —      144,354.74    2,184,087
11,699    —      36.2209    1/2/2013
19,746    —      47.1909    1/2/2014
23,737    —      66.7260    12/12/2016
—      182,027    30.0100    1/21/2018

Total

68,648    182,027    —      —      144,354.74    2,184,087
Gregory J. Fleming

—      60,675    30.0100    1/21/2018    340,590    5,153,127    58,548.21    885,834
Colm Kelleher
22,775    —      36.2209    12/2/2012    —      —      149,057.08    2,255,234
40,201    —      47.1909    12/2/2013
144,551    —      66.7260    12/12/2016
—      182,027    30.0100    1/21/2018

Total

207,527    182,027    —      —      149,057.08    2,255,234
Paul J. Taubman
47,686    —      48.5345    1/2/2012    —      —      167,244.55    2,530,410
56,941    —      36.2209    1/2/2013
65,160    —      47.1909    1/2/2014
116,371    —      66.7260    12/12/2016
—      182,027    30.0100    1/21/2018

Total
286,158    182,027    —      —      167,244.55    2,530,410


		Option Awards								Stock Awards
Name		Number of Securities Underlying Unexercised Options Exercisable (#)⁽¹⁾⁽²⁾		Number of Securities Underlying Unexercised Options Unexercisable (#)⁽¹⁾		Option Exercise Price ($)⁽²⁾		Option Expiration Date (mm/dd/ yyyy)		Number of Shares or Units of Stock That Have Not Vested (#)		Market Value of Shares or Units of Stock That Have Not Vested ($)		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)⁽³⁾		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)⁽³⁾
James P. Gorman			354,986		—		51.7552		2/17/2016		—		—		511,163		19,833,132
			56,772		—		66.726		12/12/2016
			424,731		—		30.01		1/21/2018
			161,607		323,220		22.98		1/22/2018

	Total		998,096		323,220						—		—		511,163		19,833,132
Ruth Porat			23,737		—		66.726		12/12/2016		—		—		362,660		14,071,236
			182,027		—		30.01		1/21/2018

	Total		205,764		—						—		—		362,660		14,071,236
Gregory J. Fleming			60,675		—		30.01		1/21/2018		—		—		409,946		15,905,926
			49,294		298,594		22.98		1/22/2018

	Total		109,969		298,594						—		—		409,946		15,905,926
Colm Kelleher			144,551		—		66.726		12/12/2016		—		—		409,946		15,905,926
			182,027		—		30.01		1/21/2018
			148,473		296,952		22.98		1/22/2018

	Total		475,051		296,952						—		—		409,946		15,905,926
James A. Rosenthal			121,351		—		30.01		1/21/2018		—		—		347,420		13,479,912
			124,668		249,341		22.98		1/22/2018

	Total		246,019		249,341						—		—		347,420		13,479,912

⁽¹⁾ The stock option awards in this table are vested and are exercisable, or will ~~vest and~~ become exercisable, as ~~follows:~~set forth in the chart below.


Option Expiration Date (mm/dd/yyyy)		~~Vesting~~Exercisability Schedule
~~1/2/2012~~		~~100% of the award became exercisable on 1/2/2004. The shares acquired upon exercise were subject to cancellation and transfer restrictions until 1/2/2007.~~
~~12/2/2012~~		~~100% of the award became exercisable on 1/2/2005. The shares acquired upon exercise were subject to cancellation and transfer restrictions until 1/2/2008.~~
~~1/2/2013~~		~~100% of the award became exercisable on 1/2/2005. The shares acquired upon exercise were subject to cancellation and transfer restrictions until 1/2/2008.~~
~~12/2/2013~~		50% of the award became exercisable on 1/2/2006 and 50% of the award became exercisable on 1/2/2007. The shares acquired upon exercise were subject to cancellation and transfer restrictions until 1/2/2009.
~~1/2/2014~~		50% of the award became exercisable on 1/2/2006 and 50% of the award became exercisable on 1/2/2007. The shares acquired upon exercise were subject to cancellation and transfer restrictions until 1/2/2009.
2/17/2016		60% of the award became exercisable on 2/17/2006 and 40% of the award became exercisable on 2/16/~~2007.~~2007
12/12/2016		50% of the award became exercisable on each of 1/2/2009 and ~~50%~~1/2/2010
1/21/2018		One-third of the award became exercisable ~~on 1/2/2010. The shares acquired upon exercise were subject to cancellation and transfer restrictions until 1/2/2010.~~
~~1/21/2018~~		~~Exercisable in three equal installments~~ on each of 2/2/2012, 2/2/2013 and 2/2/~~2014.~~2014
1/22/2018		One-third of the award became exercisable on each of 1/27/2014 and 1/26/2015. One-third of the award will become exercisable on 1/25/2016

⁽²⁾Stock options were granted with an exercise price equal to the fair market value of the Company’s common stock on the date of grant and, with ~~the exception of~~respect to the stock options that are scheduled to expire ~~on January 21, 2018,~~in 2016, were subsequently equitably adjusted to reflect the spin-off of Discover Financial Services in 2007.

LOGO

⁽³⁾~~Mr. Fleming is retirement-eligible under~~Based on Company performance through December 31, 2014 and in accordance with SEC rules, the ~~award terms as~~number of ~~February 8, 2012 and, therefore, the awards are considered vested as of that date. The RSUs set forth~~performance units reflected in the table for Mr. Fleming are scheduled to convert to shares as follows: 110,079 on February 8, 2012; 113,415 on February 8, 2013; and 58,548 on each of February 2, 2013 and February 2, 2014. The market value of the RSUs is based on $15.13, the closing price of the Company’s common stock on December 30, 2011.

⁽⁴⁾~~The number of PSUs reflects the grant of~~represents the target number of performance units ~~although~~granted under the ~~senior executive~~2014 LTIP award that are realizable in connection with the achievement of pre-established performance targets over a three-year period beginning in 2014, and the maximum number of performance units granted under the 2013 LTIP award that are realizable in connection with the achievement of pre-established performance targets over a three-year period beginning in 2013. With respect to the 2014 LTIP awards and 2013 LTIP awards, the NEOs may ultimately earn up to 1.5 times or two times the target number of performance units, respectively, or nothing, based on the Company’s performance over the applicable three-year ~~performance~~ period. The PSUs included in this table were granted to the NEOs for performance in 2009 (with the number of 2009 PSUs granted to each NEO as follows: 97,295.47 to Mr. Gorman; 82,460.92 to Ms. Porat; 80,521 to Mr. Kelleher;2014 LTIP awards and 98,659.51 to Mr. Taubman) and 2010 (with the number of 2010 PSUs granted to each NEO as follows: 64,904.87 to Mr. Gorman; 61,893.82 to Ms. Porat; 58,548.21 to Mr. Fleming; 68,536.08 to Mr. Kelleher; and 68,585.04 to Mr. Taubman) and2013 LTIP awards are scheduled to vest and convert to shares in ~~2013~~2017 and ~~2014,~~2016, respectively, only if the Company satisfies the predetermined performance goals over the applicable ~~three-year~~ performance period (see ~~footnote~~note 2 ofto the ~~“2011~~“2014 Grants of Plan-Based Awards Table”) with respect to the 2014 LTIP award performance goals). The market value of the ~~PSUs~~performance units is based on ~~$15.13,~~$38.80, the closing price of the Company’s common stock on December ~~30, 2011.~~31, 2014.

~~2011~~2014 Option Exercises and Stock Vested Table

The following table contains information about the stock options exercised by NEOs during 2014 and the RSUs and performance stock units (PSUs) held by the ~~applicable~~ NEOs that vested during ~~2011. With the exception of Mr. Fleming’s award, these~~2014. The RSUs are also disclosed in the “Stock Awards” column of the ~~“2011~~“2014 Summary Compensation Table,” the ~~“2011~~“2014 Grants of Plan-Based Awards Table” and the ~~“2011~~“2014 Nonqualified Deferred Compensation Table.” The table does not include PSUs granted in January 2011 for 2010 performance because the vesting of such awards is subject to the Company’s satisfaction of predetermined performance goals over a three-year performance period.


	Option Awards				Stock Awards				Option Awards				Stock Awards
Name	Number of Shares Acquired on Exercise (#)		Value Realized on Exercise ($)		Number of Shares Acquired on Vesting (#)⁽¹⁾		Value Realized on Vesting ($)⁽²⁾		Number of Shares Acquired on Exercise (#)		Value Realized on Exercise ($)⁽¹⁾		Number of Shares Acquired on Vesting (#)⁽²⁾		Value Realized on Vesting ($)
James P. Gorman		—		—		129,809	$	3,879,978		—		—		155,207		5,092,000	⁽³⁾
														113,510		4,422,713	⁽⁴⁾
Ruth Porat		—		—		123,787	$	3,699,981		—		—		102,933		3,377,000	⁽³⁾
														93,616		3,647,579	⁽⁴⁾
Gregory J. Fleming		—		—		110,079	$	3,290,250		100,000		993,000		127,825		4,193,667	⁽³⁾
														99,468		3,875,592	⁽⁴⁾
Colm Kelleher		—		—		137,072	$	4,097,068		—		—		128,152		4,204,397	⁽³⁾
Paul J. Taubman		—		—		137,170	$	4,099,998
														99,047		3,859,188	⁽⁴⁾
														5,820		189,380	⁽⁵⁾
James A. Rosenthal										—		—		87,997		2,887,000	⁽³⁾
														84,840		3,305,638	⁽⁴⁾

⁽¹⁾~~Other than with respect to Mr. Fleming, consists~~The value realized on exercise of a stock option represents the difference between the option exercise price and the closing price of the Company’s common stock on the exercise date.

⁽²⁾Consists of RSUs ~~that were~~ granted on January 21, 2014 for 2013 performance and PSUs granted on January 20, 2012 in connection with 2011 ~~for 2010 performance.~~compensation (2011 PSUs). For further details on ~~these~~the RSUs, including the terms of the deferral, see note 3 to the ~~“2011~~“2014 Grants of Plan-Based Awards Table.” ~~With respect to Mr. Fleming, consists of RSUs that were~~The PSUs granted on ~~February 8,~~January 21, 2011 in connection with 2010 compensation (2010 PSUs) vested on December 31, 2013, the date on which the performance period ended, and converted to shares of common stock on January 28, 2014. For further details on the 2010 PSUs, see note 3 to the “2013 Outstanding Equity Awards at Fiscal Year-End Table” in ~~accordance with his employment offer letter with the Company, that vested in accordance with their terms~~our proxy statement filed on ~~February 8, 2011.~~March 28, 2014.

⁽²⁾⁽³⁾ The value realized represents the aggregate grant date fair value, in accordance with the applicable accounting guidance for equity-based awards, of the RSUs. The aggregate grant date fair value of ~~the~~these RSUs is based on ~~$29.8899,~~$32.8077, the volume-weighted average price of the Company’s common stock on the grant date.

⁽⁴⁾ The value realized is based on $38.9632, the volume-weighted average price of the Company’s common stock on December 31, 2014, which is the last day of the 2011 PSU performance period and the date ~~or vesting~~on which 106.25% of the target number of 2011 PSUs vested based on the Company’s performance from January 1, 2012 through December 31, 2014. The 2011 PSUs converted to shares of common stock on March 2, 2015.

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⁽⁵⁾ The value realized is based on $32.5391, the volume-weighted average price of the Company’s common stock on July 21, 2014, which is the date ~~as applicable.~~on which the award vested pursuant to its terms.

~~2011~~2014 Pension Benefits Table

The table below discloses the present value of accumulated benefits payable to each ~~of the NEOs~~NEO and the years of service credited to each NEO under the Company’s defined benefit retirement plans as of December 31, ~~2011.~~2014.


Name	Plan Name⁽¹⁾	Number of Years Credited Service		Retirement Age for Full Benefits		Present Value of Accumulated Benefit ($)⁽²⁾		Payments During Last Fiscal Year ($)		Plan Name	Number of Years Credited Service⁽¹⁾		Retirement Age for Full Benefits		Present Value of Accumulated Benefit ($)⁽²⁾		Payments During Last Fiscal Year ($)
James P. Gorman	Morgan Stanley Employees Retirement Plan		4		65		62,511		—	Morgan Stanley Employees Retirement Plan		4		65		83,720		—
Ruth Porat	Morgan Stanley Employees Retirement Plan		20		65		343,622		—	Morgan Stanley Employees Retirement Plan		20		65		469,010		—
	Morgan Stanley Supplemental Executive Retirement and Excess Plan		22		60		1,124,620		—	Morgan Stanley Supplemental Executive Retirement and Excess Plan		25		60		1,466,843		—
Gregory J. Fleming⁽³⁾	—		—		—		—		—	—		—		—		—		—
Colm Kelleher	Morgan Stanley U.K. Group Pension Plan⁽⁴⁾		7		60		132,851		—	Morgan Stanley U.K. Group Pension Plan⁽⁴⁾		7		60		206,890		—
	Morgan Stanley Supplemental Executive Retirement and Excess Plan		22		60		866,211		—	Morgan Stanley Supplemental Executive Retirement and Excess Plan		25		60		1,118,547		—
Paul J. Taubman	Morgan Stanley Employees Retirement Plan		25		65		371,185		—
	Morgan Stanley Supplemental Executive Retirement and Excess Plan		26		60		1,310,058		—
James A. Rosenthal⁽³⁾										—		—		—		—		—

⁽¹⁾ ~~Benefits~~After December 31, 2010, no further benefit accruals occur under the ~~SEREP are shown even if~~ERP. After September 30, 2014, no further benefit accruals occur under the ~~eligibility requirements (~~~~i.e.~~~~, grandfathered group, age 55, five~~SEREP. Therefore, employees may have different years of credited service under the ERP and ~~age plus~~SEREP. No NEO is awarded with credited service ~~totals at least 65) have not been met as~~under the ERP or SEREP in excess of ~~the current date. See the discussion under “Supplemental Executive Retirement and Excess Plan” following this table.~~his/her actual service.

⁽²⁾The present value at December 31, ~~2011~~2014 is based on ~~PPA generational annuitant~~the RP-2014 mortality tables projected generationally with Scale MP-2014 and discount rates of ~~4.65%~~4.07% for the ERP, ~~4.66%~~3.83% for the Excess Plan component and ~~4.54%~~3.80% for the ~~SERP~~Supplemental Employee Retirement Plan (SERP) component of the SEREP. Present values are determined using an interest-only discount before retirement. Post-retirement discounts are based on interest and mortality. The assumed benefit commencement date is the earliest age at which the executive can receive unreduced benefits or current age, if greater.

⁽³⁾ Mr. Fleming isand Mr. Rosenthal are not eligible for any of the Company-sponsored defined benefit plans.

⁽⁴⁾During 2014, Mr. Kelleher ~~participates~~participated in the Morgan Stanley U.K. Group Pension Plan (U.K. Pension Plan), a defined contribution plan that provided defined benefit pension accruals until October 1, 1996. As of October 1, 1996, Mr. Kelleher’s accrued defined benefit under the U.K. Pension Plan was converted to an account balance, the value of which is ~~£82,831~~£125,586 ($~~132,851)~~206,890) as of December 31, ~~2011.~~2014. If the value of the account balance relating to the pre-October 1996 portion of Mr. Kelleher’s U.K. Pension Plan benefit, adjusted for investment experience until the payment date, is greater than the value of the guaranteed minimum pension under the U.K. Pension Plan, no defined benefit pension is payable. If the value of the guaranteed minimum pension, determined in accordance with U.K. laws, is greater than the value of the adjusted account balance, the guaranteed minimum pension is payable, in addition to any defined contribution amount payable for the period after September 30, 1996. Mr. Kelleher had seven years of credited service in the ~~U.K~~U.K. Pension Plan at the time his accrued benefit was converted to an account balance. The amount shown in the table for Mr. Kelleher does not include defined contribution benefits that were accrued after September 30, 1996. The amount of British pounds sterling was converted to U.S. dollars using the ~~2011~~2014 average of daily spot rates of £1 to ~~$1.6039.~~$1.6474.

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The following is a description of the material terms with respect to each of the plans referenced in the table above.

Employees Retirement Plan (ERP)

Substantially all of the U.S. employees of the Company and its U.S. affiliates hired before July 1, 2007 ~~other than certain employees in the Company’s mortgage business,~~ were covered after one year of service by the ERP, a non-contributory, defined benefit pension plan that is qualified under Section 401(a) of the Internal Revenue Code. Effective after December 31, 2010, the ERP was frozen and no further benefit accruals will occur. Benefits are generally payable as an annuity at age 65 (or earlier, subject to certain reductions in the amounts payable). Under the pre-2004 provisions of the ERP, benefits are payable in full at age 60 and reduced 4% per year for retirement between ages 55 and 60 for employees who retire after age 55 with ten years of service. Before the ERP was frozen, annual benefits were equal to 1% of eligible earnings plus 0.5% of eligible earnings in excess of Social Security covered compensation for each year of service. Eligible earnings generally included all taxable compensation, other than certain equity-based and ~~nonrecurring~~non-recurring amounts, up to $170,000 per year. ERP participants who, as of January 1, 2004, had age plus service equal to at least 65 and who had been credited with five years of service, received benefits determined under the ERP’s pre-2004 benefit formula, if greater. Pre-2004 benefits equaled 1.15% of final average salary, plus 0.35% of final average salary in excess of Social Security covered compensation, in each case multiplied by ~~Credited Service~~credited service up to 35 years, where final average salary was base salary, up to specified limits set forth in the ERP, for the highest paid 60 consecutive months of the last 120 months of service. Mr. Gorman and Ms. Porat ~~and Mr. Taubman~~ have accrued benefits in the ERP.

Supplemental Executive Retirement and Excess Plan (SEREP)

The SEREP is an unfunded, nonqualified plan. Effective after September 30, 2014, the SEREP was frozen and no further benefit accruals will occur. Credited ~~Service~~service is counted starting from the first day of the month after the hire date, except that for certain excess benefits ~~Credited Service~~credited service begins after one year of service. The SEREP provides benefits not otherwise provided under the ERP formula because of limits in the ERP or Internal Revenue Code on eligible pay and benefits. The SEREP also provides certain grandfathered benefits and supplemental retirement income (unreduced at age 60) for eligible employees after offsetting other Company-provided pension benefits, pension benefits provided by former employers and, ~~effective~~ for ~~calendar years after 2010,~~January 1, 2011 through June 30, 2014, adjusted to take into account ~~a portion of 401(k) contributions.~~certain defined contribution plan awards. The supplemental benefit, before offsets,

equals 20% of final average salary plus 2% of final average salary per year after five years (up to 50% cumulatively) plus 1% of final average salary per year after 25 years (up to 60% cumulatively), where final average salary is base salary for the highest paid 60 consecutive months of the last 120 months of service through September 30, 2014, up to a maximum annual benefit payable of $140,000 at age 60, reduced by 4% per year for payments beginning before age 60. The SEREP was restricted effective January 1, 2004 to allow only “grandfathered” employees who as of that date met certain eligibility criteria to benefit from the plan. Grandfathering in this plan was provided to all similarly situated eligible employees and may be provided to other employees with the approval of the CMDS Committee. Benefits may be paid in various actuarially equivalent forms of annuity. Other than for small balances, no lump sums are available under this plan. Ms. Porat and ~~Messrs.~~Mr. Kelleher ~~and Taubman~~ participate in the SEREP.

U.K. Group Pension Plan

~~Mr. Kelleher is a U.K.-benefits-eligible NEO who participates in~~Until March 31, 2012, the Company contributed to the U.K. Pension ~~Plan.~~Plan on behalf of Mr. Kelleher, and he remains a deferred vested participant in that plan. As described in note 4 to the “Pension Benefits Table,” the U.K. Pension Plan is a defined contribution plan that provided defined benefit accruals until 1996. The guaranteed minimum pension payable under the U.K. Pension Plan is determined in accordance with U.K. laws.

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~~2011~~2014 Nonqualified Deferred Compensation Table

The following table contains information with respect to the participation of the NEOs in the Company’s unfunded cash ~~nonqualified~~ deferred compensation plans that provide for the deferral of compensation on a basis that is not tax-qualified, as well as with respect to RSUs granted to the NEOs that are vested but have not yet converted to shares of Morgan Stanley common stock.

In addition to the Company equity plans, each NEO participated in one or more of ~~seven~~the following cash nonqualified deferred compensation plans as of December 31, ~~2011: the Capital Accumulation Plan (CAP),~~2014: the Key Employee Private Equity Recognition Plan (KEPER), the Notional Leveraged Co-Investment Plan (LCIP), MSCIP, the Pre-Tax Incentive Program (PTIP), ~~the Select Employees’ Capital Accumulation Program (SECAP)~~ and the ~~Strategic Equity Incentive~~U.K. Alternative Retirement Plan ~~(SEIP)~~(ARP). The NEOs participate in the plans on the same terms and conditions as other similarly situated employees. These terms and conditions are described below following the notes to the table. ~~CAP,~~ KEPER, LCIP ~~PTIP~~ and ~~SEIP~~PTIP are closed to new participants and ~~contributions and SECAP was not offered to the NEOs for 2011.~~

contributions.


Name	Executive Contributions in Last FY ($)⁽¹⁾		Registrant Contributions in Last FY ($)		Aggregate Earnings in Last FY ($)⁽²⁾		Aggregate Withdrawals/ Distributions ($)⁽³⁾		Aggregate Balance at Last FYE ($)⁽⁴⁾		Executive Contributions in Last FY ($)⁽¹⁾		Registrant Contributions in Last FY ($)		Aggregate Earnings in Last FY ($)⁽²⁾			Aggregate Withdrawals/ Distributions ($)⁽³⁾		Aggregate Balance at Last FYE ($)⁽⁴⁾
James P. Gorman
LCIP		—		—		(32,088)		—		1,171,476		—		—		296,546			—		2,400,801
MSCIP		2,328,000		—		18,009		1,172,314		7,331,080		5,092,000		—		217,791			3,379,906		3,375,627
RSUs⁽⁵⁾		3,879,978		—		(8,473,617)		72,143		10,440,962		5,092,000		—		4,894,119			6,391,855		25,769,282

Total		6,207,978		—		(8,487,696)		1,244,457		18,943,518		10,184,000		—		5,408,456			9,771,761		31,545,710
Ruth Porat
CAP		—		—		(15)		—		7,082
KEPER		—		—		1,214		2,486		10,049		—		—		586			2,655		5,223
LCIP		—		—		20,208		—		20,208		—		—		10,906			—		66,082
MSCIP		2,220,000		—		(102,280)		1,685,399		4,777,302		3,377,000		—		(46,992	)		2,224,546		2,224,849
PTIP		—		—		(86,680)		—		477,316		—		—		115,710			—		933,001
RSUs⁽⁵⁾		3,699,981		—		(3,445,078)		3,332,006		4,332,927		3,377,000		—		1,830,916			5,371,557		10,576,208
SEIP		—		—		(1,828)		—		72,952

Total		5,919,981		—		(3,614,459)		5,019,891		9,697,836		6,754,000		—		1,911,126			7,598,758		13,805,363
Gregory J. Fleming
MSCIP		2,100,000		—		1,803		1,050,743		1,051,060		4,193,667		—		2,019			2,696,063		2,696,451
RSUs⁽⁵⁾												4,193,667		—		1,438,349			4,681,371		8,804,630

Total												8,387,334		—		1,440,368			7,377,434		11,501,081
Colm Kelleher
CAP		—		—		27		—		11,024
LCIP												—		—		465,410			—		3,722,823
MSCIP												4,204,397		—		(29,832	)		2,218,428		7,728,965
RSUs⁽⁵⁾												4,204,397		—		1,980,429			3,587,788		11,184,155
ARP												—		—		1,670			—		36,220	⁽⁶⁾

Total												8,408,794		—		2,417,677			5,806,216		22,672,163
James A. Rosenthal
LCIP		—		—		(6,948)		—		1,792,127		—		—		44,805			—		650,792
MSCIP		2,458,244		—		27,788		1,237,902		5,354,262		2,887,000		—		60,883			2,083,852		2,089,505
RSUs⁽⁵⁾		4,097,068		—		(4,648,781)		1,322,926		5,668,201		2,887,000		—		1,103,023			3,636,220		6,680,856

Total		6,555,312		—		(4,627,914)		2,560,828		12,825,614		5,774,000		—		1,208,711			5,720,072		9,421,153
Paul J. Taubman
CAP		—		—		(659)		—		29,005
KEPER		—		—		38,838		79,561		321,564
LCIP		—		—		149,063		—		3,544,994
MSCIP		2,460,000		—		111,437		1,239,948		6,809,467
PTIP		—		—		11,400		—		1,256,198
RSUs⁽⁵⁾		4,099,998		—		(8,345,655)		80,932		10,242,723
SECAP		—		—		45,736		—		5,039,626
SEIP		—		—		(564)		—		24,702

Total		6,559,998		—		(7,990,404)		1,400,441		27,268,279

⁽¹⁾RSU contributions represent the RSU awards granted in January ~~2011~~2014 for ~~2010~~2013 performance that are considered vested at grant but are subject to cancellation until the scheduled conversion dates of such ~~awards in 2013 and 2014.~~awards. MSCIP contributions represent MSCIP awards granted in January ~~2011~~2014 for ~~2010~~2013 performance that are considered vested at grant and are subject to ~~vesting and~~ cancellation until the scheduled payment dates of such ~~awards in 2011 and 2012. Other than with respect to Mr. Taubman, the~~awards. The MSCIP awards reported in this table are also reported as part of the ~~2010~~2013 bonus in the ~~“2011~~“2014 Summary Compensation Table.” The value of the RSUs in this column (which are also included in the “Stock Awards” column of the ~~“2011~~“2014 Summary Compensation Table” for ~~2011,~~2014, the ~~“2011~~“2014 Grants of Plan-Based Awards ~~Table”~~Table,” and the ~~“2011~~“2014 Option Exercises and Stock Vested Table”) is the aggregate grant date fair value of the RSUs based on ~~$29.8899,~~$32.8077, the volume-weighted average price of the Company’s common stock on the grant date.

⁽²⁾With respect to our cash-based nonqualified deferred compensation plans, represents the change in (i) the balance of the NEO’s account reflected on the Company’s books and records at December 31, ~~2011,~~2014, without giving effect to any withdrawals or distributions, compared to (ii) the sum of the balance of the NEO’s account reflected on the Company’s books and records at December 31, ~~2010~~2013 and the value of any contributions made

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during ~~2011.~~2014. Includes any nonqualified deferred compensation earnings that are disclosed in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column of the ~~“2011~~“2014 Summary Compensation Table” for ~~2011~~2014 and described in note 6 thereto.

With respect to the RSUs, represents (i) the change in the average of the high and low prices of the Company’s common stock on December ~~30, 2011~~31, 2014 (or, if applicable, the earlier distribution date), compared to December 31, ~~2010~~2013 (or, if applicable, the later contribution date), as well as (ii) the amount of the vested cash dividend equivalent rights ~~credited~~ in ~~2011 with respect to the award~~2014 (which ~~for the RSUs granted prior to 2010,~~ are paid to the ~~RSU~~award holder at the time dividends are paid to holders of the Company’s common ~~stock~~stock) and ~~for~~dividend equivalents in the form of additional RSUs ~~granted~~credited in ~~2010 and 2011,~~2014 with respect to the award (which are paid to the award holder at the time that the underlying award converts to shares, subject to the same cancellation provisions as the underlying award).

⁽³⁾Represents distributions from our cash-based nonqualified deferred compensation plans and ~~RSU~~with respect to the RSUs, conversions based on the average of the high and low prices of the Company’s common stock on the conversion date and ~~with respect to the RSUs, also represents~~ amounts paid ~~on RSUs~~ during ~~2011~~2014 pursuant to cash dividend equivalent rights.

⁽⁴⁾ With respect to our cash-based nonqualified deferred compensation plans, represents the balance of the NEO’s account reflected on the Company’s books and records at December 31, ~~2011, and with~~2014. With respect to the RSUs, represents the number of vested units held by the NEO on December 31, ~~2011,~~2014 multiplied by the average of the high and low prices of the Company’s common stock on December ~~30, 2011, as well as the amount of the vested deferred cash dividend equivalent rights held with respect to the RSUs.~~31, 2014. All amounts deferred by a NEO in prior years have been reported in the Summary Compensation Tables in our previously filed proxy statements in the year earned (or with respect to equity awards, granted) to the extent he or she was a NEO for that year for purposes of the SEC’s executive compensation disclosure rules.

⁽⁵⁾ The RSUs disclosed in this table include awards that as of December 31, ~~2011~~2014 had vested, but had not reached their scheduled conversion date and remained subject to cancellation, as well as awards that had reached their scheduled conversion date, but were deferred to preserve the Company’s tax deductibility of the award, in accordance with the terms of the award.

⁽⁶⁾ Mr. Kelleher’s aggregate balance at year-end of £21,987 ($36,220) was converted from British pounds sterling to U.S. dollars using the 2014 average of daily spot rates of £1 to $1.6474.

The following is a description of the material terms with respect to contributions, earnings and distributions applicable to each of the ~~seven~~following cash nonqualified deferred compensation plans and the RSUs referenced in the table above.

~~Capital Accumulation Plan~~

Under CAP, participants were granted a number of units based on their level of compensation in excess of base salary. The plan has been closed to new contributions since 1998. Earnings on units are based on notional interests in investment earnings and interest on risk capital investments selected by the Company. Participants generally receive plan distributions after dividends, distributions of capital, liquidation proceeds or other distributions are paid from the underlying investments.

Key Employee Private Equity Recognition Plan

Under KEPER, participants were permitted to defer a portion of their cash bonus. The plan has been closed to new contributions since 2001. Contributions to KEPER are notionally invested by the Company in reference investments. Such reference investments may include investments made by Company-sponsored private equity funds, investments made by private equity funds sponsored by third parties in which the Company has acquired or will acquire a limited partner or similar interest, and investments in private equity securities that the Company makes for its own account. Distributions are made to participants following the realization of any proceeds in respect of any investment. The amounts contributed by a participant plus any earnings on participant contributions under the program remain subject to cancellation under specified circumstances.

Notional Leveraged Co-Investment Plan

Under LCIP, participants ~~may~~were permitted to allocate a portion of their long-term incentive compensation to the plan. LCIP is closed to new participants and has not been offered since 2008. For each of fiscal 2006, fiscal 2007 and fiscal 2008, participants were permitted to allocate up to 40% of their long-term incentive compensation to LCIP.

The Company ~~may make~~contributed a notional investment in an amount equal to a multiple of each participant’s contribution (for each of fiscal 2006, fiscal 2007 and fiscal 2008, this multiple was two; however, for fiscal 2008,

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participants could elect to forgo the notional investment). Contributions are notionally invested by the Company in reference investments, which may include the Company’s proprietary investment funds, “funds of funds” that include Company proprietary investment funds and third-party investment funds, and other third-party investment funds. All amounts contributed by a participant plus any earnings on participant contributions and the Company notional investment ~~are~~were subject to cancellation under specified circumstances until three years after deferral. Participants generally are entitled to receive distributions in respect of their contributions plus any earnings on their contributions and on the Company notional investment on the third anniversary of grant and the tenth anniversary of grant, based on the valuation of the notional investments and any realizations of those investments prior to the scheduled distribution date. Participant distributions under LCIP are offset by the Company notional investment, excluding any earnings thereon.

Morgan Stanley Compensation Incentive Plan

Beginning with fiscal 2008 year-end compensation, a portion of ~~the NEOs’~~each participant’s year-end long-term incentive compensation was mandatorily deferred into MSCIP. Earnings on MSCIP awards are based on the performance of notional investments available under the plan and selected by the participants. Participants may reallocate such balances periodically, as determined by the plan administrator. Until MSCIP awards reach their scheduled distribution date, they are subject to cancellation and clawback by the Company. The cancellation and clawback events applicable to MSCIP awards held by our NEOs are described ~~below~~in the CD&A and in “Potential Payments ~~Upon~~upon Termination or Change-in-Control.”

Pre-Tax Incentive Program

Under PTIP, participants were permitted to defer a portion of their cash bonus or commissions for one or more fiscal years. The plan has been closed to new contributions since 2003. Earnings on PTIP contributions are based on the performance of notional investments available under the plan and selected by the participants. Participants could generally elect the commencement date for distributions of their contributions and earnings and the number of annual installments over which to receive distributions (generally, 5, 10, 15 or 20 years). Subject to earlier distribution on death or termination of employment due to disability, no distributions may begin prior to the attainment of age 55, and no distribution may begin prior to termination of employment.

~~Select Employees’ Capital Accumulation Program~~

Under SECAP, participants are permitted to defer a portion of their cash bonus or commissions for one or more fiscal years. Earnings on SECAP contributions are based on the performance of notional investments available under the plan and selected by the participants. Participants can generally elect the commencement date for distributions of their contributions and earnings and the number of annual installments over which to receive distributions (generally, one to ten years), subject to earlier distribution on death or termination of employment. No distributions may begin later than January 2 following the year in which the participant attains age 65.

~~Strategic Equity Incentive Plan~~

Under SEIP, participants were granted notional points to compensate them for their contributions to the growth and profits of the Company. SEIP points entitle a participant to a pro-rata share of earnings based on the performance of notional risk capital investments selected by the Company. SEIP points were awarded for performance years 1999, 2000 and 2001. The plan has been closed to new participants since 2001. The final distribution in respect of SEIP points awarded for 1999 was made in 2010 and the last remaining distribution in respect of SEIP points awarded for 2000 and 2001 will be made in 2012.

~~RSUs~~Restricted Stock Units

RSUs may be granted under the Morgan Stanley 2007 Equity Incentive Compensation Plan or any other Company equity plan as determined by the CMDS Committee. Each RSU constitutes a contingent and unsecured promise of the Company to pay the holder one share of Company common stock on the conversion date of the RSU. The RSUs included in this table are considered vested; however, the RSUs are subject to cancellation if a cancellation event occurs at any time prior to the scheduled conversion date. RSUs granted in 2012 and later are subject to clawback, as well as cancellation, prior to the scheduled conversion date. The cancellation and clawback events applicable to RSUs held by our NEOs are described in the CD&A and in “Potential Payments ~~Upon~~upon Termination or ~~Change-in-Control,~~Change-in-Control.” ~~as applicable.~~

U.K. Alternative Retirement Plan

The ARP is a U.K. employer financed retirement benefits scheme as defined by Her Majesty’s Revenue and Customs (HMRC). Under the ARP, eligible participants receive monthly notional contributions from the Company based on a percentage of base salary, subject to specified limits. Participants may also elect to contribute a portion of their cash bonus and distributions from certain cash-based nonqualified deferred compensation plans to the ARP. Participants include those employees who either have an accumulated pension value in the U.K. Group Pension Plan that exceeds a limit set by the U.K. government or have elected pension taxation protection available from the HMRC. Earnings on ARP contributions are based on the performance of notional investments available under the ARP and selected by the participants. Participants can generally elect the commencement date for distributions at any time after age 55, so long as no distributions begin later than age 75. Distributions are currently paid in the form of a lump sum.

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Potential Payments ~~Upon~~upon Termination or Change-in-Control

This section describes and quantifies the benefits and compensation to which each NEO would have been entitled under our existing plans and arrangements if his or her employment had terminated or if the Company had undergone a change-in-control, in each case on December 31, 2011. The section does not include any awards granted to our NEOs in January 2012 for performance in 2011, as such awards were not outstanding, and the NEOs were not entitled to such awards, as of December 31, 2011.2014. For purposes of valuing any equity awards, we have assumed a per share value of ~~$15.13,~~$38.80, the closing price of the Company’s common stock on December ~~30, 2011.~~31, 2014.

I.	~~General Policies~~

General Policies.Our NEOs are not entitled to cash severance payments upon any termination of employment, but they are entitled to receive post-termination health and welfare benefits that are generally available to all salaried employees, such as accrued vacation pay and death, disability and post-retirement welfare benefits. Our NEOs are not contractually entitled to ~~special or enhanced termination benefits under our pension and nonqualified deferred compensation plans as compared to other employees.~~any excise tax protection upon a change-in-control of the Company.

Following termination of employment, the NEOs are entitled to amounts, to the extent vested, due under the terms of our pension arrangements, as described inunder the ~~“2011~~“2014 Pension Benefits ~~Table”~~Table,” and ~~accompanying narrative. Further, upon a termination of employment, NEOs are entitled to the~~our nonqualified deferred compensation ~~amounts, to~~plans, as described under the ~~extent vested, reported~~“2014 Nonqualified Deferred Compensation Table.” The NEOs are retirement-eligible under the terms of the PSUs and LTIP awards; however, such awards are not included in the ~~“2011~~“2014 Nonqualified Deferred Compensation Table” ~~pursuant~~because these awards deliver value only if the Company achieves objective performance goals. Our NEOs are not entitled to ~~the terms of the arrangements,~~special or enhanced termination benefits under our pension and nonqualified deferred compensation plans as ~~described in the accompanying narrative.~~compared to other employees.

Even if a NEO is considered vested in a ~~long-term incentive~~deferred award, ~~reported in the “2011 Nonqualified Deferred Compensation Table,”~~ the award may be subject to cancellation through the distribution date of such award in the event the NEO engages in a cancellation event or if ~~applicable,~~ a clawback event occurs.

In general, a cancellation event with respect to ~~such vested long-term~~deferred incentive compensation awards ~~and the awards described in the table below~~ includes: engaging in competitive activity during a specified period following a voluntary termination of employment (other than following a Good Reason termination for Mr. Gorman’s 2009 and 2010 year-end awards); a termination for cause, a later determination that the NEO’s employment could have been terminated for cause oremployment; engaging in cause ~~whether~~(i.e., any act or ~~not employment has been terminated;~~omission that constitutes a breach of obligation to the Company, including a failure to comply with internal compliance, ethics or risk management standards and failure or refusal to perform duties satisfactorily, including supervisory and management duties); improper disclosure of the Company’s proprietary information; solicitation of Company employees, clients or customers during employment or within a specified period following termination of employment; the making of unauthorized comments regarding the Company; resignation of employment without providing the Company proper advance ~~notice within a specified period;~~notice; or ~~for 2009 and 2010 year-end awards,~~ the failure ~~or refusal following termination of employment~~ to cooperate with or assist the Company in connection with investigations, regulatory matters, lawsuits or arbitrations ~~in which the NEO may have pertinent information.~~

following termination of employment.

~~MSCIP~~Clawback of deferred incentive compensation awards ~~also include a provision for clawback~~ by the Company can be triggered through the applicable scheduled ~~payment~~distribution date if the NEO had significant responsibility for a material adverse outcome for the Company or any of ~~such awards, which can be triggered~~its businesses or functions, even absent misconduct, or if ~~an individual takes,~~the NEO’s act or ~~omits to take, any action~~omission (including with respect to direct supervisory responsibilities) ~~that~~ causes ~~the need for~~ a restatement of the Company’s consolidated financial results, ~~a significant financial loss~~violates the Company’s global risk management principles, policies and standards, or ~~other reputational harm to the Company or one of its businesses, or if the Company determines that there has been a substantial loss on a trading position, investment, commitment or other holding or~~causes a loss of revenue associated with a position on ~~a trading position, investment, commitment or other holding where~~which the NEO was paid and he or she operated outside ~~the applicable risk parameters or profile, and in either case, such position, investment, commitment or other holding was a factor in the award determination.~~

of internal control policies. Further, shares resulting from the conversion of ~~the~~ PSUs and LTIP awards are subject to clawback by the Company in the event the Company’s achievement of the specified goals was based on materially inaccurate financial statements or other performance metric criteria.

In addition to the cancellation and clawback events described above, each NEO is party to a Notice and Non-Solicitation Agreement that provides for injunctive relief and cancellation of ~~any equity or other~~ incentive awards ~~granted with respect to fiscal 2005 and thereafter, whether or not vested, in the event that~~if the NEO does not provide 180 days’ advance notice prior to a resignation from employment or ~~in the event that~~ the NEO improperly solicits ~~our~~the Company’s employees, clients or customers during, ~~employment~~ and for 180 days following termination of, employment.

~~II.~~

~~Amounts Vesting upon a Termination of Employment/Change-in-Control~~

~~With respect to~~Termination of Employment / Change-in-Control. The table below sets forth the ~~unvested~~value as of December 31, 2014 of the outstanding ~~long-term~~unvested incentive awards held by the NEOs to which each NEO would be have been

LOGO

entitled ~~to the following amounts~~ in the event of a termination of employment ~~or change-in-control of the Company,~~ on December 31, ~~2011,~~2014, subject to no cancellation event or clawback event occurring through the distribution date of such ~~award, as applicable.~~award.

    Termination Reason/
Change-in-Control
Name Value of
Unvested
RSUs and
related
dividend
equivalents⁽¹⁾ Value of Unvested
PSUs and related
dividend equivalents⁽²⁾ Value of
Unvested Stock
Options⁽³⁾ Value of
Unvested MSCIP
Awards⁽⁴⁾
Involuntary Termination (other than for cause or a cancellation event)/Termination Due to Disability/ Qualifying Termination⁽⁵⁾ James P. Gorman —   $230,257 $0 $1,181,584

Ruth Porat
—   $199,540 $0 $1,142,416

Gregory J. Fleming
$5,254,769 $37,329 $0 $1,051,060

Colm Kelleher
—   $200,009 $0 $1,247,690

Paul J. Taubman
—   $235,252 $0 $1,177,672
Retirement/Voluntary
Termination⁽⁶⁾
James P. Gorman —   $230,257 forfeit forfeit

Ruth Porat
—   $199,540 forfeit forfeit
Gregory J. Fleming forfeit forfeit forfeit forfeit

Colm Kelleher
—   $200,009 forfeit forfeit
Paul J. Taubman —   $235,252 forfeit forfeit
Good Reason
Termination⁽⁷⁾
James P. Gorman —   $230,257 forfeit $1,181,584

Gregory J. Fleming
$3,459,687 forfeit forfeit forfeit
Termination Due to
Death/ Governmental Service Termination⁽⁸⁾ James P. Gorman —   $188,875 $0 $1,181,584
Ruth Porat —   $160,077 $0 $1,142,416

Gregory J. Fleming
$5,254,769 $0 $0 $1,051,060
Colm Kelleher —   $156,311 $0 $1,247,690

Paul J. Taubman
—   $191,523 $0 $1,177,672
Change-in-Control
(for PSUs, with a termination of employment)⁽⁹⁾
James P. Gorman —   $230,257 —   —

Ruth Porat
—   $199,540 —   —
Gregory J. Fleming $3,459,687 $37,329 —   —

Colm Kelleher
—   $200,009 —   —
Paul J. Taubman —   $235,252 —   —


Termination Reason	Name	Value of Unvested RSUs and Related Dividend Equivalents ($)⁽¹⁾	Value of Unvested Stock Options ($)⁽¹⁾	Value of Unvested MSCIP Awards ($)⁽¹⁾	Value of Unvested PSUs/LTIP Awards and Related Dividend Equivalents ($)⁽¹⁾⁽²⁾
Involuntary (other than due to cause or other cancellation event) / Disability / Retirement / In connection with a Change-in-Control / Death / Governmental Service Termination	James P. Gorman	—	—	—	16,124,315
	Ruth Porat	—	—	—	11,352,373
	Gregory J. Fleming	—	—	—	12,938,795
	Colm Kelleher	—	—	—	12,938,795
	James A. Rosenthal	—	—	—	10,762,218

⁽¹⁾ As of December 31, ~~2011,~~2014, our NEOs ~~other than Mr. Fleming,~~ were ~~considered~~ retirement-eligible for purposes of their outstanding RSU ~~awards~~ and ~~related dividend equivalents~~MSCIP awards (which are set forth in the ~~“2011~~“2014 Nonqualified Deferred Compensation Table”) and ~~therefore, the NEOs~~their outstanding stock option awards (which are ~~considered vested in such awards.~~

⁽²⁾ ~~Pursuant to the terms of the PSU awards, amounts~~ set forth in the “2014 Outstanding Equity Awards at Fiscal Year-End Table”), which are therefore considered vested for purposes of this column with respect to (a) the NEO’s death or governmental service termination reflect Company performance through September 30, 2011 (the quarter ending simultaneously with or before the date of such termination for which the Company’s earnings information had been released as of the date of termination) and (b) a change-in-control of the Company reflect Company performance through December 31, 2011 (the quarter ending simultaneously with the effective date of the change-in-control). Amounts set forth in this column for all other terminations of employment as of December 31, 2011 assume the Company’s performance through the applicable three-year performance period mirror its performance through December 31, 2011. Where applicable, amounts reflect a pro-rata reduction in the number of PSUs otherwise payable given Company performance due to the NEO’s termination of employment prior to the applicable scheduled vesting date.

⁽³⁾ ~~No outstanding stock options held by the~~proxy statement. NEOs ~~had intrinsic value as of December 31, 2011, as the exercise price of the stock options was in all cases greater than $15.13, the closing price of the Company’s common stock on December 30, 2011.~~

⁽⁴⁾ ~~As of December 31, 2011, our NEOs, other than Mr. Fleming, were considered~~are also retirement-eligible for purposes of the ~~outstanding MSCIP~~PSUs and LTIP awards; however, such awards ~~set forth in the “2011 Nonqualified Deferred Compensation Table,” other than with respect to the 2010 year-end MSCIP awards, and therefore the NEOs~~ are not considered vested ~~in such awards. Amounts set forth in~~for purposes of this ~~column reflect~~proxy statement until the ~~value~~end of the ~~NEOs’ 2010 year-end MSCIP awards.~~

⁽⁵⁾performance period because these awards only deliver value if the Company achieves objective performance goals over such performance period. Amounts ~~set forth in this row will generally be paid~~are payable on the scheduled distribution dates, subject to cancellation and clawback provisions, ~~as applicable; provided~~except that ~~amounts set forth in this row with respect to RSU~~RSUs and MSCIP awards ~~that~~ are payable upon a termination in connection with a ~~qualifying termination~~change-in-control and all awards are payable upon death or a governmental service termination. Options will ~~be paid upon such termination. Unvested options will vest upon such termination~~become exercisable and ~~will generally expire on (a) February 2, 2016 upon an involuntary termination of employment or qualifying termination or (b) on~~remain exercisable through the expiration ~~date~~date. Retirement treatment is conditioned upon advance notice of termination. For RSUs, MSCIP awards and options, amounts payable with respect to a termination in connection with a change-in-control are conditioned upon the termination ~~due to disability. For purposes of the RSUs, stock options and MSCIP awards set forth in this row, a “qualifying termination” is a termination~~occurring within 18 months of athe change-in-control as a result of (i) the Company terminating the NEO’s employment under circumstances not involving any cancellation event, (ii) the NEO resigning from employment due to a materially adverse alteration in ~~his or her~~ position or in the nature or status of ~~his or her~~ responsibilities from those in effect immediately prior to the change-in-control or (iii) the Company requiring the NEO’s principal place of employment to be located more than 75 miles from ~~his or her~~the current ~~principal~~ location. ~~For this purpose, the definition of~~A “change-in-control” generally means a significant change in the share ownership of the Company or composition of the Board. ~~The PSUs set forth in this row do not include an accelerated vesting and/or payment provision in connection with a qualifying termination.~~

⁽⁶⁾ ~~Amounts set forth in this row will be paid on schedule, subject to cancellation.~~

⁽⁷⁾ Other than with respect to Messrs. Gorman and Fleming, no NEO is a party to an arrangement with the Company providing for accelerated vesting or other benefits upon a termination of employment for Good Reason. Amounts set forth in this row will be paid on schedule, subject to cancellation and clawback provisions, as applicable (provided that, following a Good Reason termination, the competitive activity cancellation event does not apply to Mr. Gorman’s awards set forth in this row). “Good Reason,” with respect to Mr. Gorman, generally means a material change or reduction in his duties or responsibilities, including a failure to reelect him to the Board, any diminution in his title or reporting relationship, the Company’s breach of its obligations to provide payments or benefits under the applicable compensation arrangement or requiring Mr. Gorman to be based at a location other than the Company’s headquarters. “Good Reason,” with respect to Mr. Fleming, generally means a reduction in base salary, a failure to honor the terms of his award, a material diminution in his duties, titles, responsibilities or reporting relationship or interference with his carrying out of his duties or material failure to make available resources required for him to effectively carry out his duties, the assignment of materially inconsistent duties or those which materially impair his ability to function in his current role, a relocation of the Company’s headquarters or his principal office greater than 25 miles or a material breach by the Company of any material agreement between him and the Company.

⁽⁸⁾ Amounts set forth in this row with respect to RSUs and PSUs will be paid upon such termination and the amounts set forth with respect to PSUs reflect Company performance through September 30, 2011. Unvested

options will vest and remain exercisable through the expiration date (in connection with the NEO’s death) or the 90-day period following termination (in connection with a governmental service termination). In exchange for the accelerated vesting and payment of the amounts set forth in this row with respect to a governmentalGovernmental service termination ~~the NEO must sign an agreement requiring the NEO to repay the Company the value~~treatment is conditioned upon satisfactory proof of a conflict of interest that necessitates divestiture of the awards ~~that are distributed or exercised~~and executing an agreement to repay amounts vested in connection with such termination if the NEO engages in any ~~activity that would have resulted in the~~ cancellation ~~of such awards had the distribution or vesting of the awards not been accelerated.~~event.

⁽⁹⁾⁽²⁾ ~~Pursuant to~~Amounts shown in the ~~terms~~table reflect performance through December 31, 2014 (the quarter ending simultaneously with the effective date of the ~~PSUs, in~~termination), which, with the ~~event~~exception of a change-in-control of the Company on December 31, 2011, the performance period would have ended on December 31, 2011; however, in general, the NEO must remain employed by the Company through the applicable scheduled vesting date to not be subject to a pro-rata reduction in the number of shares payable with respect to the PSUs. For purposes of quantifying the value of PSUs to which the NEO would have been entitled upon a change-in-control on December 31, 2011, amounts set forth in this row with respect to the PSUs assume that each NEO terminated employment on December 31, 2011 (due to either a disability or an involuntary termination of employment other than in connection with a cancellation event), and therefore, the value reflects a pro-rata reduction in the number of PSUs otherwise payable where applicable. Amounts set forth in this row will be paid on schedule, subject to cancellation.

~~III.~~

~~Change-in-Control~~

~~Mr. Gorman’s employment arrangement with the Company, dated August 16, 2005, provides that if it is determined that any payments made to him~~ in connection with a change-in-control, is a substitute for performance through the three-year performance period, which would not be known until the end of ~~the Company would be subject to an excise tax under Section 4999~~such period. To facilitate timely payment of the Internal Revenue Code, he would be entitled to receive an additional payment to restore him to the after-tax position that he would have been in if the tax had not been imposed. Calculations to estimate the excise tax due under the Internal Revenue Code are complex and reflectLTIP awards upon death or a ~~number of assumptions. For purposes of determining whether Mr. Gorman would have been entitled to an additional payment due to a change-in-control~~governmental service termination as of December 31, ~~2011,~~2014, amounts payable with respect to these awards would instead reflect Company performance through September 30, 2014 (the quarter ending with or before the ~~following assumptions were made: (i) all RSUs, MSCIP~~date of the termination for which the Company’s earnings information has been released) as follows: $16,282,191 for Mr. Gorman; $11,457,624 for Ms. Porat; $13,065,973 for Messrs. Fleming and ~~LCIP awards~~Kelleher; and the applicable pro-rata portion of PSUs became payable, (ii) all cancellation provisions and transfer restrictions lift, (iii) an excise tax rate of 20% and (iv) an individual tax rate of 45%. Based on these assumptions,$10,854,312 for Mr. ~~Gorman would not have been entitled to an additional payment.~~Rosenthal.

Item 2—Ratification of Appointment of Morgan Stanley’s Independent Auditor

OUR BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF DELOITTE & TOUCHE’S APPOINTMENT AS OUR INDEPENDENT AUDITOR.

The Audit Committee has the sole authority and responsibility to appoint, compensate, retain, oversee and evaluate the independent auditor retained to audit the Company’s consolidated financial statements. The Audit Committee reviews and assesses annually the qualifications and performance of the independent auditor and considers, as appropriate, the rotation of the independent auditor. The Audit Committee also ensures the mandatory, regular rotation of the lead audit partner and, in connection with such rotation, the Audit Committee is involved in the selection of the lead audit partner.

The Audit Committee has appointed Deloitte & Touche LLP (Deloitte & Touche) as independent auditor for the year ending December 31, ~~2012~~2015 and presents this selection to the shareholders for ratification. The Audit Committee believes the continued retention of Deloitte & Touche is in the best interest of the Company and its shareholders. Deloitte & Touche was selected as independent auditor upon the merger creating the current Company in 1997 and has served continuously as independent auditor since that time. Deloitte & Touche will audit ~~our~~the Company’s consolidated financial statements ~~that will be~~ included in the Annual Report on Form 10-K for the year ending December 31, ~~2012~~2015 and will perform other permissible, pre-approved services. The Audit Committee ~~preapproves~~pre-approves all audit and permitted non-audit services that Deloitte & Touche performs for the ~~Company.~~Company and is responsible for the audit fee negotiations associated with the engagement of Deloitte & Touche.

Independent Auditor’s Fees.The following table summarizes the aggregate fees (including related expenses; $ in millions) for professional services provided by Deloitte & Touche related to ~~2011~~2014 and ~~2010.~~2013.

   2011    2010
Audit Fees⁽¹⁾
   $ 43.4    $ 43.4
Audit-Related Fees⁽²⁾
   8.5    6.5
Tax Fees⁽³⁾
   1.3    1.3
All Other Fees
   —      —


Total
   $ 53.2    $ 51.2


	2014 ($)		2013 ($)
Audit Fees⁽¹⁾		49.0		46.2
Audit-Related Fees⁽²⁾		6.9		7.9
Tax Fees⁽³⁾		1.7		1.4
All Other Fees		—		—

Total		57.6		55.5

⁽¹⁾ Audit Fees services include: the audit of our consolidated financial statements included in the Company’s Annual Report on Form 10-K and reviews of the interim condensed consolidated financial statements included in our quarterly reports on Form 10-Q; services attendant to, or required by, statute or regulation; comfort letters, consents and other services related to SEC and other regulatory filings; and audits of subsidiary financial statements.

⁽²⁾ Audit-Related Fees services include: ~~due diligence associated with mergers and acquisitions or dispositions of operating businesses or entities;~~ data verification and agreed-upon procedures related to asset securitizations; assessment and testing of internal controls and risk management processes beyond the level required as part of the consolidated audit; statutory audits and financial audit services provided relating to investment products offered by Morgan Stanley, where Morgan Stanley incurs the audit fee in conjunction with the investment management services it provides; audits of employee benefit plans; agreed upon procedures engagements; regulatory matters; and attest services in connection with debt covenants.

⁽³⁾ Tax Fees services include: U.S. federal, state and local income and non-income tax planning and advice; U.S. federal, state and local income and non-income tax compliance; non-U.S. income and non-income tax planning and advice; non-U.S. income and non-income tax compliance; and transfer pricing documentation.

Fund-Related Fees. Morgan Stanley offers various unconsolidated registered money market, equity, fixed income and alternative funds, and other funds (collectively, Funds). Deloitte & Touche provides audit, audit-related

and tax services to certain of these unconsolidated Funds. The aggregate fees for such services are summarized in the following table ($ in millions).


	2011			2010		2014 ($)		2013 ($)
Audit Fees		$	3.8		$5.8		3.6		5.1
Audit-Related Fees			0		2.2		0.7		1.5
Tax Fees			3.3		2.3		3.0		2.3

A Deloitte & Touche representative will attend the annual meeting to respond to your questions and will have the opportunity to make a statement. If shareholders do not ratify the appointment, the Audit Committee will reconsider it.

Our Board unanimously recommends athat you vote “FOR” the ratification of Deloitte & Touche’s appointment as our independent auditor. Proxies solicited by the Board will be voted “FOR” this ratification unless otherwise instructed.

Audit Committee Report

The Audit Committee’s charter provides that the Audit Committee is responsible for the oversight of the integrity of the Company’s consolidated financial statements, the Company’s system of internal control over financial reporting, certain aspects of the Company’s risk management as described in the charter, the qualifications and independence of the Company’s independent registered public accounting firm (independent auditor), the performance of the Company’s internal auditor and independent auditor, and the Company’s compliance with legal and regulatory requirements. We have the sole authority and responsibility to appoint, compensate, retain, oversee, evaluate and, when appropriate, replace the Company’s independent auditor. The Board has determined that ~~each~~all members of the Audit Committee ~~member is independent under applicable independence standards~~are “financially literate” within the meaning of current NYSE rules and a majority of the ~~NYSE and~~members of the ~~Securities Exchange Act of 1934, as amended, and is an audit~~Audit Committee are “audit committee financial ~~expert~~experts” within the meaning of current SEC rules.

The Audit Committee serves in an oversight capacity and is not part of the Company’s managerial or operational decision-making process. Management is responsible for the financial reporting process, including the system of internal controls, for the preparation of consolidated financial statements in accordance with accounting principles generally accepted in the U.S. (GAAP) and for the report on the Company’s internal control over

financial reporting. The Company’s independent auditor, Deloitte & Touche, is responsible for auditing those financial statements and expressing an opinion as to their conformity with GAAP and expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Our responsibility is to oversee the financial reporting process and to review and discuss management’s report on the Company’s internal control over financial reporting. We rely, without independent verification, on the information provided to us and on the representations made by management, the internal auditor and the independent auditor.

The Audit Committee, among other things:

Reviewed and discussed the Company’s quarterly earnings releases, Quarterly Reports on Form 10-Q and Annual Report on Form 10-K, including the consolidated financial statements;

Reviewed the major ~~franchise, reputational,~~ legal and compliance risk exposures and the guidelines and policies that govern the process for risk assessment and risk management, including coordinating with the Risk Committee and the Operations and Technology Committee;

Reviewed and discussed the plan and the scope of the work of the internal auditor for ~~2011~~2014 and summaries of the significant reports to management by the internal auditor;

Reviewed and discussed the plan and scope of work of the independent auditor for ~~2011;~~2014;

Reviewed and discussed reports from management on the Company’s policies regarding applicable legal and regulatory requirements; and

Met with Deloitte & Touche, the internal auditor and Company management in executive sessions.

We reviewed and discussed with management, the internal auditor and Deloitte & Touche: the audited consolidated financial statements for ~~2011,~~2014, the critical accounting policies that are set forth in the Company’s Annual Report on Form 10-K, management’s annual report on the Company’s internal control over financial reporting and Deloitte & Touche’s opinion on the effectiveness of the Company’s internal control over financial reporting.

We discussed with Deloitte & Touche matters that independent registered public accounting firms must discuss with audit committees under standards of the Public Company Accounting Oversight Board (PCAOB), including, among other things, matters related to the conduct of the audit of the Company’s consolidated financial statements and the matters required to be discussed by Auditing ~~Standards AU Section 380 (Communication~~Standard No. 16,Communication with Audit ~~Committees)~~Committees, as adopted by the PCAOB in Rule 3200T. This review included a discussion with management and the independent auditor of the quality (not merely the acceptability) of the Company’s accounting principles, the reasonableness of significant estimates and judgments, and the disclosures in the Company’s consolidated financial statements, including the disclosures relating to critical accounting policies.

PCAOB. Deloitte & Touche also provided to the Audit Committee the written disclosures and the letter required by applicable requirements of the PCAOB regarding the independent auditor’s communications with the Audit Committee concerning independence and represented that it is independent from the Company. We discussed with Deloitte & Touche their independence from the Company, and considered if services they provided to the Company beyond those rendered in connection with their audit of the Company’s consolidated financial statements, reviews of the Company’s interim condensed consolidated financial statements included in its Quarterly Reports on Form 10-Q, and their opinion on the effectiveness of the Company’s internal control over financial reporting were compatible with maintaining their independence. We also reviewed and pre-approved, among other things, the audit, audit-related and tax services performed by Deloitte & Touche. We received regular updates on the amount of fees and scope of audit, audit-related and tax services provided.

Based on our review and the meetings, discussions and reports discussed above, and subject to the limitations on our role and responsibilities referred to above and in the Audit Committee charter, we recommended to the Board

that the Company’s audited consolidated financial statements for ~~2011~~2014 be included in the Company’s Annual Report on Form 10-K. We also selected Deloitte & Touche as the Company’s independent auditor for the year ending December 31, ~~2012~~2015 and are presenting the selection to the shareholders for ratification.

Respectfully submitted,

~~Donald T. Nicolaisen,~~Robert H. Herz, Chair

Howard J. Davies

~~James~~Thomas H. ~~Hance, Jr.~~Glocer (effective January 1, 2015)

~~O. Griffith Sexton~~Donald T. Nicolaisen

Item 3—Company Proposal to ~~Amend~~Approve the ~~2007 Equity Incentive~~ Compensation ~~Plan~~

~~Our 2007 Equity Incentive Compensation Plan (EICP) was approved by shareholders on April 10, 2007. Upon recommendation~~ of the CMDS Committee, on March 22, 2012, the Board adopted an amendment to the EICP to increase the number of shares of common stock available to be granted under the EICP by 50 million shares and to extend the term of the EICP for an additional five years, subject to shareholder approval at the annual meeting of shareholders. This represents approximately 2.5% of the common shares of the Company outstandingExecutives as ~~of January 31, 2012. Under NYSE rules, the amendment of the EICP will not be effective if our shareholders do not approve it.~~

Morgan Stanley pays a significant portion of incentive compensation as equity awards, which aligns the interests of the Company’s employees with those of its shareholders. In recent years, the Company has fundamentally restructured the way it pays its employees and has more closely tied compensation to the Company’s long-term financial performance by paying a significant portion of year-end compensationDisclosed in the form of deferred awards and significantly reducing the portion of year-end compensation paid as a cash bonus. Furthermore, for the third year, the Company has paid senior executives a substantial portion of their incentive compensation in “at-risk” performance stock units that only deliver value if the Company meets specific performance targets after three years. Given the significant portion of incentive compensation paid as equity awards, which is consistent with regulatory guidance and best practices, the relatively small number of available shares under the EICP will not be sufficient for grants that would be made over the next year until the 2013 annual meeting of shareholders.

As of January 31, 2012, the Company had approximately 14 million shares available for future stock unit and restricted stock awards to employees, which include available shares under the EICP as well as a relatively small number of available shares under the Company’s legacy equity plans. If the EICP amendment is approved, the Company expects to have sufficient shares for grants to be made over the next year and to return to shareholders to request approval of additional shares at the 2013 annual meeting of shareholders.Proxy Statement (Non-Binding Advisory Resolution)

OUR BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” ~~THE AMENDMENT OF THE EICP~~THIS PROPOSAL.~~Our Board believes that this proposal is in the best interest of our shareholders and supports this proposal for the following reasons, as discussed more fully below:~~

In recent years, Morgan Stanley has significantly increased the portion of pay that is deferred and a significant portion of deferred compensation is granted as equity awards. Additional shares are needed to continue this equity-based approach, which provides employees with long-term incentives that are aligned with shareholder interests and which is consistent with regulatory guidance and best practices.

As of January 31, 2012, the Company had approximately 13 million shares available under the EICP, and if the amendment of the EICP is not approved, the Company will be compelled to increase significantly the cash-based component of employee compensation.

If the amendment of the EICP is not approved, the Company will lose a critical tool for recruiting, retaining and motivating employees. It would thus be at a severe competitive disadvantage in attracting and retaining talent.

~~The terms of our EICP, our annual equity awards and our employee policies are all designed to protect shareholder interests and encourage employees to focus on the long-term success of the Company.~~

~~In recent years, Morgan Stanley has fundamentally restructured the way it pays its employees and has more closely tied compensation to the Company’s long-term financial performance.~~ Morgan Stanley has significantly increased the portion of pay that is deferred and, for 2011, continued to grant a meaningful portion of year-end deferred compensation as equity awards to a broad group of employees. Of the shares underlying annual equity awards granted as part of 2011 incentive compensation, less than 3% were granted to our NEOs.

~~In addition, for~~As required by Section 14A of the ~~third year, we are paying senior executives in “at-risk” performance stock units from~~Securities Exchange Act of 1934, this proposal seeks a shareholder advisory vote to approve the compensation of our ~~EICP that only deliver value if~~NEOs as disclosed pursuant to Item 402 of Regulation S-K through the Company meets specific performance targets after three years. That means our senior executives have to earn these “at-risk” performance stock units twice and will not receive a payout on these performance stock units if the Company does not meet the specified ROE and relative TSR targets.following resolution:

If“RESOLVED, that the Company’s shareholders ~~do not~~ approve, on an advisory basis, the ~~amendment~~compensation of the ~~EICP,~~Company’s named executive officers, as disclosed in the ~~Company will be compelled~~Company’s proxy statement for the 2015 Annual Meeting of Shareholders pursuant to ~~increase~~ the ~~cash-based portion of total compensation. This is contrary to regulatory guidance and will reduce the alignment of employee and shareholder interests.~~ ~~As part~~compensation disclosure rules of the ~~2011 year-end compensation process, approximately 53 million shares underlying equity awards were granted. As of January 31, 2012,~~Securities and Exchange Commission (which disclosure includes the ~~Company had approximately 14 million shares available for future employee stock unit~~Compensation Discussion and ~~restricted stock awards under the EICP~~Analysis and the Company’s legacy equity plans, which is not expected to be sufficient for the period until the next annual meeting of shareholders in 2013. Equity awards at Morgan Stanley are delivered as a component of – not in addition to – an employee’s total year-end incentiveaccompanying compensation tables and thus, protect the interests of shareholders. If the amendment is not approved, the Company would be required to increase the portion of bonus paid in cash, which is not consistent with the Company’s pay philosophy and the principles set forth by regulators.related narrative).”

~~The Company would be at a severe competitive disadvantage in attracting and retaining talent if~~Morgan Stanley’s shareholders are urged to read the ~~amendment of the EICP is not approved, as equity awards are a critical recruitment and retention tool.~~ ~~The Company operates in an intensely competitive environment and~~CD&A, which discusses our ~~success is closely correlated with recruiting and retaining talented employees and a strong management team. A competitive~~ compensation program ~~that includes equity awards is therefore essential to the Company’s long-term performance. Our Board believes that equity awards are necessary to attract~~ and retain highly talented employees. The Company would be at a severe competitive disadvantage if it could not compensate its employees using equity awards. If our shareholders do not approve the amendment of the EICP, our retention and recruiting efforts would be compromised due to the loss of equity as a form of compensation for employees.

The terms of our annual equity awards, of our employee policies and of our EICP are all designed to protect shareholder interests and encourage employees to focus on the long-term success of the Company.

~~The vesting and payment provisions of annual equity awards are determined by~~ the CMDS ~~Committee~~Committee’s pay decisions for the CEO, James Gorman, and ~~are designed to encourage employees to focus on~~ the long-term success of the Company because employees typically cannot fully monetize annual equity awards until three years after grant. For example, RSUs granted for 2011 generally vest no sooner than 50% after two years, with the remaining 50% vesting after three years and generally convert to stock on the scheduled vesting dates. Furthermore, annual equity awards generally are subject to cancellation for, among other things, engaging in competitive activity, termination for cause, violating the Company’s compliance, ethics or risk management standards, soliciting clients or employees and misuse of proprietary information.NEOs.

In 2011, the Company expanded its clawback provision to apply to equity awards, in addition to deferred cash-based awards. The clawback provision ensures that 2011 year-end compensation granted under the EICP can be canceled if an individual engages in conduct (including with respect to direct supervisory responsibilities) detrimental to the Company, including causing a restatement of the Company’s consolidated financial results or violating the Company’s risk policies and standards.

As described above, the Company is paying senior executives in “at-risk” PSUs that only deliver value if the Company meets specific performance targets after three years. That means our senior executives will not

Robust Framework for Making Pay Decisions. The CMDS Committee considers multiple factors to ensure that the compensation program is highly motivating, competitive, and shareholder-aligned and reflects best practices in corporate governance, risk management and regulatory principles. The CMDS Committee, with the advice of its independent compensation consultant, Pay Governance, places performance at the forefront of the executive compensation program. This performance orientation is demonstrated in the structure of executive compensation, the performance results that drive compensation decisions, and the resulting executive compensation decisions for the CEO and the other NEOs.

Morgan Stanley’s Performance Continued to Improve in 2014. In its assessment of 2014 results, the CMDS Committee considered the improvement in the Company’s business results relative to 2013, and continued progress on important strategic priorities, which resulted in industry leading shareholder returns for the second consecutive year. See the CD&A for details about Company performance in 2014.

Consistent Approach Aligns CEO Pay and Performance. The CMDS Committee has applied a consistent approach to align pay with performance. For 2014, in consultation with its independent consultant, the Committee considered compensation information for peer companies and established a target range for the CEO pay opportunity for the year of $23 million or more for superior performance to $13 million or less for performance substantially below expectations. The actual CEO pay opportunity for 2014 was evaluated based on the CMDS Committee’s assessment of Morgan Stanley’s performance and Mr. Gorman’s individual performance. For 2014, the CEO pay opportunity is $22.5 million, driven by Morgan Stanley’s strong business results, strategic execution and shareholder returns.

Total Pay Opportunity Encourages Long-Term View. Mr. Gorman’s pay opportunity was delivered in a combination of base salary, cash bonus, deferred cash, deferred equity, and an LTIP award, as outlined in the chart below. A significant portion of the pay opportunity is deferred and awarded as equity awards that are subject to future stock price performance, cancellation and clawback and, in the case of the LTIP award, future achievement of specified financial targets. The CMDS Committee believes this approach to executive compensation is consistent with shareholder alignment, executive motivation, best practices and regulatory principles.


1.	~~receive~~Substantial deferral of pay opportunity	72% of Mr. Gorman’s 2014 pay opportunity is deferred and is subject to cancellation and clawback over a ~~payout~~multi-year period

2.	Clawbacks on these performance stock units if the Company does not meet the ROE and relative TSR targets in place. If, after payment of the PSUs, the CMDS Committee determines that the performance was based on materially inaccurate financial statements or other performance metric criteria, then the shares paid will beall deferred compensation	All deferred compensation for NEOs is subject to clawback, including for acts or omissions that cause a restatement of the Company’s consolidated financial results or constitute a violation of the Company’s global risk management principles, policies and standards and for significant responsibility for a material adverse outcome for the Company, even absent misconduct

3.	Performance-based LTIP award remains a significant portion of deferred compensation	40% of Mr. Gorman’s 2014 deferred compensation was delivered in an LTIP award, the ultimate realizable value of which will be directly determined by 2015-2017 return on equity and relative total shareholder return performance

4.	Equity is a significant portion of the ~~Company. The PSUs~~deferred compensation	67% of Mr. Gorman’s 2014 deferred compensation is equity-based to further drive shareholder alignment

5.	Share retention requirements	NEOs and ~~RSUs align~~other Operating Committee members are subject to an Equity Ownership Commitment that requires them to retain shares and equity awards at least equal to 75% of the ~~interests~~after-tax shares they receive as compensation for service on the Operating Committee



6.	Prohibitions against hedging, short selling or trading derivatives	NEOs and other Operating Committee members are prohibited from engaging in hedging strategies, selling short or trading derivatives with Company securities

7.	Double-trigger change-in-control vesting	No deferred compensation for NEOs automatically vests upon a change-in-control. Both a change-in-control and a qualifying termination of ~~executives and shareholders while~~employment within 18 months of the change-in control are required

8.	No excise tax gross-ups for NEOs	NEOs are not ~~encouraging unnecessary or excessive risk-taking.~~ contractually entitled to excise tax protection upon a change-in-control of Morgan Stanley. In 2013, Mr. Gorman waived his right to this protection, which dated back to his 2005 employment letter with Morgan Stanley

~~Members of~~Other NEO Pay Also Aligned with Performance. Similar to the process for determining CEO compensation, the CMDS Committee weighed the Company’s ~~Operating Committee are subject~~overall business performance, performance for shareholders and accomplishment of strategic initiatives, as well as individual performance, to ~~an Equity Ownership Commitment policy that requires that they retain at least 75% of common stock and equity awards (less allowances~~establish compensation for the ~~payment of any option exercise price~~remaining NEOs and ~~taxes) made to them while they are on~~ the ~~Company’s Operating Committee. This commitment ties a portion~~structure of their ~~net worth~~compensation is generally consistent with the CEO’s.

Shareholder Views are Considered. Although the vote on this proposal is not binding, the CMDS Committee, which is comprised solely of independent directors and is responsible for making decisions regarding the amount and form of compensation paid to the Company’s ~~stock price and provides~~senior executives, will carefully consider the shareholder vote on this matter. To help ensure that the range of shareholder views are well understood by the Board – in a ~~continuing incentive for them to work towards superior long-term stock performance. Executives are also prohibited from engaging in hedging strategies, selling short~~way that a simple “for” or ~~trading derivatives with~~“against” vote does not allow – the Company ~~securities. In addition, all Management Committee members, as~~also encourages shareholders to use any of a ~~condition~~number of available direct communication mechanisms to ~~receiving annual equity or other incentive awards, signed a notice and non-solicitation agreement that generally requires, among other things, Management Committee members~~effectively raise specific items with regard to our executive compensation practices.

The Company’s current policy is to provide shareholders with an opportunity to approve the ~~Company with 180 days advance notice~~compensation of ~~their resignation and not to solicit certain clients, customers or Company employees within 180 days following their termination~~the named executive officers, on an advisory basis, each year at the annual meeting of ~~employment. Failure to comply with~~shareholders. It is expected that the ~~agreement generally results in cancellation~~next such vote will occur at the 2016 annual meeting of ~~their equity or other incentive awards granted for fiscal 2005 and subsequent years.~~shareholders.

•

The EICP prohibits the repricing of stock options and stock appreciation rights (other than an equitable adjustment in connection with a corporate transaction) and the grant of stock option restoration rights (~~i.e~~~~., the right to an automatic grant of a new stock option upon exercise of a stock option without payment of additional consideration in excess of the exercise price of the underlying stock option).~~

Our Board unanimously recommends that you vote“FOR” this proposal. Proxies solicited by the Board will be voted“FOR” this proposal unless otherwise ~~instructed.~~instructed

Item 4—Company Proposal to Amend the 2007 Equity Incentive Compensation Plan to Increase Shares Available for Grant

OUR BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THIS PROPOSAL.

Upon the recommendation of the CMDS Committee, on March 26, 2015, the Board adopted an amendment to our 2007 Equity Incentive Compensation Plan (EICP) to increase the number of shares of common stock available to be granted under the EICP by 25 million shares. The EICP was originally approved by shareholders on April 10, 2007 and was last amended to increase the number of shares of common stock available for grant in 2013. The proposed increase in shares, which represents approximately 1.3% of the common shares of the Company outstanding as of January 31, 2015, is less than the 47 million shares the Company has repurchased since 2013. The Company has an active share repurchase program and is authorized by the Board to repurchase up to an additional $3.1 billion of common shares of the Company (85 million shares based on the March 23, 2015 closing price of $36.31) through the end of the second quarter of 2016.

Under NYSE rules, this amendment will not be effective if our shareholders do not approve it. If this amendment is approved, the Company expects to have sufficient shares for grants to be made over the next year and to return to shareholders to request approval of additional shares at the 2016 annual meeting of shareholders.

Morgan Stanley delivers a significant portion of incentive compensation for eligible employees in deferred equity awards (RSUs) that are impacted by future stock price performance over a multi-year period and, for senior executives, performance stock units that only deliver value if the Company meets specific performance targets after three years (LTIP awards). We believe this approach to executive compensation aligns the interests of the Company’s employees with those of its shareholders and is consistent with executive motivation, best practices, and regulatory principles.

The Board believes that the EICP amendment is in the best interest of shareholders and supports this proposal for the following reasons:

In January 2015, approximately 30 million shares underlying equity awards were granted as part of the 2014 year-end compensation process and approximately 1.4 million shares (representing the target number of stock units) were granted as LTIP awards. Approximately 3.5% of these shares were granted to our NEOs. After these grants, as of January 31, 2015, approximately 30.7 million shares were available for future equity awards under the EICP and the Company’s legacy equity plans, with only 24.5 million of such shares available under the EICP. Given the significant portion of incentive compensation paid as equity awards, the number of shares currently available under the Company’s plans is not expected to be sufficient for grants that would be made over the next year until the 2016 annual meeting of shareholders.

The Company strives to maximize employee and shareholder alignment through the use of deferred equity awards, while minimizing dilution. Since 2009, the Company has requested approval of additional shares to cover only one year of grant needs. In 2014, after a year in which the Company’s stock price increased substantially, the Company expected to have sufficient shares for grants to be made over the next year and, therefore, did not request shareholder approval for additional shares at the 2014 annual meeting of shareholders. Since the last amendment to the EICP, the Company has re-initiated a share repurchase program in 2013 with regulatory approval. The Company has evaluated, as it does annually, whether to return to shareholders to request approval of additional shares at the 2015 annual meeting of shareholders and has determined to request 25 million shares to cover one year of grant needs, which is less than the 47 million shares the Company has repurchased since 2013. In addition, the Company is authorized to repurchase up to an additional $3.1 billion of shares through the end of the second quarter of 2016 (85 million shares based on the March 23, 2015 closing price of $36.31).

If the proposed amendment to increase the number of shares available under the EICP is not approved, the Company will be compelled to increase the cash-based component of employee compensation, which is contrary to regulatory guidance and could reduce the alignment of employee and shareholder interests.

If the proposed amendment to increase the number of shares available under the EICP is not approved, the Company will lose a critical tool for recruiting, retaining and motivating employees. The Company would thus be at a competitive disadvantage in attracting and retaining talent.

The terms of our equity and other annual and long-term incentive compensation awards and our employee policies are all designed to protect shareholder interests and encourage employees to focus on the long-term success of the Company.

Employees typically cannot fully monetize equity awards until three years after grant. For example, RSUs granted for 2014 generally vest and convert to shares after three years.

•

The Company’s equity awards generally are subject to cancellation for, among other things, engaging in competitive activity, cause (i.e., any act or omission that constitutes a breach of obligation to the Company, including failure to comply with internal compliance, ethics or risk management standards and failure or refusal to perform duties satisfactorily, including supervisory and management duties), soliciting clients or employees, and misuse of proprietary information.

Equity awards are subject to clawback if an employee’s act or omission (including with respect to direct supervisory responsibilities) causes a restatement of the Company’s consolidated financial results, constitutes a violation of the Company’s global risk management principles, policies and standards, or causes a loss of revenue associated with a position on which the employee was paid and

the employee operated outside of internal control policies. Equity awards to senior executives are also subject to clawback if the CMDS Committee determines that the individual had significant responsibility for a material adverse outcome for the Company or any of its businesses or functions, even absent misconduct.

The EICP expressly prohibits the grant of stock option restoration rights and the repricing of stock options and stock appreciation rights (including any amendment to such awards that has the effect of reducing the exercise price and any cancellation of such awards in exchange for cash or another award) other than an equitable adjustment in connection with a corporate transaction.

Our Board unanimously recommends that you vote “FOR” this proposal. Proxies solicited by the Board will be voted “FOR” this proposal unless otherwise instructed.

Summary of the EICP as Proposed to Be Amended.A copy of the EICP as proposed to be amended is attached to this proxy statement as Annex A and the following summary is qualified in its entirety by reference thereto. Other than the amendment to the number of shares available under the EICP ~~and the extension of the term of the EICP~~ for which we are seeking ~~shareholder~~ approval under this Item 4, the EICP terms remain unchanged. The capitalized terms not otherwise defined in this summary shall ~~has~~have the meaning assigned to them in the EICP.

Purposes and Eligibility. The primary purposes of the EICP are to attract, retain and motivate employees, to compensate them for their contributions to our growth and profits and to encourage them to own shares of our common stock to align their interests with those of shareholders. The EICP authorizes the issuance of awards (Awards) to all officers, other employees (including newly hired employees) and consultants of the Company, non-employee directors of our subsidiaries and employees and consultants of joint ventures, partnerships or similar business organizations in which we or one of our subsidiaries has an equity or similar interest (Eligible Individuals). As of ~~December~~January 31, ~~2011,~~2015, there were approximately ~~62,000~~56,000 Eligible Individuals who were employees of the Company and its subsidiaries.

Administration.The CMDS Committee will administer the EICP, select the Eligible Individuals who receive Awards (Participants) and determine the form and terms of the Awards, including any vesting, exercisability, payment or other restrictions. Subject to certain limitations, the CMDS Committee may delegate some or all of its authority to one or more administrators (~~e.g~~e.g.., one or more CMDS Committee members or one or more of our officers).

Shares Available Under the EICP.~~The~~ Since initial shareholder approval of the EICP in 2007, the total number of shares of common stock that may be delivered pursuant to Awards will be ~~248~~303 million (which takes into account the proposed 5025 million share increase), of which approximately ~~185~~253.5 million were already granted as of January 31, ~~2012,~~2015, subject to adjustment pursuant to the EICP’s share counting rules as described below and to reflect certain transactions. Shares delivered under the

EICP may be either treasury shares or newly issued shares. In addition to the overall limit, the EICP limits the number of shares of common stock that may be subject to stock option and stock appreciation right (SAR) awards in any single year.

Share Counting Rules.When the CMDS Committee grants an Award, the full number of shares subject to the Award is charged against the number of shares that remain available for delivery pursuant to Awards. After grant, the number of shares subject to any portion of an Award that is canceled or that expires without having been settled in shares, or that is settled through the delivery of consideration other than shares, will be available for new Awards. If shares are tendered or withheld to pay the exercise price of an Award or to satisfy a tax withholding obligation, those tendered or withheld shares will be available for new Awards. Awards granted upon assumption of, or in substitution for, outstanding awards previously granted by, or held by employees of, a company or other entity or business acquired (directly or indirectly) by the Company or with which the Company combines are not counted against the number of shares of common stock available for delivery pursuant to Awards and are not subject to the individual limit on stock options and SARs.

Awards Generally.

Form of Awards. The EICP authorizes the following Awards: (i) restricted stock Awards consisting of one or more shares of common stock granted or sold to a Participant; (ii) stock unit Awards settled in one or more shares of common stock or, as authorized by the CMDS Committee, an amount in cash based on the fair market value of shares of common stock; (iii) stock option Awards consisting of the right to purchase at a specified exercise price a number of shares of common stock determined by the CMDS Committee; (iv) SARs consisting of the grant of a right to receive upon exercise of such right, in cash or common stock (or a combination thereof) as determined by the CMDS Committee, an amount equal to the increase in the fair market value of a share of common stock over the specified exercise price; (v) Qualifying Performance Awards to participants covered by Section 162(m) of the Internal Revenue Code (Section 162(m)), with the intent that such awards qualify as “performance-based compensation” under Section 162(m) and ~~(v)~~(vi) other forms of equity-based or equity-related Awards that the CMDS Committee determines to be consistent with the purposes of the EICP (Other Awards). Awards under the EICP may, at the discretion of the CMDS Committee, be made in substitution in whole or in part for cash or other compensation payable to an Eligible Individual.

Dividends and ~~Distributions.~~Distributions. If we pay any dividend or make any distribution to holders of our common stock, the CMDS Committee may in its discretion authorize payments (which may be in cash, common stock (including restricted stock) or stock units or a combination thereof) with respect to the shares of common stock corresponding to an Award, or may authorize appropriate adjustments to outstanding Awards, to reflect the dividend or distribution. The CMDS Committee may make any such payments subject to vesting, deferral, restrictions on transfer or other conditions. Dividends are not paid on stock options or SARs.

Restricted Stock and Stock Units.Restricted shares awarded or sold to a Participant are outstanding shares of common stock that the CMDS Committee may subject to restrictions on transfer, vesting requirements or cancellation under specified circumstances. Each stock unit awarded to a Participant corresponds to one share of common stock and the CMDS Committee may subject the award to vesting requirements or cancellation under specified circumstances. Upon satisfaction of the terms and conditions of a stock unit Award, applicable stock units will be payable, at the discretion of the CMDS Committee, in common stock or in cash equal to the fair market value on the payment date of one share of common stock. As a holder of stock units, a Participant will have only the rights of a general unsecured creditor of the Company. A Participant will not be a shareholder with respect to the shares underlying stock units unless and until the stock units convert to shares of common stock.

Stock Options and SARs.

•

General. .Stock options may be either nonqualified stock options or incentive stock options (ISOs). Upon satisfaction of the conditions for exercisability, a Participant may exercise a stock option and receive the number of shares of common stock in respect of which the stock option is exercised. Upon satisfaction of the conditions for payment, each SAR will entitle a Participant to an amount, if any, equal to the amount by which the fair market value of a share of common stock on the date of exercise exceeds the SAR exercise price. At the discretion of the CMDS Committee, SARs may be payable in common stock, cash or a combination thereof.

conditions for payment, each SAR will entitle a Participant to an amount, if any, equal to the amount by which the fair market value of a share of common stock on the date of exercise exceeds the SAR exercise price. At the discretion of the CMDS Committee, SARs may be payable in common stock, cash or a combination thereof.



Time and Date		9:00 a.m. ~~(Eastern time)~~(EDT) on May ~~15, 2012~~19, 2015

Location		Morgan Stanley 2000 Westchester Avenue, Purchase, New York

Items of Business		• Elect the Board of Directors • Ratify the appointment of Deloitte & Touche LLP as independent auditor • Approve the ~~amendment of the 2007 Equity Incentive Compensation Plan~~ ~~• Approve the amendment of the Directors’ Equity Capital Accumulation Plan~~ ~~• Approve the~~ compensation of executives as disclosed in the proxy statement (non-binding advisory resolution) • Approve the amendment of the 2007 Equity Incentive Compensation Plan to increase shares available for grant • Consider three shareholder proposals, if properly presented at the meeting • Transact such other business as may properly come before the meeting or any postponement or adjournment thereof

Record Date		The close of business on March ~~19, 2012~~23, 2015 is the date of determination of shareholders entitled to notice of, and to vote at, the annual meeting of shareholders.

Admission		Only record or beneficial owners of Morgan Stanley’s common stock as of the record date, the close of business on March 23, 2015, or ~~their proxies~~a valid proxy or representative of such shareholder, may attend the annual meeting in person. ~~All shareholders~~Any shareholder, proxy or representative who wishes to attend the annual meeting must present ~~photo identification, such as~~the documentation described under “How Do I Attend the Annual Meeting?” Morgan Stanley reserves the right to limit the number of representatives who may attend the annual meeting on behalf of a ~~driver’s license, and beneficial owners must also provide evidence of stock holdings, such as a recent brokerage account or bank statement.~~shareholder.

Webcast		If you are unable to attend the meeting in person, you may listen to the meeting atwww.morganstanley.com/~~about/ir/~~about-us-ir/index.html. Please go to our website prior to the annual meeting for details.

Voting		It is important that ~~you vote~~ all of your shares are voted.. You may ~~vote~~submit your proxy to have your shares voted over the Internet or by ~~telephone. You may also submit a~~telephone or by returning your proxy card or voting instruction form, if you receive one in the mail.

Notice		We are ~~mailing~~distributing to certain shareholders a Notice of Internet Availability of Proxy Materials ~~(“Notice”)~~(Notice) on or about April ~~5, 2012.~~2, 2015. The Notice informs those shareholders how to access this proxy statement and our Annual Report on Form 10-K for the year ended December 31, ~~2011~~2014 through the Internet and how to ~~vote~~submit a proxy online.


~~Roy J. Bostock (71)~~Erskine B. Bowles (69) Director Since 2005		Professional Experience: • Mr. ~~Bostock has served as non-executive Vice Chairman of the Board of Delta Air Lines, Inc. since 2009 and Chairman of the Board of Yahoo! Inc. since 2008.~~ ~~• He has served as a principal of Sealedge Investments, LLC, a diversified private investment company, since 2002.~~ ~~• Mr. Bostock~~Bowles is ~~Chairman Emeritus, and served as Chairman from 2002 to 2010, of the Partnership for a Drug-Free America and served as Chairman of the Committee for Economic Development from 2002 to 2005.~~ ~~• He worked in the advertising agency business for 38 years beginning in 1964.~~ ~~• Mr. Bostock was Chairman of B\|Com3 Group, Inc., now part of the Publicis Groupe S.A., from 2000 to 2001.~~ • He also served as Chairman and Chief Executive Officer of D’Arcy, Masius Benton & Bowles and its successor firm, The MacManus Group, Inc., from 1990 to 2000, when The MacManus Group, Inc. merged with the Leo Burnett Company to form B\|Com3 Group, Inc., and was President from 1986 to 1990 of D’Arcy, Masius Benton & Bowles. ~~Other Current Directorships:~~ ~~Delta Air Lines, Inc. (Non-Executive Vice Chairman) and Yahoo! Inc. (Non-Executive Chairman; announced that he is not standing for re-election)~~ ~~Other Directorships in the Past Five Years:~~ ~~Northwest Airlines Corporation (prior to its merger with Delta Air Lines, Inc.)~~ ~~Qualifications, Attributes and Skills:~~ Mr. Bostock’s varied leadership positions, including as chief executive officer of advertising and marketing services firms and in connection with non-profit organizations and public company boards, brings to the Board the perspective of an experienced leader with strategic planning, operations and business development skills.


~~Erskine B. Bowles (66)~~ ~~Director Since 2005~~		~~Professional Experience:~~ ~~• Mr. Bowles has been~~ President Emeritus of the University of North Carolina ~~since 2011~~ and served as President from January 2006 through December 2010. • He served as Co-Chair of the National Commission on Fiscal Responsibility and Reform ~~through~~during 2010. • Mr. Bowles ~~has been~~became a senior advisor at BDT Capital Partners LLC, a private investment firm, ~~since 2012.~~in 2012 and also serves as non-executive vice chairman. He has been a senior advisor since 2001 and was Managing Director from 1999 to 2001 of Carousel Capital, ~~LLC,~~ a private investment firm. He was also a partner at the private investment firm of Forstmann Little & Co. from 1999 to 2001 and was a founder of Kitty Hawk Capital, a venture capital firm. • HeMr. Bowles began his career in corporate finance at Morgan Stanley in 1969 and subsequently helped found and served as Chairman and Chief Executive Officer (CEO) of Bowles Hollowell Connor & Co., an investment banking firm. • Mr. Bowles served as White House Chief of Staff from 1996 to 1998 and Deputy White House Chief of Staff from 1994 to 1995. He was head of the Small Business Administration from 1993 to 1994 and served as United Nations Under Secretary General, Deputy Special Envoy for Tsunami Recovery in 2005. Other Current Public Company Directorships: Belk, Inc., ~~Cousins Properties Incorporated,~~ Facebook, Inc. and Norfolk Southern Corporation Other Public Company Directorships in the Past Five Years: ~~General Motors Corporation~~Cousins Properties Incorporated Qualifications, Attributes and ~~Skills~~Skills:: Mr. Bowles brings to the Board his extensive experience in the financial services industry and ~~academia~~our Company, particularly in his capacity as Independent Lead Director appointed by our independent directors, as well as in academia and his distinguished public service.

Thomas H. Glocer (55) Director Since 2013		Professional Experience: • Mr. Glocer served as CEO of Thomson Reuters Corporation, a news and information provider for businesses and professionals, from April 2008 through December 2011 and as CEO of Reuters Group PLC from July 2001 to April 2008. He joined Reuters Group PLC in 1993 and served in a variety of executive roles before being named CEO. • He was a mergers and acquisitions lawyer at the law firm of Davis Polk & Wardwell LLP from 1984 to 1993. Other Current Public Company Directorships: Merck & Co., Inc. Other Public Company Directorships in the Past Five Years: Thomson Reuters Corporation Qualifications, Attributes and Skills: Mr. Glocer’s leadership positions, including as CEO of Thomson Reuters Corporation, provide extensive management experience as well as operational and technology experience and international perspective.



~~Howard J. Davies (61)~~ ~~Director Since 2004~~		~~Professional Experience:~~ ~~• Mr. Davies has served as a professor at SciencesPo, the Paris School of International Affairs since 2011.~~ ~~• He is an external advisor to the Government Investment Corporation of Singapore and a member of the International Advisory Board of the China Securities Regulatory Commission.~~ • Mr. Davies served as Director of the London School of Economics and Political Science from 2003 to 2011. He was Chairman of the U.K. Financial Services Authority, the U.K.’s financial regulator, from 1997 to 2003. • Mr. Davies previously served as Deputy Governor of the Bank of England from 1995 to 1997. He was Director General of the Confederation of British Industry from 1992 to 1995 and Controller of the Audit Commission in the U.K. from 1987 to 1992. • He worked at McKinsey & Co. from 1982 to 1987 and was seconded to the Treasurer as Special Advisor to the Chancellor of the Exchequer. Mr. Davies also previously worked at the U.K. Treasury and the Foreign and Commonwealth Office, including two years as Private Secretary to the British Ambassador in Paris. ~~Other Current Directorships:~~ ~~Prudential plc~~ ~~Qualifications, Attributes and Skills:~~ ~~Mr. Davies brings an international perspective to the Board as well as extensive financial regulatory, accounting and risk management experience from his years of accomplished public service.~~

James P. Gorman ~~(53)~~(56) Director Since 2010		Professional Experience: • Mr. Gorman has served as Chairman of the Board ~~since 2012, President~~ and ~~Chief Executive Officer~~CEO of Morgan Stanley since January 2012. He was President and CEO from January 2010 ~~and Chairman of Morgan Stanley Smith Barney Holdings LLC since 2009.~~through December 2011. • He was Co-President ~~of Morgan Stanley~~ from December 2007 to December 2009, Co-Head of Strategic Planning from October 2007 to December 2009 and President and Chief Operating Officer of ~~the Global~~ Wealth Management ~~Group~~at Morgan Stanley from February 2006 to April 2008. • Mr. Gorman joined Merrill Lynch & Co., Inc. (Merrill Lynch) in 1999 and served in various positions including Chief Marketing Officer, Head of Corporate Acquisitions Strategy and Research in 2005 and President of the Global Private Client business from 2002 to 2005. • Prior to joining Merrill Lynch, he was a senior partner at McKinsey & Co., serving in the firm’s financial services practice. Earlier in his career, Mr. Gorman was an attorney in Australia. ~~Other Directorships in the Past Five Years:~~ ~~MSCI Inc.~~ Qualifications, Attributes and Skills: As ~~Chief Executive Officer~~CEO of the Company, Mr. Gorman is a proven leader with an established record as a strategic thinker backed by strong operating, business development and execution skills and brings an extensive understanding of Morgan Stanley’s businesses and decades of financial services experience.
Robert H. Herz (61) Director Since 2012		Professional Experience: • Mr. Herz has served as President of Robert H. Herz LLC, providing consulting services on financial reporting and other matters, since September 2010. • He served as Chairman of the Financial Accounting Standards Board from July 2002 to September 2010 and as a part-time member of the International Accounting Standards Board from January 2001 to June 2002. • Mr. Herz has served on the Accounting Standards Oversight Council of Canada since 2011 and as a member of the Standing Advisory Group of the Public Company Accounting Oversight Board since 2012. • Mr. Herz served as a partner in PricewaterhouseCoopers, an accounting firm, from 1985 to 2002. Other Current Public Company Directorships: Federal National Mortgage Association (Fannie Mae) and Workiva Inc. Qualifications, Attributes and Skills: Mr. Herz brings to the Board extensive regulatory, public accounting, financial reporting, risk management and financial experience through his private and public roles, including as Chairman of the Financial Accounting Standards Board.


~~C. Robert Kidder (67)~~ ~~Director Since 1993~~		~~Professional Experience:~~ • Mr. Kidder served as Chairman and Chief Executive Officer of 3Stone Advisors LLC, a private investment firm, from 2006 to 2011, and as non-executive Chairman of the Board of Chrysler Group LLC from 2009 to 2011. • He was Principal at Stonehenge Partners, Inc., a private investment firm, from 2004 to 2006. Mr. Kidder served as President of Borden Capital, Inc., a company that provided financial and strategic advice to the Borden family of companies, from 2001 to 2003. ~~• He was Chairman of the Board from 1995 to 2004 and Chief Executive Officer from 1995 to 2002 of Borden Chemical, Inc. (formerly Borden, Inc.), a forest products and industrial chemicals company.~~ • Mr. Kidder was Chairman and Chief Executive Officer from 1991 to 1994 and President and Chief Executive Officer from 1988 to 1991 of Duracell International Inc. Prior to joining Duracell International Inc. in 1980, Mr. Kidder worked in planning and development at Dart Industries. He also previously worked at McKinsey & Co. as a general management consultant. ~~Other Current Directorships:~~ ~~Merck & Co. Inc.~~ ~~Other Directorships in the Past Five Years:~~ ~~Chrysler Group LLC and Schering-Plough Corporation (prior to its merger with Merck & Co. Inc.)~~ ~~Qualifications, Attributes and Skills:~~ Mr. Kidder brings to the Board extensive financial and senior executive experience, including in business development, operations and strategic planning, as well as a deep understanding of our Company, particularly in his capacity as Lead Director appointed by our independent directors.

Klaus Kleinfeld ~~(54)~~(57) Director ~~Nominee~~Since 2012		Professional Experience: • Mr. Kleinfeld has served as Chairman and CEO of Alcoa Inc. (Alcoa), athe world’s leading producer ~~and manager~~ of primary aluminum and fabricated aluminum, ~~and alumina,~~ since April 2010. • He served as President and CEO of Alcoa from 2008 to 2010 and President and Chief Operating Officer of Alcoa from 2007 ~~through 2008~~to 2008. He has served on the Board of ~~Alcoa.~~Alcoa since 2003. • Mr. Kleinfeld served for 20 years at Siemens AG from 1987 to 2007, including as CEO and President from 2005 to 2007, as a member of the Managing Board from 2004 to 2007, and as President and ~~Chief Executive Officer~~CEO from 2002 to 2004 and Executive Vice President and Chief Operating Officer in 2001 of Siemens AG’s principal U.S. subsidiary, Siemens Corporation. ~~• He serves on the Brookings Institution Board of Trustees~~ Other Current Public Company Directorships: Alcoa and ~~is Chairman of the U.S.-Russia Business Council.~~Hewlett-Packard Company Other ~~Current Directorships:~~ Public Company Directorships in the Past Five Years:~~Alcoa, Inc. and~~ Bayer AG (Supervisory Board) ~~Other Directorships in the Past Five Years:~~ ~~Siemens AG (Managing Board) and Citigroup Inc.~~ Qualifications, Attributes and Skills:Mr. Kleinfeld brings to the Board extensive international and senior executive experience, including in business development, operations and strategic planning at multinational organizations.
Jami Miscik (56) Director Since 2014		Professional Experience: • Ms. Miscik has served as President and Vice Chairman of Kissinger Associates, Inc., a New York-based strategic international consulting firm that assesses and navigates emerging market geopolitical and macroeconomic risks for its clients, since 2009. • She served as the global head of sovereign risk at Lehman Brothers from 2005 to 2008. • Ms. Miscik served at the Central Intelligence Agency from 1983 to 2005, including as Deputy Director for Intelligence from 2002 to 2005. • She is a member of the President’s Intelligence Advisory Board and has served as a Senior Advisor for Geopolitical Risk at Barclays Capital. Other Current Public Company Directorships: EMC Corporation Qualifications, Attributes and Skills: Ms. Miscik brings to the Board extensive leadership in navigating geopolitical and macroeconomic and technology risks through her private and public roles, including as President and Vice Chairman of Kissinger Associates, Inc. and her service with the Central Intelligence Agency.


Donald T. Nicolaisen ~~(67)~~(70) Director Since 2006		Professional Experience: • Mr. Nicolaisen was Chief Accountant for the U.S. Securities and Exchange Commission (SEC) from 2003 to 2005, where he served as the principal advisor to the SEC on accounting and auditing matters and was responsible for formulating and administering the accounting program and policies of the SEC. • He was a partner of PricewaterhouseCoopers, an accounting firm, from 1978 to 2003 and first joined Price Waterhouse in 1967. • Mr. Nicolaisen led Price Waterhouse’s national office for accounting and SEC services and its financial services practice and was responsible for auditing and providing risk management advice to large, complex ~~multi-national~~multinational corporations. Other Current Public Company Directorships: MGIC Investment Corporation, Verizon Communications Inc. and Zurich ~~Financial Services~~Insurance Group Qualifications, Attributes and Skills:Mr. Nicolaisen brings to the Board over 40 years of regulatory, public accounting and financial reporting, risk management and financial experience and the varied perspectives he has gained in the private sector as well as through distinguished service at the SEC.

Hutham S. Olayan ~~(58)~~(61) Director Since 2006		Professional Experience: • Ms. Olayan has been a principal and director since 1981 of The Olayan Group, a private multinational enterprise that is a diversified global investor and operator of commercial and industrial businesses in Saudi Arabia. • ~~Ms. Olayan~~She has been President and ~~Chief Executive Officer~~CEO of The Olayan Group’s U.S. operations for more than 2025 years, overseeing all investment activity in the Americas. • Ms. Olayan is a member of the ~~International~~Executive Advisory Board of ~~The Blackstone Group~~General Atlantic and a former director of ~~Equity International and~~ Thermo Electron Corporation. Qualifications, Attributes and Skills: Ms. Olayan’s extensive financial experience in the U.S. and internationally, including the Middle East, strengthens the Board’s global perspective.



Item 1—Election of Directors			1

Director Selection and Nomination Process			1

Director Experience, Qualifications, Attributes and Skills			2

Director Nominees			2

Corporate Governance			910

Corporate Governance ~~Policies~~Highlights			910

Director Independence			1012

Director Attendance at Annual Meeting			1214

Board Meetings and Committees			1214

Board Leadership Structure and Role in Risk Oversight			1416

Director Compensation			1619

Related Person Transactions Policy			1821

Certain Transactions			1921

Beneficial Ownership of Company Common Stock			2022

Executive Equity Ownership Commitment			2022

Director ~~Career Stock Unit Holding~~Equity Ownership Requirement			2022

Stock Ownership of Executive Officers and Directors			2022

Principal Shareholders			2223

Section 16(a) Beneficial Ownership Reporting Compliance			2224

Executive Compensation			2324

Compensation Governance			2324

Consideration of Risk Matters in Determining Compensation			2425

Compensation Discussion and Analysis			2627

Compensation, Management Development and Succession Committee Report			3943

~~2011~~2014 Summary Compensation Table			3944

~~2011~~2014 Grants of Plan-Based Awards ~~Table~~			42

~~2011 Outstanding Equity Awards at Fiscal Year-End Table~~			45

~~2011 Option Exercises and Stock Vested~~ Table			47

~~2011 Pension Benefits Table~~			47

~~2011 Nonqualified Deferred Compensation~~2014 Outstanding Equity Awards at Fiscal Year-End Table			49

2014 Option Exercises and Stock Vested Table			50

2014 Pension Benefits Table			51

2014 Nonqualified Deferred Compensation Table			53

Potential Payments ~~Upon~~upon Termination or Change-in-Control			5356

Item 2—Ratification of Appointment of Morgan Stanley’s Independent Auditor			5658

~~Item 3—Company Proposal to Amend the 2007 Equity Incentive Compensation Plan~~Audit Committee Report			59

Item ~~4—Company Proposal to Amend the Directors’ Equity Capital Accumulation Plan~~			67

~~Item 5—~~3—Company Proposal to Approve the Compensation of Executives as Disclosed in the Proxy Statement (Non-Binding Advisory Resolution)			60

Item 4—Company Proposal to Amend the 2007 Equity Incentive Compensation Plan to Increase Shares Available for Grant			62

Shareholder Proposals			70

Item 5—Shareholder Proposal Regarding Annual Report on Lobbying Expenses			70

Item 6—Shareholder Proposal Regarding Vote-Counting Bylaw Change			73

Item 7—Shareholder Proposal Regarding Report on Government Service Vesting			76

Information ~~About~~about the Annual Meeting			7278

Other Business			7581

Annex A: Morgan Stanley 2007 Equity Incentive Compensation Plan (As Proposed to beBe Amended)			A-1

~~Annex B: Morgan Stanley Directors’ Equity Capital Accumulation Plan (As Proposed to be Amended)~~			~~B-1~~


James W. Owens ~~(66)~~(69) Director Since 2011		Professional Experience: • Mr. Owens served as Chairman and ~~Chief Executive Officer~~CEO of Caterpillar Inc. (Caterpillar), a manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines, from 2004 to 2010. • He served as Vice Chairman of Caterpillar ~~Inc.~~ from 2003 to 2004 and as Group President from 1995 to 2003, responsible at various times for 13 of the company’s 25 divisions. • Mr. Owens served at Caterpillar ~~Inc.~~ as Vice President and Chief Financial Officer from 1993 to 1995, Corporate Vice President and President of Solar Turbines Incorporated from 1990 to 1993, and managing director of P.T. Natra Raya, ~~Caterpillar Inc.’s~~Caterpillar’s Indonesian joint venture, from 1987 to 1990. • He held various managerial positions in the Accounting and Product Source Planning Departments from 1980 to 1987 and was chief economist of Caterpillar Overseas S.A. in Geneva, Switzerland, from 1975 to 1980. ~~Mr. Owens~~He joined Caterpillar ~~Inc.~~ in 1972 as a corporate economist. • HeMr. Owens served on the President’s Economic Recovery Advisory Board from 2009 to 2011. ~~Mr. Owens serves on the boards of the Peter G. Peterson Institute for International Economics and the Council on Foreign Relations and~~He is a senior advisor at Kohlberg Kravis Roberts & Co. Other Current Public Company Directorships:Alcoa ~~Inc.~~ and International Business Machines Corporation Other Public Company Directorships in the Past Five Years:Caterpillar ~~Inc.~~ Qualifications, Attributes and Skills:Mr. Owens’ various leadership positions, including as ~~Chief Executive Officer~~CEO of a major global corporation, bring to the Board extensive management experience and economics expertise and ~~strengthens~~strengthen the Board’s global perspective.

~~O. Griffith Sexton (68)~~ ~~Director Since 2005~~		~~Professional Experience:~~ ~~• Mr. Sexton has served as an adjunct professor at Columbia Business School since 1995 and visiting lecturer at Princeton University since 2000, teaching courses in corporate finance.~~ ~~• He was an Advisory Director of Morgan Stanley from 1995 to 2008.~~ • Mr. Sexton joined Morgan Stanley in 1973 and was a Managing Director from 1985 to 1995, ultimately serving as Director of the Corporate Restructuring Group within the Advisory Services Department. ~~Other Current Directorships:~~ ~~Investor AB~~ ~~Qualifications, Attributes and Skills:~~ Mr. Sexton brings to the Board extensive financial services, accounting and risk experience as well as substantive knowledge of Morgan Stanley’s businesses from his nearly 40 years of prior service at the Company.


A. Equity Ownership. A relationship arising solely from a director’s ownership of an equity or limited partnership interest in a party that engages in a transaction with Morgan Stanley, so long as such director’s ownership interest does not exceed 5% of the total equity or partnership interests in that other party.		B. Other Directorships. A relationship arising solely from a director’s position as (i) director or advisory director (or similar position) of another company or for-profit corporation or organization or (ii) director or trustee (or similar position) of a tax exempt organization.
C. Ordinary Course Business. A relationship arising solely from transactions, including financial services transactions such as underwriting, banking, lending or trading in securities, commodities or derivatives, or from other transactions for products or services, between Morgan Stanley and a company of which a director is an executive officer, employee or owner of 5% or more of the equity of that company, if such transactions are made in the ordinary course of business and on terms and conditions and under circumstances (including, if applicable, credit or underwriting standards) that are substantially similar to those prevailing at the time for comparable transactions, products or services for or with unaffiliated third parties.		D. Contributions.A relationship arising solely from a director’s status as an executive officer of a tax exempt organization, and the contributions by Morgan Stanley (directly or through the Morgan Stanley Foundation or any similar organization established by Morgan Stanley) to the organization are less than the greater of $1,000,000 or 2% of the organization’s consolidated gross revenues during the organization’s preceding fiscal year (matching of employee charitable contributions is not included in Morgan Stanley’s contributions for this purpose).
E. Products and Services. A relationship arising solely from a director utilizing products or services of Morgan Stanley in the ordinary course of business and on substantially the same terms as those prevailing at the time for comparable products or services provided to unaffiliated third parties.		F. Professional, Social and Religious Organizations and Educational Institutions.A relationship arising solely from a director’s membership in the same professional, social, fraternal or religious association or organization, or attendance at the same educational institution, as an executive officer or director.
G. Family Members. Any relationship or transaction between an immediate family member of a director and Morgan Stanley shall not be deemed a material relationship or transaction that would cause the director not to be independent if the standards in this Section 2 would permit the relationship or transaction to occur between the director and Morgan Stanley.


~~Relationship~~		~~Director(s)~~
~~Commercial relationships~~in the last three years between Morgan Stanley and entities where the directors are employees or executive officers, or their immediate family members are executive officers, that did not exceed the greater of $1 million or 2% of such other entity’s consolidated gross revenues in any of the last three years		~~Bostock, Davies, Kleinfeld, Olayan and Tyson~~
~~Ordinary course relationships~~ arising from transactions on terms and conditions substantially similar to those with unaffiliated third parties between Morgan Stanley and entities where the directors or their immediate family members own equity of 5% or more of that entity		~~Bostock~~
~~Morgan Stanley’s~~~~contributions to charitable organizations~~ where the directors or their immediate family members serve as officers, directors or trustees that did not exceed the greater of $100,000 or 1% of the organization’s consolidated gross revenues in the preceding year		~~Bostock, Bowles, Davies, Hance, Kidder, Kleinfeld, Olayan and Owens~~
~~Directors’~~~~utilization of Morgan Stanley products and services~~ ~~in the ordinary course of business on terms and conditions substantially similar to those provided to unaffiliated third parties~~		~~Bostock, Hance, Kidder, Owens, Sexton and Tyson~~


	Retainer
Lead Director (Mr. Kidder)	$	30,000

Committee Chair
Audit Committee (Mr. Nicolaisen)*	$	25,000
Compensation, Management Development and Succession Committee (Mr. Bowles)	$	20,000
Nominating and Governance Committee (Dr. Tyson)	$	20,000
Operations and Technology Committee (Mr. Nicolaisen)*	$	10,000
Risk Committee (Mr. Davies)	$	20,000

Committee Members
Audit Committee (Messrs. Davies, Hance and Sexton)*	$	10,000
Compensation, Management Development and Succession Committee (Messrs. Kidder and Nicolaisen and Ms. Olayan)	$	10,000
Nominating and Governance Committee (Messrs. Bostock, Kidder and Owens)	$	10,000
Operations and Technology Committee (Messrs. Davies and Hance)*	$	10,000
Risk Committee (Messrs. Bostock and Hance)	$	10,000


Name	Stock Units (#)		Stock Options (#)^(a)
Roy J. Bostock		35,904		—
Erskine B. Bowles		67,657		—
Howard J. Davies		42,173		7,049
James H. Hance, Jr.		18,732		—
C. Robert Kidder		50,926		33,273
Donald T. Nicolaisen		45,774		—
Hutham S. Olayan		60,979		—
James W. Owens		13,126		—
O. Griffith Sexton		60,009		—
Laura D. Tyson		25,459		25,847


Name	^(a)Stock Units (#)
Directors were awarded stock options annually under DECAP until February 8, 2005, at which point stock option awards were discontinued. As of December 31, 2011, the outstanding stock options had no intrinsic value because the exercise price of each stock option was greater than $15.13, the closing price of the Company’s common stock on December 30, 2011.Erskine B. Bowles		119,772
Howard J. Davies		52,034
Thomas H. Glocer		22,803
Robert H. Herz		21,349
C. Robert Kidder		69,687
Klaus Kleinfeld		22,465
Jami Miscik		3,579
Donald T. Nicolaisen		79,035
Hutham S. Olayan		111,084
James W. Owens		44,980
O. Griffith Sexton		—
Laura D. Tyson		43,413
Rayford Wilkins, Jr.		11,885



Name	Shares⁽¹⁾		Underlying Stock Units⁽²⁾		Subject to Stock Options Exercisable Within 60 Days		Total⁽³⁾
NAMED EXECUTIVE OFFICERS
James P. Gorman		507,967		606,952		1,159,703		2,274,622
Ruth Porat		684,596		142,008		205,764		1,032,368
Gregory J. Fleming		387,111		181,462		259,263		827,836
Colm Kelleher		163,992		299,571		623,524		1,087,087
James A. Rosenthal		160,490		120,389		370,687		651,566

DIRECTORS AND DIRECTOR NOMINEE
Erskine B. Bowles		1,000		120,097		—		121,097
Howard J. Davies		20,690		52,175		—		72,865
Thomas H. Glocer		1,000		22,865		—		23,865
Robert H. Herz		12,969		21,406		—		34,375
C. Robert Kidder		89,675		69,875		—		159,550
Klaus Kleinfeld		14,037		22,526		—		36,563
Jami Miscik		—		3,588		—		3,588
Donald T. Nicolaisen		—		79,249		—		79,249
Hutham S. Olayan		8,000		111,385		—		119,385
James W. Owens		10,194		45,101		—		55,295
Ryosuke Tamakoshi⁽⁴⁾		—		—		—		—
Masaaki Tanaka⁽⁴⁾		—		—		—		—
Perry M. Traquina⁽⁵⁾		—		—		—		—
Laura D. Tyson		26,377		43,531		—		69,908
Rayford Wilkins, Jr.		3,608		11,917		—		15,525

ALL DIRECTORS AND EXECUTIVE OFFICERS AS OF FEBRUARY 27, 2015 AS A GROUP (22 PERSONS)		2,157,981		2,170,984		2,974,096		7,303,061


	Common Stock Beneficially Owned as of February 29, 2012

Name	Shares⁽¹⁾		Underlying Stock Units⁽²⁾		Subject to Stock Options Exercisable within 60 days		Total⁽²⁾⁽³⁾
NAMED EXECUTIVE OFFICERS
James P. Gorman		310,713		867,921		553,333		1,731,967
Ruth Porat		474,683		355,366		115,857		945,906
Gregory J. Fleming		123,098		419,682		20,224		563,004
Colm Kelleher		53,486		440,062		268,202		761,750
Paul J. Taubman		550,706		732,206		299,147		1,582,059

DIRECTORS
Roy J. Bostock		43,572		35,998		—		79,570
Erskine B. Bowles		1,000		67,833		—		68,833
Howard J. Davies		9,260		42,283		7,049		58,592
James H. Hance, Jr.		28,325		18,781		—		47,106
C. Robert Kidder		70,452		51,059		33,273		154,784
Klaus Kleinfeld⁽⁴⁾		—		—		—		—
Donald T. Nicolaisen		4,704		41,176		—		45,880
Hutham S. Olayan		8,000		61,138		—		69,138
James W. Owens		5,000		13,160		—		18,160
O. Griffith Sexton		633,934		60,165		—		694,099
Ryosuke Tamakoshi⁽⁵⁾		—		—		—		—
Masaaki Tanaka⁽⁵⁾		—		—		—		—
Laura D. Tyson		32,154		25,525		25,847		83,526

ALL DIRECTORS AND EXECUTIVE OFFICERS AS OF FEBRUARY 29, 2012 AS A GROUP (20 PERSONS)		2,446,657		3,774,022		1,388,965		7,609,644


	Shares of Common Stock Beneficially Owned
Name and Address	Number		Percent⁽¹⁾
China Investment Corporation (CIC)⁽²⁾ New Poly Plaza, No. 1 Chaoyangmen Beidajie Dongcheng District, Beijing 100010, People’s Republic of China		150,782,379		7.6	%
Mitsubishi UFJ Financial Group, Inc.⁽³⁾ 7-1, Marunouchi 2-chome Chiyoda-ku, Tokyo 100-8330, Japan		435,452,411		22.0	%
State Street Corporation (State Street)⁽⁴⁾ 225 Franklin Street, Boston, MA 02110		165,720,173		8.4	%


	Page:
I. Executive Summary		26
~~II. Compensation Objectives and Strategy~~		27
~~III.~~II. Compensation ~~Program for 2011~~		28
~~IV. 2011 Compensation Process~~Objectives and ~~Decisions~~Strategy		32
III. Framework for Making Compensation Decisions		32
IV. Compensation Decisions and Program		37
V. Notes to the Compensation Discussion and Analysis		40


Summary of Company Results
$ Millions
	As Reported				Excluding DVA⁽⁴⁾
	2013		2014		2013		2014
Net Revenues⁽⁷⁾	$	32,493	$	34,275	$	33,174	$	33,624

Income from Continuing Operations Applicable to Morgan Stanley⁽⁷⁾	$	2,975	$	3,481	$	3,427	$	3,063

Return on Equity⁽⁷⁾		4%		5%		5%		4%

Income from Continuing Operations Applicable to Morgan Stanley, excluding the Subsequent Event⁽¹⁾⁽⁸⁾			$	6,151			$	5,733

Return on Equity, excluding the Subsequent Event⁽⁹⁾				9%				8%

•
Continue to improve Wealth Management margins through cost discipline and revenue growth		*~~Members~~Increased Wealth Management pretax margin⁽⁶⁾ from 18% in 2013 to 20% in 2014⁽⁷⁾* On track to achieve stated goal of ~~the Company’s Operating Committee, including each NEO, received no cash bonus~~22-25% by year-end 2015**

Improve Fixed Income and Commodities ROE: risk-weighted assets (RWAs) reductions and strategic solution for ~~2011. Instead, 100% of year-end compensation was paid with deferred long-term incentive awards, which are subject to market and cancellation risk over a three-year period.~~ Members of the Operating Committee in 2011 received 100% of their year-end compensation in deferred long-term incentive awards. Deferred compensation for the NEOs was comprised of “at-risk” PSUs, RSUs and deferred cash-based awards under the Morgan Stanley Compensation Incentive Program (MSCIP). A meaningful portion of the 2011 year-end compensation for NEOs was paid in equity, further aligning a significant portion of their compensation with shareholders’ interests by tying it directly to the Company’s stock price. These long-term incentive awards continue to be subject to the Company’s cancellation and clawback provisions, as described below, over a three-year period.Commodities

•		*~~We redesigned our “at-risk” PSUs program~~Reduced Basel III RWAs⁽¹⁰⁾ in Fixed Income and Commodities from $280 billion at year-end 2012 to ~~further moderate risk-taking incentives while continuing~~$210 billion at year-end 2013 and $188 billion at year-end 2014 (excluding lending) On track to ~~incent performance~~*. ~~For the third consecutive year, the Company granted 20%~~achieve year-end 2015 target of ~~each NEO’s 2011 year-end~~<$180 billion

		Sold/divested TransMontaigne Inc. and CanTerm Canadian Terminals. Committed to selling Global Oil Merchanting business

Additional expense reductions and improvement in expense ratios		Non-compensation efficiency ratio (adjusted non-compensation expenses / net revenue) improved from 30% in 2013 to 29% in 2014⁽¹¹⁾ Institutional Securities incentive compensation in “at-risk” PSUs that deliver value only if the Company, after the full three-year performance period, achieves objective performance goals with respect to return on average common shareholders’ equity (ROE) and relative total shareholder return (TSR). In order to better align the PSU program for 2011 with principles of balanced risk-taking, the maximum payout has been reduced from two times the target award to 1.5 times the target award to provide for a less leveraged payout range and the performance target for the average ROE portion of the award was reduced to better reflect the current operating environment. In addition, the TSR portion of the award was modified to provide for a comparison to an industry index rather than a small group of peer companies. By reducing the payout leverage, setting a challenging but achievable goal and removing the volatility of a small peer group, the program is more balanced and less likely to encourage executives to take excessive riskrestructured in order to ~~achieve payouts.~~reduce compensation to net revenue ratio to 39% or less starting in 2015

B.	~~“At-Risk” Performance-Based Compensation Program.~~ ~~In 2009,~~ Received a non-objection from the CMDS Committee, in response to shareholder feedback, approved an “at-risk” PSU program under the Company’s 2007 Equity Incentive Compensation Plan. Like the PSU programs approved by the CMDS Committee for 2009 and 2010, the 2011 PSU program ties a meaningful portion of each NEO’s compensation to the Company’s long-term financial performance and reinforces the NEOs’ accountabilityFederal Reserve for the Company’s ~~future financial~~2014 capital plan to repurchase up to $1 billion of common stock through 1Q 2015 and ~~strategic goals by linking~~increase the ~~ultimate payout~~quarterly common stock dividend from $0.05 to ~~two core financial metrics~~$0.10 beginning in 2Q 2014

Achieve returns that meet and exceed cost of capital		Improved ROE excluding the ~~Company – return on average common shareholders’ equity~~impact of DVA⁽⁴⁾ and ~~relative total shareholder return over a three-year performance period.~~the subsequent event⁽¹⁾⁽⁹⁾ from 5% in 2013 to 8% in 2014, making strong progress toward 10% and higher goal


MS AVERAGE ROE*		Multiplier
12% or more		1.50
10%		1.00
6%		0.50
Less than 6%		0.00


MS TSR vs. Index Group TSR*		~~Multiplier~~
~~Above~~		~~Up to 1.50~~
~~Equal~~		~~1.00~~
~~Below~~		~~Down to 0.00~~


~~Compensation Element~~	~~Description~~	~~Other Features and Comments~~
~~1. Base Salary~~	~~An executive’s base salary reflects the executive’s experience and level of responsibility and is intended to be competitive with salaries for comparable positions at competitors.~~	Base salaries are reviewed periodically and subject to change, for, among other reasons, a change in the executive’s responsibilities or competitive market environment. The CMDS Committee reviewed the NEOs’ base salaries in January 2012 and made no changes from 2011 levels.
~~2. Incentive Compensation~~
*~~Mix of Cash and Long-Term Incentives~~*	For 2011, incentive compensation consisted of equity and MSCIP long-term incentive awards. NEOs received no cash bonus and instead received 100% of year-end incentive compensation in a mix of PSUs, RSUs and MSCIP deferred cash-based awards.	In determining the 2011 deferral for long-term incentive awards, the CMDS Committee considered a number of factors, including the business environment, the Company’s pay-for-performance philosophy and global regulatory principles. As a result, the portion of compensation that was awarded to NEOs on a deferred basis was increased to 100%.
*~~a. Equity Awards – PSUs~~*	“At-risk” PSUs awarded to NEOs vest and pay out after a three-year performance period, with the number of PSUs ultimately earned determined by the Company’s performance against predetermined goals. PSUs accumulate dividend equivalents that are paid only to the extent the underlying units convert to shares. PSUs do not provide for voting rights before they convert to shares.	With the exception of Mr. Fleming’s award, 2011 year-end RSUs are considered vested upon grant; however, these RSUs are subject to cancellation provisions, including upon termination of employment if the NEO leaves the Company to join a competitor. 2011 PSUs and MSCIP awards are subject to vesting and, until vested, are generally cancelable upon termination of employment other than by the Company without cause. As a result, the cost of leaving the Company to go to a competitor can be significant to an NEO. Similarly, a competitor who wants to recruit the NEO would incur a significant cost if it were to agree to replace the NEO’s canceled awards.


Termination Reason/ Change-in-Control	Name	Value of Unvested RSUs and related dividend equivalents⁽¹⁾	Value of Unvested PSUs and related dividend equivalents⁽²⁾	Value of Unvested Stock Options⁽³⁾	Value of Unvested MSCIP Awards⁽⁴⁾
Involuntary Termination (other than for cause or a cancellation event)/Termination Due to Disability/ Qualifying Termination⁽⁵⁾	James P. Gorman	—	$230,257	$0	$1,181,584
	Ruth Porat	—	$199,540	$0	$1,142,416
	Gregory J. Fleming	$5,254,769	$37,329	$0	$1,051,060
	Colm Kelleher	—	$200,009	$0	$1,247,690
	Paul J. Taubman	—	$235,252	$0	$1,177,672
Retirement/Voluntary Termination⁽⁶⁾	James P. Gorman	—	$230,257	forfeit	forfeit
	Ruth Porat	—	$199,540	forfeit	forfeit
	Gregory J. Fleming	forfeit	forfeit	forfeit	forfeit
	Colm Kelleher	—	$200,009	forfeit	forfeit
	Paul J. Taubman	—	$235,252	forfeit	forfeit
Good Reason Termination⁽⁷⁾	James P. Gorman	—	$230,257	forfeit	$1,181,584
Good Reason Termination⁽⁷⁾	Gregory J. Fleming	$3,459,687	forfeit	forfeit	forfeit
Termination Due to Death/ Governmental Service Termination⁽⁸⁾	James P. Gorman	—	$188,875	$0	$1,181,584
	Ruth Porat	—	$160,077	$0	$1,142,416
	Gregory J. Fleming	$5,254,769	$0	$0	$1,051,060
	Colm Kelleher	—	$156,311	$0	$1,247,690
	Paul J. Taubman	—	$191,523	$0	$1,177,672
Change-in-Control (for PSUs, with a termination of employment)⁽⁹⁾	James P. Gorman	—	$230,257	—	—
	Ruth Porat	—	$199,540	—	—
	Gregory J. Fleming	$3,459,687	$37,329	—	—
	Colm Kelleher	—	$200,009	—	—
	Paul J. Taubman	—	$235,252	—	—