Table of Contents

April 12, 2010

Fellow shareholder:

I cordially invite you to attend Morgan Stanley’s 2010 annual meeting of shareholders to:

Our Board of Directors recommends that you vote “FOR” the election of directors, the ratification of the appointment of the auditor, the approval of the compensation of executives as disclosed in this proxy statement and the amendment of the 2007 Equity Incentive Compensation Plan, and “AGAINST” the shareholder proposals.

We enclose our letter to shareholders, our proxy statement, our annual report on Form 10-K and a proxy card. Please submit your proxy. Thank you for your support of Morgan Stanley.

Very truly yours,

John J. Mack		James P. Gorman
Chairman		President and Chief Executive Officer

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Morgan Stanley

1585 Broadway

New York, New York 10036

April 12, 2010

Proxy Statement

We are sending you this proxy statement in connection with the solicitation of proxies by our Board of Directors for the 2010 annual meeting of shareholders. We are mailing this proxy statement and the accompanying form of proxy to shareholders on or about April 13, 2010. In this proxy statement, we refer to Morgan Stanley as the “Company,” “we,” “our” or “us” and the Board of Directors as the “Board.” In December 2008, the Board approved a change in the Company’s fiscal year end from November 30 to December 31, beginning January 1, 2009. The period from December 1, 2008 to December 31, 2008 was a transition period (the December 2008 transition period). Whenever we refer to Morgan Stanley’s fiscal year prior to 2009, we mean the twelve-month period ending November 30 of the stated year. When we refer to 2009, we mean the twelve-month period ending December 31, 2009.

Annual Meeting Information

Date and Location.    We will hold the annual meeting on Tuesday, May 18, 2010 at 9:00 a.m., local time, at our offices at 2000 Westchester Avenue, Purchase, New York.

Admission.    Only record or beneficial owners of Morgan Stanley’s common stock or their proxies may attend the annual meeting in person. When you arrive at the annual meeting, you must present photo identification, such as a driver’s license. Beneficial owners must also provide evidence of stock holdings, such as a recent brokerage account or bank statement.

Electronic Access.    You may listen to the meeting at www.morganstanley.com/about/ir/index.html. Please go to our website prior to the annual meeting to register.

Voting Information

Record Date.    The record date for the annual meeting is March 22, 2010. You may vote all shares of Morgan Stanley’s common stock that you owned as of the close of business on that date. Each share of common stock entitles you to one vote on each matter voted on at the annual meeting. On the record date, 1,398,833,922 shares of common stock were outstanding. We need a majority of the shares of common stock outstanding on the record date represented, in person or by proxy, to hold the annual meeting.

Confidential Voting.    Our Amended and Restated Bylaws (Bylaws) provide that your vote is confidential and will not be disclosed to any officer, director or employee, except in certain limited circumstances such as when you request or consent to disclosure. Voting of the shares held in the Morgan Stanley 401(k) Plan and Morgan Stanley 401(k) Savings Plan (401(k) Plans) also is confidential.

Submitting Voting Instructions for Shares Held Through a Broker.    If you hold shares through a broker, follow the voting instructions you receive from your broker. If you want to vote in person at the annual meeting, you must obtain a legal proxy from your broker and present it at the annual meeting. If you do not submit voting instructions to your broker, your broker may still be permitted to vote your shares. New York Stock Exchange (NYSE) member brokers may vote your shares as described below.

1

Table of Contents

If you do not submit voting instructions and your broker does not have discretion to vote your shares on a matter, the broker will return the proxy card without voting (referred to as “broker non-votes”). Your shares will not be counted in determining the vote on that matter, but will be counted for purposes of determining the presence of a quorum.

Important Notice Regarding Director Elections.    Due to recent rule changes, the election of directors is no longer considered a discretionary item and your shares will remain unvoted for director elections if your broker does not receive instructions from you. If you hold your shares through a broker, it is critically important that you submit your voting instructions if you want your shares to count in the election of directors.

Submitting Voting Instructions for Shares Held in Your Name.    If you hold shares as a record holder, you may vote by submitting a proxy for your shares by mail, telephone or Internet as described on the proxy card. If you submit your proxy via the Internet, you may incur Internet access charges. Submitting your proxy will not limit your right to vote in person at the annual meeting. A properly completed and submitted proxy will be voted in accordance with your instructions, unless you subsequently revoke your proxy. If you submit a signed proxy card without indicating your voting instructions, the person voting the proxy will vote your shares according to the Board’s recommendations.

Submitting Voting Instructions for Shares Held in Employee Plans.    If you hold shares in, or have been awarded stock units under, certain employee plans, you will receive directions on how to submit your voting instructions. Shares held in the following employee plans also are subject to the following rules.

Revoking Your Proxy.    You can revoke your proxy at any time before your shares are voted by (1) delivering a written revocation notice prior to the annual meeting to Martin M. Cohen, Secretary, Morgan Stanley, 1585 Broadway, New York, New York 10036; (2) submitting a later proxy that we receive no later than the conclusion of voting at the annual meeting; or (3) voting in person at the annual meeting. Attending the annual meeting does not revoke your proxy unless you vote in person at the meeting.

2

Table of Contents

Votes Required to Elect Directors.    Each director will be elected by a majority of the votes cast with respect to such director. A “majority of the votes cast” means that the number of votes cast “for” a director exceeds the number of votes cast “against” that director. Under Delaware law, if the director is not elected at the annual meeting, the director will continue to serve on the Board as a “holdover director.” As required by the Company’s Bylaws, each director has submitted an irrevocable letter of resignation as director that becomes effective if he or she is not elected by the shareholders and the Board accepts the resignation. If a director is not elected, the Nominating and Governance Committee will consider the director’s resignation and recommend to the Board whether to accept or reject the resignation. The Board will decide whether to accept or reject the resignation and publicly disclose its decision, including the rationale behind the decision if it rejects the resignation, within 90 days after the election results are certified.

Votes Required to Adopt Other Proposals.    The ratification of Deloitte & Touche LLP’s appointment as independent auditor, the approval of the compensation of executives as disclosed in this proxy statement and the approval of the shareholder proposals each require the affirmative vote of a majority of the shares of common stock represented at the annual meeting and entitled to vote thereon. The approval of the amendment of the 2007 Equity Incentive Compensation Plan requires a majority of votes cast, provided that the total votes cast must represent a majority of the shares entitled to vote on the proposal.

“Abstaining” and “Broker Non-Votes.”    You may vote “abstain” for any nominee in the election of directors and on the other proposals. Shares voting “abstain” on any nominee for director will be excluded entirely from the vote and will have no effect on the election of directors. Shares voting “abstain” on the other proposals will be counted as present at the annual meeting for purposes of establishing the presence of a quorum and your abstention will have the effect of a vote against the proposal. In addition, failure to cast a vote or a broker non-vote can have the effect of a vote against the proposal to approve the amendment of the 2007 Equity Incentive Compensation Plan if such failure or broker non-vote results in the total number of votes cast on the proposal not representing over 50% of all shares of common stock entitled to vote on the proposal.

Item 1—Election of Directors

Director Selection and Nomination Process.    The Nominating and Governance Committee’s charter provides that the Committee is appointed by the Board of Directors to identify individuals qualified to become Board members and to recommend to the Board the director nominees at annual meetings of shareholders. In discharging its duties, 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 Board membership criteria set forth in the Corporate Governance Policies. The Corporate Governance Policies provide that the Board values members who combine a broad spectrum of experience and expertise with a reputation for integrity and that directors should have experience in positions with a high degree of responsibility, be leaders in the companies or institutions with which they are affiliated and be selected based upon contributions they can make to the Board and management and their ability to represent the interests of shareholders. While the Board has not adopted a policy regarding diversity, the 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.

As set forth in its charter, the Nominating and Governance Committee may consider director candidates proposed by shareholders and the Board has adopted a policy regarding director candidates recommended by shareholders discussed under “Shareholder Nominations for Director Candidates” herein. The Nominating and Governance Committee may also retain and terminate, in its sole discretion, a third party to assist in identifying director candidates or to assist in gathering information regarding a director candidate’s background and experience and to approve the fee that the Company pays for these services. Members of the Nominating and Governance

3

Table of Contents

Committee, the Lead Director and other members of the Board interview potential director candidates as part of the selection process when evaluating new director candidates.

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 Corporate Governance Policy that provides that the Board expects a director who changes his or her present job responsibility to advise and to offer to tender his or her resignation for consideration by the Board.

Our Board currently has fourteen (14) directors. 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.

In connection with its 2008 issuance of Series B Non-Cumulative Non-Voting Perpetual Convertible Preferred Stock (Series B Preferred Stock) to Mitsubishi UFJ Financial Group, Inc. (MUFG), Morgan Stanley entered into an Investor Agreement with MUFG dated October 13, 2008 and amended as of October 27, 2008 (Investor Agreement), whereby Morgan Stanley agreed to take all lawful action to cause one of MUFG’s senior officers or directors to be a member of Morgan Stanley’s Board of Directors. Pursuant to the terms of the Investor Agreement, Mr. Nobuyuki Hirano was elected to the Board, effective March 10, 2009. Mr. Hirano subsequently was elected by shareholders at the 2009 annual meeting of shareholders.

In light of the Company’s conversion into a financial holding company, an executive officer of the Company recommended Mr. James H. Hance, Jr. as a potential director candidate to the Nominating and Governance Committee and to the committee’s third party director search firm given his extensive financial services background as described below. The Lead Director and other directors met or spoke with Mr. Hance. The Committee unanimously recommended to the Board that Mr. Hance be elected as a director, and the Board unanimously elected Mr. Hance, effective July 1, 2009. Mr. Charles E. Phillips, Jr. will not stand for re-election at this annual meeting of shareholders.

2010 Director Nominees.    The Board has nominated the thirteen (13) director nominees below for election at the 2010 annual meeting of shareholders in accordance with the Corporate Governance Policies. 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 be voted for another person nominated by the Board.

Below are descriptions of the experience, qualifications, attributes and skills of each of the Company’s director nominees. The Company believes that an effective board consists of a diverse group of individuals who bring a variety of complementary skills that the Nominating and Governance Committee and Board consider 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. As indicated below, 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. They have substantive knowledge and skills applicable to our business, including in the regulatory; public accounting and financial reporting; finance; risk management; business development; operations; strategic planning; management development, succession and compensation; corporate governance; public policy; international; banking; and financial services areas. The Nominating and Governance Committee regularly reviews the composition of the Board in light of Morgan Stanley’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.

4

Table of Contents

		Roy J. Bostock (69).    Mr. Bostock served as Chairman of the Partnership for a Drug-Free America from 2002 until 2010 and 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., an advertising and marketing services firm that is 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, an advertising and marketing services firm, and its successor firm, The MacManus Group, Inc., a global communications services holding company, from 1990 to 2000 when The MacManus Group, Inc. merged with the Leo Burnett Company to form B|Com3 Group, Inc. in 2000, and was President from 1986 to 1990 of D’Arcy, Masius Benton & Bowles.   Director since:    2005   Other current directorships:    Delta Air Lines Inc. (Non-Executive Vice Chairman) and Yahoo! Inc. (Non-Executive Chairman)   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 (64).    Mr. Bowles has served as President of the University of North Carolina since 2006. In 2010, he was named Co-Chair of the National Commission on Fiscal Responsibility and Reform. Mr. Bowles 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. Mr. Bowles began his career in corporate finance at Morgan Stanley in 1969 and subsequently helped found and ultimately served as Chairman and Chief Executive Officer of Bowles Hollowell Connor & Co., an investment banking firm. He also was a founder of Kitty Hawk Capital, a venture capital 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. Mr. Bowles also served as United Nations Under Secretary General, Deputy Special Envoy for Tsunami Recovery in 2005.   Director since:    2005   Other current directorships:    Cousins Properties Incorporated   Other directorships in the past five years:    General Motors Corporation   Mr. Bowles brings to the Board his extensive experience in the financial services industry and academia as well as distinguished public service.

5

Table of Contents

		Howard J. Davies (59).    Mr. Davies has served as Director of the London School of Economics and Political Science since 2003. 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. Mr. Davies worked at McKinsey & Co. from 1982 to 1987 and was seconded to the Treasurer as Special Advisor to the Chancellor of the Exchequer. He 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.   Director since:    2004   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 (51).    Mr. Gorman has served as President and Chief Executive Officer of Morgan Stanley since 2010 and as Chairman of Morgan Stanley Smith Barney Holdings LLC since 2009. He was Co-President of Morgan Stanley from 2007 to 2009, Co-Head of Strategic Planning from 2007 to 2009 and President and Chief Operating Officer of the Global Wealth Management Group from 2006 to 2008. Mr. Gorman joined Merrill Lynch & Co., Inc. 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.   Director since:    2010   Other directorships in the past five years:    MSCI Inc.   As Chief Executive Officer 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.

6

Table of Contents

		James H. Hance, Jr. (65).    Mr. Hance has served as a Senior Advisor at The Carlyle Group, a global private equity firm, since 2005, and was Chairman of Carlyle Capital Corporation Limited from 2006 to 2008. He joined Bank of America in 1987 as Executive Vice President and Chief Accounting Officer and served as Vice Chairman of Bank of America Corporation from 2004 to 2005, Vice Chairman and Chief Financial Officer from 1988 to 2004 and Director from 1999 to 2005. Prior to joining Bank of America, Mr. Hance worked at Price Waterhouse, an accounting firm, for 17 years.   Director since:    2009   Other current directorships:    Cousins Properties Incorporated, Duke Energy Corporation, Rayonier Corporation and Sprint Nextel Corporation (Non-Executive Chairman)   Other directorships in the past five years:    EnPro Industries, Inc. and Summit Properties Inc.   As a former senior executive of a commercial bank, Mr. Hance brings to the Board extensive public accounting and financial reporting, commercial banking, financial services, risk management and bank regulatory experience.
		Nobuyuki Hirano (58).    Mr. Hirano has served since 2009 as Managing Officer of MUFG, one of the world’s leading financial groups, and as Deputy President of The Bank of Tokyo-Mitsubishi UFJ, Ltd., the core commercial banking unit of MUFG. He served as Senior Managing Director from 2008 to 2009 and Managing Director from 2006 to 2008 of The Bank of Tokyo-Mitsubishi UFJ, Ltd. Mr. Hirano has held numerous senior-level positions in Japan and abroad with the financial group since joining The Mitsubishi Bank, Ltd. in 1974, including in the Corporate Planning Office and Corporate Banking Division of The Bank of Tokyo-Mitsubishi, Ltd.   Director since:    2009   Other current directorships:    The Bank of Tokyo-Mitsubishi UFJ, Ltd.   Other directorships in the past five years:    Mitsubishi UFJ Financial Group, Inc. and The Bank of Tokyo-Mitsubishi, Ltd.   In his role as a senior officer at MUFG and its associated companies, Mr. Hirano brings to the Board global leadership as well as international banking, financial services, risk management and regulatory experience.

7

Table of Contents

		C. Robert Kidder (65).    Mr. Kidder has served as Chairman and Chief Executive Officer of 3Stone Advisors LLC, a private investment firm, since 2006. 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 previously worked at McKinsey & Co. as a general management consultant.   Director since:    1993   Other current directorships:    Merck & Co. Inc. (formerly Schering-Plough Corporation) and Chrysler Group LLC (Non-Executive Chairman)   Other directorships in the past five years:    Electronic Data Systems Corporation   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.
		John J. Mack (65).    Mr. Mack has been Chairman of the Board of Directors of Morgan Stanley since 2005 and was Chief Executive Officer from 2005 to 2009. He was Chairman of Pequot Capital Management in 2005. Mr. Mack was Co-Chief Executive Officer of Credit Suisse Group from 2003 to 2004 and President, Chief Executive Officer and Director of Credit Suisse First Boston from 2001 to 2004. He became President, Chief Operating Officer and Director of Morgan Stanley Dean Witter & Co. in 1997 and served in that position until 2001. Mr. Mack joined Morgan Stanley in 1972 in the bond department and served as head of the Worldwide Taxable Fixed Income Division from 1985 to 1992, became Chairman of the Operating Committee in 1992 and became President in 1993.   Director since:    2005   As the Company’s former Chief Executive Officer and current Chairman, Mr. Mack’s over 35 years of service to the Company brings to the Board a unique understanding of Morgan Stanley’s businesses and the financial services industry as well as the perspective of an experienced leader.

8

Table of Contents

		Donald T. Nicolaisen (65).    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 corporations.   Director since:    2006   Other current directorships:    MGIC Investment Corporation, Verizon Communications Inc. and Zurich Financial Services   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.
		Charles H. Noski (57).    Mr. Noski served as Corporate Vice President and Chief Financial Officer from 2003 to 2005 and Director from 2002 to 2005 of Northrop Grumman Corporation. He was senior advisor to The Blackstone Group in 2003. Mr. Noski was Vice Chairman of the Board and Chief Financial Officer in 2002 and Senior Executive Vice President and Chief Financial Officer from 1999 to 2002 of AT&T Corp. He was President, Chief Operating Officer and Director of Hughes Electronics Corporation, then a publicly-traded subsidiary of General Motors Corporation in satellite and wireless communications, from 1997 to 1999, Vice Chairman from 1996 to 1999, Corporate Senior Vice President and Chief Financial Officer from 1992 to 1996 and Corporate Vice President and Controller from 1990 to 1992. Previously, Mr. Noski was a partner of Deloitte & Touche LLP, an accounting firm, for 17 years, and worked in audit, accounting and business consulting roles for clients in various industries, including financial services, and served as National Industry Director for the aerospace and defense industry.   Director since:    2005   Other current directorships:    Air Products and Chemicals, Inc., Automatic Data Processing, Inc. and Microsoft Corporation   Other directorships in the past five years:    Northrop Grumman Corporation   Mr. Noski’s experience as a chief operating officer and chief financial officer, and roles in auditing, accounting and business consulting while a partner at a major accounting firm, brings extensive public accounting, financial reporting and risk management experience to the Board that is complemented by his business and leadership skills.

9

Table of Contents

		Hutham S. Olayan (56).    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 has been President and Chief Executive Officer of The Olayan Group’s U.S. operations for more than 20 years, overseeing all investment activity originating in the Americas. Ms. Olayan is a member of the International Advisory Board of The Blackstone Group, a director of Equity International and a former director of Thermo Electron Corporation.   Director since:    2006   Ms. Olayan’s extensive financial experience in the U.S. and internationally, including the Middle East, strengthens the Board’s global perspective.
		O. Griffith Sexton (66).    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.   Director since:    2005   Other current directorships:    Investor AB   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.
		Laura D. Tyson (62).    Dr. Tyson has served as the S. K. and Angela Chan Professor of Global Management since 2008 and served as Professor of Business Administration and Economics from 2007 to 2008 at the Walter A. Haas School of Business, University of California at Berkeley. She was Dean of the London Business School from 2002 to 2006. Dr. Tyson was Dean from 1998 to 2001 and Class of 1939 Professor in Economics and Business Administration from 1997 to 1998 at the Walter A. Haas School of Business, University of California, Berkeley. She served as National Economic Advisor to the President and Chair of the President’s National Economic Council from 1995 to 1996 and as Chair of the White House Council of Economic Advisors from 1993 to 1995. Dr. Tyson was appointed in 2009 to the President’s Economic Recovery Advisory Board.   Director since:    1997   Other current directorships:    AT&T Inc. (formerly SBC Communications Inc.), CB Richard Ellis Group, Inc. and Eastman Kodak Company   Dr. Tyson brings to the Board economics and public policy expertise and leadership skills from her positions in academia and through her distinguished public service.

Our Board unanimously recommends a vote “FOR” the election of all thirteen (13) nominees. Proxies solicited by our Board will be voted “FOR” these nominees unless otherwise instructed.

10

Table of Contents

Corporate Governance

Corporate Governance Documents.    Morgan Stanley has a corporate governance webpage at the “Company Information” link under the “About Morgan Stanley” link at www.morganstanley.com (www.morganstanley.com/about/company/governance/index.html).

Our 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, Policy Regarding Director Candidates Recommended by Shareholders, Policy Regarding Corporate Political Contributions, Policy Regarding Shareholder Rights Plan, information regarding the Integrity Hotline and the Equity Ownership Commitment are available at our corporate governance webpage at www.morganstanley.com/about/company/governance/index.html and are available to any shareholder who requests them by writing to Morgan Stanley, Suite D, 1585 Broadway, New York, New York 10036.

Shareholders and other interested parties may contact any of our Company’s directors, the Lead Director, a committee of the Board, the Board’s non-employee directors as a group or the Board generally, by writing to them at Morgan Stanley, Suite D, 1585 Broadway, New York, New York 10036. Shareholder and interested party communications received in this manner will be handled in accordance with the procedures approved by the Company’s independent directors. The Board’s Policy Regarding Communication by Shareholders and Other Interested Parties with the Board of Directors is available at our corporate governance webpage at www.morganstanley.com/about/company/governance/index.html.

Director Independence.    The Board has determined that Messrs. Bostock, Bowles, Davies, Hance, Kidder, Nicolaisen, Noski, Ms. Olayan, Messrs. Phillips and Sexton and Dr. Tyson are independent in accordance with the Director Independence Standards established under our Corporate Governance Policies. To assist the Board with its determination, the standards follow NYSE rules and establish guidelines as to employment and commercial relationships that affect independence and categories of relationships that are not deemed material for purposes of director independence. Eleven (11) of fourteen (14) of our current directors are independent. All members of the Audit Committee, the Compensation, Management Development and Succession Committee and the Nominating and Governance Committee satisfy the standards of independence applicable to members of such committees. All members of the Risk Committee are non-employee directors and a majority of the Risk Committee members satisfy the independence requirements of the Company and the NYSE. In addition, the Board has determined that all members of the Audit Committee, Messrs. Davies, Hance, Nicolaisen, Noski and Sexton, are “audit committee financial experts” within the meaning of current SEC rules.

In making its determination as to the independent directors, the Board reviewed relationships between Morgan Stanley and the directors, including 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 a certain amount of such other entity’s gross revenues in any year (Messrs. Bowles and Davies, Ms. Olayan, Mr. Phillips and Dr. 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 (Mr. Bostock and Ms. Olayan); 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 a certain amount of the organization’s annual charitable receipts in the preceding year (Messrs. Bostock, Bowles, Davies and Kidder, Ms. Olayan, Mr. Phillips and Dr. Tyson); and the 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 (Messrs. Bostock, Hance, Kidder, Noski, Phillips and Sexton and Dr. Tyson).

In determining Mr. Bostock’s independence, the Board also considered the employment of Mr. Bostock’s son-in-law by the Company’s Asset Management segment (see also “Other Matters—Certain Transactions” herein). This year the Board considered, among other things, that Mr. Bostock’s son-in-law has never been a

11

Table of Contents

member of the Company’s senior management and was awarded compensation in line with his position at Morgan Stanley and in comparison with market standards and that Mr. Bostock has no influence over the Asset Management business other than that possessed by any other Morgan Stanley non-employee director. The Board (other than Mr. Bostock) determined consistent with NYSE rules and based upon the facts and circumstances, that the relationship is immaterial to Mr. Bostock’s independence.

In determining Mr. Sexton’s independence, the Board also considered the Company’s provision of medical insurance to Mr. Sexton (for which Mr. Sexton pays the full cost). The Board (other than Mr. Sexton) determined, consistent with NYSE rules and based upon the facts and circumstances, that the relationship is immaterial to Mr. Sexton’s independence.

Board Leadership Structure and Role in Risk Oversight.

Board Leadership Structure.    The Board is responsible for reviewing the Board’s leadership structure. 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, rather than mandating a particular leadership structure. In making this decision, the Board considers, among other things, the composition of the Board, the role of the Company’s Lead Director, the Company’s strong corporate governance practices, the Chief Executive Officer’s working relationship with the Board, and the challenges specific to the Company. Historically, the positions of Chief Executive Officer and Chairman were held by the same individual. As a result of Mr. Mack’s discussion with the Board about stepping down as Chief Executive Officer and as part of its ongoing review of the Board’s leadership structure and succession planning process, the Board in September 2009 determined that the positions of the Chief Executive Officer and Chairman should be held by two separate individuals. The Board elected John J. Mack, the Company’s former Chief Executive Officer, as Chairman of the Board, and James P. Gorman as the Company’s Chief Executive Officer, effective January 1, 2010.

In addition, the Company’s Corporate Governance Policies provide for an independent and active Lead Director with clearly defined leadership authority and responsibilities. Our Lead Director, C. Robert Kidder, was appointed by our other independent directors in 2006 and has responsibilities including: (i) presiding at all meetings of the Board at which the Chairman is not present; (ii) having the authority to call, and lead, sessions composed only of non-management directors or independent directors; (iii) advising the Chairman of the Board’s informational needs; (iv) approving Board meeting agendas and the schedule of Board meetings and requesting, if necessary, the inclusion of additional agenda items; and (v) making himself available, if requested by major shareholders, for consultation and direct communication.

The Company’s Corporate Governance practices and policies ensure substantial independent oversight of management. For instance:

12

Table of Contents

Board Role in Risk Oversight.    The Board has oversight for the Company’s enterprise risk management framework and is responsible for helping to ensure that the Company’s risks are managed in a sound manner. Historically, the Board had authorized the Audit Committee, which is comprised solely of independent directors, to oversee risk management. Effective January 1, 2010, the Board established another standing committee, the Risk Committee, which is comprised solely of non-management directors, to assist the Board in the oversight of (i) the Company’s risk governance structure, (ii) the Company’s risk management and risk assessment guidelines and policies regarding market, credit and liquidity and funding risk, (iii) the Company’s risk tolerance, including risk tolerance levels and capital targets and limits, and (iv) the performance of the Chief Risk Officer. The Audit Committee retains responsibility for oversight of certain aspects of risk management, including review of the major operational, 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 guidelines and policies that govern the process for risk assessment and risk management. The Risk Committee, Audit Committee and Chief Risk Officer report to the entire Board on a regular basis.

As discussed herein under “Consideration of Risk Matters in Determining Compensation,” the Compensation, Management Development and Succession (CMDS) Committee works with the Chief Risk Officer to evaluate whether the Company’s compensation arrangements encourage unnecessary 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.

The Board has also authorized the Firm Risk Committee (FRC), a management committee appointed and chaired by the Chief Executive Officer 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 risk management structure. The FRC’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, 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 I, Item 7A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2009 (2009 Form 10-K).

* * * * *

The Board has determined that its leadership structure is appropriate for the Company. Mr. Mack’s prior role as Chief Executive Officer, his existing relationship with the Board, his understanding of Morgan Stanley’s businesses, and his professional experience and leadership skills uniquely position him to serve as Chairman while the Company’s Lead Director, Mr. Kidder, has proven effective at enhancing the overall independent functioning of the Board. The Board believes that the combination of the Chairman, the Lead Director and the Chairmen of the Audit and Risk Committees provide the appropriate leadership to help ensure effective risk oversight by the Board.

13

Table of Contents

Board Meetings and Committees.    Our Board met 26 times during the December 2008 transition period and 2009. Each director attended at least 75% of the total number of meetings of the Board and committees on which the director served that were held during the December 2008 transition period and 2009 while the director was a member. The Board’s standing committees include the following:

14

Table of Contents

^* In addition to Board and committee meetings, our directors also discharge their duties through, among other things, informal group communications and discussions with the Chairman, CEO, members of senior management and others as appropriate regarding matters of interest.

⁽¹⁾  Mr.  Hance joined the Audit Committee, effective January 1, 2010.

⁽²⁾  Mr.  Bowles was appointed as chair of the CMDS Committee to replace Mr. Kidder, effective January 1, 2010. Mr. Kidder remains on the CMDS Committee.

⁽³⁾  Ms.  Olayan concluded her service on the Nominating and Governance Committee and joined the CMDS Committee, effective January 1, 2010.

⁽⁴⁾  Mr.  Kidder will join the Nominating and Governance Committee to replace Mr. Phillips, effective May 18, 2010.

⁽⁵⁾  The Board established the Risk Committee effective January 1, 2010.

Our Board has adopted a written charter for each of the Audit Committee, CMDS Committee, Nominating and Governance Committee and Risk Committee setting forth the roles and responsibilities of each committee. The Audit Committee has adopted a written charter for its subcommittee, the Internal Audit Subcommittee, which assists the Audit Committee in the oversight of the Company’s internal audit department. The charters are available at our corporate governance website at www.morganstanley.com/about/company/governance/index.html. The reports of the Audit Committee and the CMDS Committee appear herein.

Non-Management Director Meetings.    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. If any non-management directors are not independent, then the independent directors will meet in executive session at least once annually and the Lead Director will preside over these executive sessions.

Director Attendance at Annual Meetings.    The Company’s Corporate Governance Policies state that directors are expected to attend annual meetings of shareholders. All of the current directors who were on the Board of Directors at the time attended the 2009 annual meeting of shareholders other than Mr. Phillips.

Shareholder Nominations for Director Candidates.    The Nominating and Governance Committee will consider director candidates recommended by shareholders and evaluates such candidates in the same manner as other candidates. The procedures to submit recommendations are described in the Policy Regarding Director Candidates Recommended by Shareholders, available at our corporate governance webpage at www.morganstanley.com/about/company/governance/index.html.

Shareholders of record complying with the notice procedures set forth below may make director recommendations for consideration by the Nominating and Governance Committee. Shareholders may make recommendations at any time, but recommendations for consideration as nominees at the annual meeting of shareholders must be received not less than 120 days before the first anniversary of the date that the proxy statement was released to shareholders in connection with the previous year’s annual meeting. Therefore, to submit a candidate for consideration for nomination by the Nominating and Governance Committee at the 2011 annual meeting of shareholders, shareholders must have submitted the recommendation, in writing, by December 14, 2010. The written notice must demonstrate that it is being submitted by a shareholder of record of the Company and include information about each proposed director candidate, including name, age, business address, principal occupation, principal qualifications and other relevant biographical information. In addition, the shareholder must confirm his or her candidate’s consent to serve as a director. Shareholders must send recommendations to the Nominating and Governance Committee, Morgan Stanley, Suite D, 1585 Broadway, New York, New York 10036. See “Director Selection and Nomination Process” above for more information regarding Board membership criteria.

Compensation Governance.    The CMDS Committee currently consists of four directors, including our 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

15

Table of Contents

the Board. As noted in the table above, the CMDS Committee is responsible for reviewing and approving annually all compensation awarded to the Company’s executive officers, including the Chairman of the Board, the CEO and other executive officers named in the “Summary Compensation Table” (named executive officers or NEOs). In addition, the CMDS Committee administers the Company’s equity incentive plans, including reviewing and approving equity grants to executive officers. Information on the CMDS Committee’s processes, procedures and analysis of NEO compensation for 2009 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:

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 compensation consultant. Hay Group has also been retained by the Nominating and 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.

The Company’s Human Resources Department acts as a liaison between the CMDS Committee and Hay Group and also prepares materials for the CMDS Committee’s use in making compensation decisions. Separately, Human Resources may itself engage third-party compensation consultants to assist in the development of compensation data 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 as appropriate, including to executive officers of the Company and members of the Company’s Human

16

Table of Contents

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:

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 CEO, the CMDS Committee considers our CEO’s assessment of each executive officer’s individual performance, as well as the performance of the Company and our CEO’s compensation recommendations for each executive officer, other than himself.

Annual year-end equity awards are typically granted by the CMDS Committee after the end of our fiscal 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 awards are generally approved on a monthly basis; however, they may be granted at any time, as deemed necessary for new hires, promotions, 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.

On September 10, 2009, the Company announced that Mr. Gorman would become Chief Executive Officer effective January 1, 2010 and Mr. Mack would continue to serve as Chairman of the Board. This announcement followed a detailed succession planning process, which occurred during the prior 18 months and was conducted by the CMDS Committee, with oversight by the entire Board. The CMDS Committee, in conjunction with the entire Board, established criteria for the next Chief Executive Officer and retained a consultant to review potential outside candidates and evaluated accomplished internal candidates. The Board oversaw a thorough, deliberate and successful succession process that led to the election of, and seamless transition to, our new CEO, Mr. Gorman, a proven leader with an established record as a strategic thinker backed by strong operating, business development and execution skills who brings an extensive understanding of Morgan Stanley’s businesses and decades of financial services experience.

Consideration of Risk Matters in Determining Compensation.    The CMDS Committee worked with the Company’s Chief Risk Officer and the CMDS Committee’s independent consultant to evaluate whether the Company’s compensation arrangements encourage unnecessary 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.

Prior to meeting with the CMDS Committee, the Chief Risk Officer had a series of interactive and detailed working sessions with representatives from the Firm’s Human Resources and Legal departments to evaluate each

17

Table of Contents

compensation program across each of the Company’s major areas – Institutional Securities, Investment Management, Global Wealth Management and Company/Infrastructure. These working sessions were intended 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- 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.

Following this thorough review, the Chief Risk Officer concluded that Morgan Stanley’s current compensation programs do not incent 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:

The Chief Risk Officer and the Global Head of Human Resources then reviewed these arrangements, along with the analyses and findings of the Chief Risk Officer, with the CMDS Committee and its independent compensation consultant. The Chief Risk Officer again met with the Global Head of Human Resources and the CMDS Committee before compensation decisions for 2009 were approved, to review the final compensation programs pursuant to which 2009 compensation would be paid. It is the intention that, going forward, the Chief Risk Officer will continue to evaluate any new incentive arrangements for the NEOs and material arrangements for other employees and report periodically to the CMDS Committee.

Executive Equity Ownership Commitment.    Executive officers, including the Chairman of the Board, and the other members of senior management who are members of the Company’s Operating Committee are subject to an Equity Ownership Commitment that requires them to retain at least 75% of common stock and equity awards (less allowances for the payment of any option exercise price and taxes) made to them while they are on the Operating Committee (or for the Chairman, while he was on the Operating Committee and while Chairman). 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 have prearranged trading plans under SEC Rule 10b5-1.

18

Table of Contents

Beneficial Ownership of Company Common Stock

Stock Ownership of Directors and Executive Officers.    We encourage our directors, officers and employees to own our common stock; owning our common stock aligns their interests with your interests as shareholders. All executive officers, including the NEOs, are subject to the Equity Ownership Commitment described above. Executive officers also may not engage in hedging strategies or sell short or trade derivatives involving Morgan Stanley securities.

The following table sets forth the beneficial ownership of common stock as of December 31, 2009 by each of our directors and NEOs, and by all our directors and executive officers as of December 31, 2009, as a group. As of December 31, 2009, none of the common stock beneficially owned by our directors and NEOs was pledged.

⁽¹⁾ Each director, NEO and executive officer has sole voting and investment power with respect to his or her shares, except as follows: Mr. Mack’s beneficial ownership includes 536,400 shares held in grantor retained annuity trusts for which his spouse is the sole trustee; Mr. Gorman’s beneficial ownership includes 20,000 shares held in a grantor retained annuity trust for which he and his spouse are co-trustees; Mr. Bostock’s beneficial ownership includes 1,775 shares held by his spouse; and Mr. Bowles’ shares are held in a trust revocable by Mr. Bowles on 30 days notice.

⁽²⁾ Shares of common stock held in the Trust corresponding to stock units. Directors and executive officers may direct the voting of the shares corresponding to their stock units. Voting by executive officers is subject to the provisions of the Trust described in “Voting Information – Submitting Voting Instructions for Shares Held in Your Name.”

19

Table of Contents

⁽³⁾ Excludes stock units granted on January 21, 2010 to the NEOs for services in 2009. The following table lists the number of stock units awarded to each NEO for 2009. These restricted stock unit (RSU) and performance stock unit (PSU) awards are described in greater detail in the CD&A.

⁽⁴⁾ See the “Outstanding Equity Awards at Fiscal Year End Table” for additional information regarding stock options held by the NEOs as of December 31, 2009.

⁽⁵⁾ 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 December 31, 2009 beneficially owned less than 1% of the common stock outstanding.

⁽⁶⁾ Mr. Hirano was 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.

⁽¹⁾ Based on the number of outstanding shares of common stock of the Company as of January 31, 2010 (as reported in the 2009 Form 10-K) and MUFG’s beneficial ownership (as reported in a Schedule 13D Information Statement on October 23, 2008, as amended on October 30, 2008, May 22, 2009, June 11, 2009 and April 1, 2010) of 357,017,088 shares of common stock consisting of (1) 310,464,033 shares of common stock, assuming conversion of 7,839,209 shares of Series B Preferred Stock issued to MUFG on October 13, 2008, based on an initial conversion rate of 39.604 shares of common stock for each share of preferred stock representing an initial conversion rate of $25.25 per share of common stock; (2) 29,375,000 shares of common stock in connection with the Company’s registered public offering announced on May 7, 2009; and (3) 17,178,055 shares of common stock in connection with the Company’s registered public offering announced on June 2, 2009. This information assumes that MUFG has not disposed of any shares of common stock that it purchased in the Company’s registered public offerings during 2009. In addition, this information does not include 16,207,331 shares of common stock held by certain affiliates of MUFG as of March 23, 2010 in a fiduciary capacity as the trustee of trust accounts or as the manager of investment funds, other investment vehicles and managed accounts; MUFG has disclaimed beneficial ownership of such shares.

20

Table of Contents

⁽²⁾ Based on a review of the Schedule 13G Information Statement filed on February 12, 2010 by State Street and its subsidiaries, acting in various fiduciary and other capacities. The Schedule 13G discloses that State Street had shared voting power as to 150,051,005 shares and shared dispositive power as to 150,349,759 shares; that 99,424,373 of the 135,472,888 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 disclaimed beneficial ownership of all shares reported in the Schedule 13G. The Schedule 13G discloses that the percentage of ownership reported therein was based upon the shares of common stock reported as issued and outstanding in our Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009.

⁽³⁾ Based on a review of the Schedule 13G Information Statement filed on February 16, 2010 by FMR LLC, Edward C. Johnson 3d and Fidelity Management & Research Company (Fidelity), a wholly-owned subsidiary of FMR LLC. Certain of the shares listed above are beneficially owned by FMR LLC subsidiaries and related entities. The Schedule 13G discloses that members of the Johnson family may be deemed to form a controlling group with respect to FMR LLC and that FMR LLC, Edward C. Johnson 3d and Fidelity, and their respective affiliates, have had sole voting power as to 12,654,279 shares and sole dispositive power as to 89,568,077 shares.

⁽⁴⁾ Based on a review of the Schedule 13G Information Statement filed on January 29, 2010 by BlackRock. The Schedule 13G discloses that BlackRock completed its acquisition of Barclays Global Investors, NA and certain of its affiliates as of December 1, 2009 and that substantially all of such entities are now included as subsidiaries of BlackRock for purposes of the Schedule 13G. The Schedule 13G discloses that as of December 31, 2009, BlackRock had sole dispositive and sole voting power with respect to all beneficially owned shares reported therein.

Executive Compensation

Compensation Discussion and Analysis.    This Compensation Discussion and Analysis (CD&A) describes the Company’s executive compensation objectives and policies and analyzes the CMDS Committee’s decisions on NEO compensation in 2009. The CD&A is organized into four sections:

The financial services industry and the global economy have experienced an exceptional period of turmoil, shock and change during the recent economic crisis. The adverse market conditions fundamentally reshaped the competitive landscape and led to unprecedented governmental involvement in support of the financial sector, including the Company’s participation in the Troubled Asset Relief Program (TARP), which obligations the Company repaid in mid-2009.

Morgan Stanley understands evolving concerns in the new environment in which it is operating with respect to compensation and has made significant changes, including numerous changes to how it pays – and seeks to retain and motivate – its people. The CMDS Committee evaluated our executive compensation practices considering shareholder input and, in light of recent events, industry best practices, regulatory guidance, the Company’s performance and the wider economic environment, and fundamentally restructured year-end compensation for the Company’s employees. This included reducing the portion of bonuses paid in cash and increasing the portion of compensation that is deferred, creating at-risk performance stock units (PSUs) tied to three-year performance for senior executives and instituting a strengthened “clawback” provision.

Consistent with its pay-for-performance philosophy, the CMDS Committee in 2009 also moved further away from an executive compensation program focused largely on annual incentive awards toward one that is better

21

Table of Contents

balanced between fixed, short-term and long-term compensation. Awards are now more firmly tied to future performance, and risk management is now a more integrated part of compensation determinations. With a significant portion of executives’ incentive compensation paid in equity, executives are subject to market risk and their interests are aligned with shareholders.

In 2009, while Morgan Stanley delivered a strong operating performance across many of its businesses, revenues were significantly reduced by the narrowing of the Company’s credit spreads (a positive trend) and the resulting non-cash negative accounting impact. This had the effect of increasing the compensation-to-revenue ratio for the year to a historically high level, despite the fact that firm-wide per capita compensation was at its lowest level in the past seven years. The Company believes that this ratio was an anomaly in 2009 and does not expect this ratio to be at this level again.

22

Table of Contents

The at-risk PSUs will be tied directly to the Company’s long-term core financial metrics – specifically:

23

Table of Contents

The Comparison Group for this purpose includes: 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. This group represents the primary competitors in the Company’s lines of business, as well as the companies which compete with the Company for talent globally.

Except as described below, the at-risk PSUs will vest and convert following the end of the performance period only to the extent the foregoing performance measures are achieved. To the extent that an NEO voluntarily terminates his employment with the Company prior to January 1, 2013 (the scheduled vesting date), other than due to full career retirement, none of the units will vest and the entire award will be forfeited. If, prior to January 1, 2013, an NEO’s employment is involuntarily terminated (absent a cancellation event) or is terminated due to a disability, a pro rata portion of the at-risk PSUs will vest and convert to shares following the conclusion of the performance period once the CMDS Committee certifies to the performance. Similarly, if an NEO’s employment terminates due to full career retirement (defined in a similar manner as for purposes of the NEO’s 2009 year-end equity awards) during the first half of the performance period and the NEO does not engage in competitive activity (except for Mr. Gorman if he resigns for good reason), a pro rata portion of the at-risk PSUs will vest and convert to shares following the conclusion of the performance period once the CMDS Committee certifies to the performance. If an NEO’s employment terminates due to full career retirement during the second half of the performance period and the NEO does not engage in competitive activity (except in the case of Mr. Gorman if he resigns for good reason), the full award will vest and convert to shares following the conclusion of the performance period once the CMDS Committee certifies to the performance. In the event of a change in control of the Company, performance will be measured through the last day of the Company’s quarter preceding the change in control.

The at-risk PSUs remain subject to cancellation upon certain events until conversion. 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, then such number of shares (or cash equivalent if the shares were transferred) shall be subject to clawback by the Company.

24

Table of Contents

25

Table of Contents

26

Table of Contents

In order to attract and retain the industry’s top talent and build long-term value for shareholders, Morgan Stanley’s executive compensation program is designed to meet four key objectives:

27

Table of Contents

For 2009, the Company’s comparison group for purposes of setting the performance priorities included: Bank of America Corp., Citigroup Inc., Bank of New York Mellon Corp., Goldman Sachs Group Inc., JPMorgan Chase & Co., State Street Corp. and Wells Fargo & Company. At the time the performance priorities were established, the Company was one of the original participants in TARP, along with these seven banks and, therefore, determined to use these banks as its core competitor group for this purpose.

28

Table of Contents

The CMDS Committee evaluated 2009 performance on a year-over-year basis with respect to financial and other factors. For purposes of this evaluation, the CMDS Committee compared 2009 performance to our performance in 2008 on a calendar year basis. The CMDS Committee reviewed financial metrics such as profitability, absolute and relative returns and growth in revenues. Due to significant improvement in the Company’s credit spreads on certain of its long-term debt (debt-related credit spreads), net revenues in 2009 were reduced substantially by the related non-cash negative accounting impact. That contrasts with 2008 when deteriorating spreads resulted in the accounting value of our debt being reduced and our revenues increased. The CMDS Committee considered this impact when reviewing performance for both 2008 and 2009.

The CMDS Committee specifically considered the following factors in determining NEO incentive compensation:

29

Table of Contents

The CMDS Committee considered the financial results, excluding the negative impact of the debt-related credit spreads as appropriate, since the narrowing of such spreads is a positive factor in our business in the long-term as it reflects the market’s increased confidence in the Company. The narrowing of such spreads provides the Company with the ability to access debt markets at improved economic rates.

A detailed analysis of the Company’s financial and operational performance for 2009 is contained in the Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of the 2009 Form 10-K.

30

Table of Contents

31

Table of Contents

The CMDS Committee’s compensation determinations for the NEOs for 2009 were as follows:

32

Table of Contents

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, 2009 filed with the SEC.

Respectfully submitted,

C. Robert Kidder, Chair (through December 31, 2009)

Erskine B. Bowles

Donald T. Nicolaisen

33

Table of Contents

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 2009 Chief Executive Officer, 2009 Chief Financial Officer and the three other most highly compensated executive officers as determined by their total compensation for the year ended December 31, 2009 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 recently amended SEC rules, the following table is required to include for a particular year only those stock awards and option awards granted during the year, rather than awards granted after year-end that were awarded for performance in that year. Our equity awards relating to services in a year are made shortly after year-end. Therefore, compensation in the table includes not only non-equity compensation earned 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 (or during the December 2008 transition period) reported in the table.

2009 Summary Compensation Table

*  On January 1, 2010, Mr. Gorman became President and Chief Executive Officer. At such time, Mr. Mack ceased to be Chief Executive Officer, but continues as Chairman of the Board of the Company. On January 1, 2010, Mr. Kelleher became Co-President of Institutional Securities and Mr. Chammah became Chairman and Chief Executive Officer of Morgan Stanley International.

⁽¹⁾ For Mr. Chammah, compensation is not shown for fiscal 2007 because he was not a named executive officer in fiscal 2007. For Messrs. deRegt and Gorman, compensation is not shown for the December 2008 transition period, fiscal 2008 or fiscal 2007 because they were not named executive officers in such periods.

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

⁽³⁾ Includes elective deferrals to the Company’s employee benefit plans. For 2009, includes 2009 annual cash bonus amounts paid in February 2010 and amounts awarded in January 2010 under MSCIP for performance in 2009:

34

Table of Contents

The 2009 MSCIP awards are scheduled to be distributed according to the following schedule: 50% on February 2, 2012 and 50% on February 2, 2013, and are subject to cancellation and clawback. For further details on MSCIP awards, see the CD&A.

No cash bonuses were awarded with respect to the December 2008 transition period.

⁽⁴⁾ Represents aggregate grant date fair value for awards granted during the applicable period determined in accordance with the applicable accounting guidance for equity-based awards. Therefore, values disclosed for RSUs and stock options in the table include the values for awards granted during the applicable period for the prior year’s service. Also, for this reason, the “Option Awards” column for fiscal 2007 includes values, even though no stock options were awarded to the NEOs for performance during fiscal 2007.

⁽⁵⁾ 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. For further information on the valuation of the Company’s RSUs, see note 2 to the consolidated financial statements included in the 2009 Form 10-K. No RSUs were awarded to the NEOs with respect to the December 2008 transition period.

⁽⁶⁾ No stock options were awarded to the NEOs with respect to 2009, the December 2008 transition period, fiscal 2008 or fiscal 2007. Stock options were awarded in fiscal 2007 for performance in fiscal 2006. The value set forth in the table for Messrs. Mack and Kelleher related to stock options for fiscal 2007 represents:

For further information on the Company’s accounting for stock-based compensation and for the assumptions used to value the Company’s stock options, see notes 2 and 18 to the consolidated financial statements included in the 2009 Form 10-K.

As of December 31, 2009, all outstanding Company stock options held by our NEOs had no intrinsic value because the exercise price of each stock option was greater than $29.60, the closing price of the Company’s common stock on December 31, 2009.

⁽⁷⁾ 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 2009 and, as applicable, the December 2008 transition period. Negative amounts included below are reflected as having zero value in the Summary Compensation Table.

35

Table of Contents

⁽⁸⁾ The “All Other Compensation” column for 2009 and the December 2008 transition period includes, (a) contributions made by the Company under our qualified defined contribution plans with respect to each 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.

36

Table of Contents

Mr. Kelleher is covered by Morgan Stanley’s overseas assignment policy, which is designed to eliminate any financial detriment or gain from the overseas assignment. Mr. Kelleher’s amounts include $2,360,269 in 2009 and $57,542 in the December 2008 transition period 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.

Mr. Chammah is covered by a modified expatriate package with Morgan Stanley regarding his transfer to the UK. Mr. Chammah’s amounts include $684,390 for 2009 (converted from British pounds sterling to U.S. dollars using the 2009 average of daily spot rates of £1 to $1.5664) and $54,930 for December 2008 (converted from British pounds sterling to U.S. dollars using the December 2008 average of daily spot rates of £1 to $1.4865) related to his modified expatriate package. The amounts reported for both periods also include amounts related to personal use of a Company-furnished car. The amount reported for 2009 also includes financial advisory and tax planning services, personal use of Company aircraft and an estimated expatriate equalization payment of $487,000 related to taxes. The estimated expatriate equalization payment is only an estimate based on the most recent information available and the cost to the Company may ultimately differ from the amount disclosed herein.

⁽⁹⁾ Mr. Mack’s employment agreement provides that his annual base salary cannot be less than $775,000, the base salary provided to our CEO who immediately preceded him.

⁽¹⁰⁾ Mr. Mack did not receive any bonus for 2009, fiscal 2008 or fiscal 2007 and Messrs. Chammah and Gorman did not receive any bonus for fiscal 2008. For Mr. Mack, the amounts in the Stock Awards and Option Awards columns for fiscal 2007 relate to equity awards granted with respect to fiscal 2006 performance (and with respect to the Option Awards column, amounts related to an equitable adjustment of outstanding options as described in footnote 6 above).

⁽¹¹⁾ Mr. Kelleher’s base salary was £401,233 for 2009 and £18,685 for the December 2008 transition period and Mr. Chammah’s base salary was £459,247 for 2009 and £27,603 for the December 2008 transition period. The amount of British pounds sterling was converted to U.S. dollars using the 2009 average of daily spot rates of £1 to $1.5664 and December 2008 daily spot rates of £1 to $1.4865, as applicable.

⁽¹²⁾ Mr. Kelleher’s 2009 cash bonus paid in February 2010 was $3,355,746, and was paid in British pounds sterling in the amount of £2,142,382. The amount of U.S. dollars was converted to British pounds sterling using the 2009 average of daily spot rates of $1 to £.6384.

⁽¹³⁾ Mr. Chammah’s 2009 cash bonus paid in February 2010 was $3,834,922, a portion of which was paid in British pounds sterling in the amount of £874,287 and a portion of which was paid in U.S. dollars in the amount of $2,465,471. With respect to the portion paid in British pounds sterling, the amount of U.S. dollars was converted to British pounds sterling using the 2009 average of daily spot rates of $1 to £.6384.

37

Table of Contents

Grants of Plan-Based Awards Table.    The following table sets forth information with respect to the RSUs granted under the Morgan Stanley 2007 Equity Incentive Compensation Plan to the applicable NEOs during the December 2008 transition period for fiscal 2008 performance. No equity awards were granted to our NEOs during 2009. The table does not include equity awards granted to our NEOs in January 2010 for performance in 2009.

2009 Grants of Plan-Based Awards Table⁽¹⁾

⁽¹⁾ The award included in this table was previously disclosed in the table that appears in the CD&A of the 2009 proxy statement and is disclosed in the “Stock Awards” column of the “Summary Compensation Table,” the “Option Exercises and Stock Vested Table,” and the “Nonqualified Deferred Compensation Table” in this proxy statement.

⁽²⁾ The RSUs are scheduled to convert to shares according to the following schedule: 50% in 2011 and 50% in 2012. The NEO is entitled to receive dividend equivalents on the RSUs, which are paid currently and may be paid in cash, shares of our common stock, or a combination thereof, at the Company’s discretion. The NEO may direct the vote of the shares underlying the RSUs. The NEO is retirement-eligible under the award terms and, therefore, the awards are considered vested at grant; however, the RSUs 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.”

⁽³⁾ 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 RSUs is based on $16.8313, the volume-weighted average price of the common stock on the grant date. For further information on the valuation of the Company’s RSUs, see note 2 to the consolidated financial statements included in the 2009 Form 10-K.

38

Table of Contents

Outstanding Equity Awards at Fiscal Year End Table.    The following table discloses the number of shares covered by unexercised stock options and unvested RSUs held by our NEOs on December 31, 2009. Each NEO is retirement-eligible under his RSU award terms and, therefore, all of his outstanding RSU awards are considered vested and, in accordance with SEC rules, are not included in this table. Outstanding RSUs held by the NEOs on December 31, 2009 are disclosed in the “Nonqualified Deferred Compensation Table.” As of December 31, 2009, the stock options held by the NEOs had no intrinsic value because the exercise price of each stock option was greater than $29.60, the closing price of the Company’s common stock on December 31, 2009.

2009 Outstanding Equity Awards at Fiscal Year End Table