Morgan Stanley 2014 Annual Report Download - page 277

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
January 1 of the grant year and ends three years later on December 31. Under the terms of the award, the number
of PSUs that will actually vest and convert to shares will be based on the extent to which the Company achieves
the specified performance goals during the performance period. Performance-based stock unit awards have
vesting, restriction and cancellation provisions that are generally similar to those in restricted stock units.
One-half of the award will be earned based on the Company’s return on average common shareholders’ equity,
excluding the impact of the fluctuation in the Company’s credit spreads and other credit factors for certain of the
Company’s long-term and short-term borrowings, primarily structured notes, that are accounted for at fair value,
certain gains or losses associated with the sale of specified businesses, specified goodwill impairments, certain
gains or losses associated with specified legal settlements related to business activities conducted prior to
January 1, 2011 and specified cumulative catch-up adjustments resulting from changes in an existing, or
application of a new, accounting principle that is not applied on a fully retrospective basis (“MS Average ROE”).
The number of PSUs ultimately earned for this portion of the awards will be determined by applying a multiplier
as follows:
Minimum Maximum
Grant Year MS Average ROE Multiplier MS Average ROE Multiplier
2014 ........................................... Less than 5% 0.0 11.5% or more 1.5
2013 ........................................... Less than 5% 0.0 13% or more 2.0
2012 ........................................... Less than 6% 0.0 12% or more 1.5
On the date of award, the fair value per share of this portion was $32.81, $22.85 and $18.16 for 2014, 2013 and
2012, respectively.
One-half of the award will be earned based on the Company’s total shareholder return (“TSR”), relative to the
S&P Financial Sectors Index. The number of PSUs ultimately earned for this portion of the award will be
determined by applying a multiplier as follows:
Minimum Maximum
Grant Year TSR Multiplier TSR Multiplier
2014 ................................................... Below Down to 0.0 Above Up to 1.5
2013 ................................................... Below Down to 0.0 Above Up to 2.0
2012 ................................................... Below Down to 0.0 Above Up to 1.5
On the date of award, the fair value per share of this portion was $37.72, $34.65 and $20.42 for 2014, 2013 and
2012, respectively, estimated using a Monte Carlo simulation and the following assumptions:
Grant Year
Risk-Free Interest
Rate
Expected Stock
Price Volatility
Expected Dividend
Yield
2014 ............................................. 0.8% 44.2% 0.0%
2013 ............................................. 0.4% 45.4% 0.0%
2012 ............................................. 0.4% 56.0% 1.1%
The risk-free interest rate was determined based on the yields available on U.S. Treasury zero-coupon issues. The
expected stock price volatility was determined using historical volatility. The expected dividend yield was based
on historical dividend payments. A correlation coefficient was developed based on historical price data of the
Company and the S&P Financial Sectors Index.
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