EX-99.2 4 a5105323ex99-2.htm EXHIBIT 99.2
Exhibit 99.2
 
 
 MORGAN STANLEY
Financial Supplement - 1Q 2006
Table of Contents
 
Page #
    
       
 
1
…………….
Quarterly Financial Summary
 
2
…………….
Quarterly Consolidated Income Statement Information
 
3-4
…………….
Quarterly Consolidated Financial Information and Statistical Data
 
5
…………….
Consolidated Investment Assets
 
6
…………….
Quarterly Institutional Securities Income Statement Information
 
7-8
…………….
Quarterly Institutional Securities Financial Information and Statistical Data
 
9
…………….
Quarterly Global Wealth Management Group Income Statement Information
 
10
…………….
Quarterly Global Wealth Management Group Financial Information and Statistical Data
 
11
…………….
Quarterly Asset Management Income Statement Information
 
12
…………….
Quarterly Asset Management Financial Information and Statistical Data
 
13
…………….
Quarterly Consolidated Assets Under Management or Supervision
 
14
…………….
Quarterly Discover Income Statement Information
 
15
…………….
Quarterly Discover Income Statement Information (Managed Loan Basis)
 
16
…………….
Quarterly Discover Financial Information and Statistical Data
 
17
…………….
Quarterly Intersegment Eliminations Income Statement Information
 
18
…………….
Quarterly Inst'l. Securities, Global Wealth Management Group and Asset Mgmt. Combined Income Statement Information
 
19
…………….
Quarterly Discover Financial Information (Managed Loan Basis)
 
20
…………….
Quarterly Discover Reconciliation of General Purpose Credit Card Loan Data (Current Year)
 
21
…………….
Quarterly Discover Reconciliation of General Purpose Credit Card Loan Data (Prior Year)
 
22
…………….
Quarterly Discover Reconciliation of Managed Income Statement Data
 
23
…………….
Quarterly Reconciliation of Adjusted Assets
 
24
…………….
Illustration of Standard Equity Award Amortization
 
25
…………….
Legal Notice
 
 
 
 
MORGAN STANLEY
  
Quarterly Financial Summary
  
(unaudited, dollars in millions)
  
                               
                               
                               
   
Quarter Ended
  
Percentage Change From:
  
   
Feb 28, 2005
  
May 31, 2005
  
Aug 31, 2005
  
Nov 30, 2005
  
Feb 28, 2006
  
1Q06 vs. 1Q05
  
1Q06 vs. 4Q05
  
Net revenues
                              
Institutional Securities
  
$
4,015
  
$
3,340
  
$
4,164
  
$
4,154
  
$
5,474
    
36
%
  
32
%
Global Wealth Management Group
    
1,238
   
1,228
   
1,255
   
1,298
   
1,284
   
4
%
  
(1
%)
Asset Management
    
696
   
642
   
679
   
890
   
695
   
--
   
(22
%)
Discover
    
959
   
888
   
911
   
694
   
1,089
   
14
%
  
57
%
Intersegment Eliminations
    
(70
)
  
(67
)
  
(62
)
  
(74
)
  
(59
)
  
16
%
  
20
%
Consolidated net revenues
  
$
6,838
  
$
6,031
  
$
6,947
  
$
6,962
  
$
8,483
    
24
%
  
22
%
                                             
Income before taxes (1)
                                            
Institutional Securities
  
$
1,077
  
$
813
  
$
1,288
  
$
1,576
  
$
1,754
    
63
%
  
11
%
Global Wealth Management Group
    
353
   
118
   
30
   
84
   
23
   
(93
%)
  
(73
%)
Asset Management
    
287
   
175
   
162
   
383
   
172
   
(40
%)
  
(55
%)
Discover
    
354
   
263
   
239
   
65
   
479
   
35
%
  
*
 
Intersegment Eliminations
    
24
   
25
   
23
   
22
   
19
   
(21
%)
  
(14
%)
Consolidated income before taxes
  
$
2,095
  
$
1,394
  
$
1,742
  
$
2,130
  
$
2,447
    
17
%
  
15
%
                                             
                                             
Earnings per basic share:
                                            
Income from continuing operations
  
$
1.26
  
$
0.88
  
$
1.12
  
$
1.69
  
$
1.56
    
24
%
  
(8
%)
Discontinued operations
  
$
-
  
$
-
  
$
(0.98
)
$
0.70
  
$
0.04
    
*
   
(94
%)
Cumulative effect of accounting change (2)
  
$
0.05
  
$
-
  
$
-
  
$
-
  
$
-
    
*
   
--
 
Earnings per basic share
  
$
1.31
  
$
0.88
  
$
0.14
  
$
2.39
  
$
1.60
    
22
%
  
(33
%)
                                             
Earnings per diluted share:
                                            
Income from continuing operations
  
$
1.24
  
$
0.86
  
$
1.09
  
$
1.64
  
$
1.50
    
21
%
  
(9
%)
Discontinued operations
  
$
-
  
$
-
  
$
(0.96
)
$
0.68
  
$
0.04
    
*
   
(94
%)
Cumulative effect of accounting change (2)
  
$
0.05
  
$
-
  
$
-
  
$
-
  
$
-
    
*
   
--
 
Earnings per diluted share
  
$
1.29
  
$
0.86
  
$
0.13
  
$
2.32
  
$
1.54
    
19
%
  
(34
%)
                                             
Average common shares outstanding
                                            
Basic
    
1,069,097,162
   
1,053,812,487
   
1,045,874,085
   
1,031,343,423
   
1,020,041,181
             
Diluted
    
1,090,166,326
   
1,079,811,172
   
1,072,033,275
   
1,063,147,962
   
1,061,764,798
             
Period end common shares outstanding
    
1,103,263,369
   
1,086,652,691
   
1,082,727,000
   
1,057,677,994
   
1,070,407,513
             
                                             
Return on average common equity
                                            
from continuing operations
    
20.0
%
  
13.8
%
  
17.1
%
  
24.9
%
  
21.5
%
            
Return on average common equity
    
19.7
%
  
13.1
%
  
2.0
%
  
34.6
%
  
22.1
%
            
                                             
 
(1)
Represents consolidated income from continuing operations before losses from unconsolidated investees, taxes,
gain/(loss) from discontinued operations and cumulative effect of accounting change.
(2)
Represents the effects of the adoption of SFAS 123R in the first quarter of fiscal 2005.
Note:
Certain reclassifications have been made to prior period amounts to conform to the current presentation.
 
Refer to Legal Notice page 25.
 
 
1
 
 
MORGAN STANLEY
  
Quarterly Consolidated Income Statement Information
  
(unaudited, dollars in millions)
  
                               
                               
   
Quarter Ended
  
Percentage Change From:
  
   
Feb 28, 2005
  
May 31, 2005
  
Aug 31, 2005
  
Nov 30, 2005
  
Feb 28, 2006
  
1Q06 vs. 1Q05
  
1Q06 vs. 4Q05
  
                               
Investment banking
  
$
821
  
$
814
  
$
992
  
$
1,216
  
$
982
    
20
%
  
(19
%)
Principal transactions:
                                            
Trading
    
1,846
   
1,794
   
2,150
   
1,575
   
3,067
   
66
%
  
95
%
Investments
    
153
   
226
   
103
   
499
   
314
   
105
%
  
(37
%)
Commissions
    
824
   
824
   
804
   
911
   
929
   
13
%
  
2
%
Fees:
                                            
Asset management, distribution and admin.
    
1,204
   
1,246
   
1,249
   
1,259
   
1,279
   
6
%
  
2
%
Merchant, cardmember and other
    
308
   
318
   
357
   
340
   
289
   
(6
%)
  
(15
%)
Servicing and securitization income
    
494
   
423
   
398
   
294
   
596
   
21
%
  
103
%
Interest and dividends
    
5,843
   
6,035
   
6,998
   
9,299
   
10,549
   
81
%
  
13
%
Other
    
105
   
121
   
106
   
132
   
114
   
9
%
  
(14
%)
Total revenues
    
11,598
   
11,801
   
13,157
   
15,525
   
18,119
   
56
%
  
17
%
Interest expense
    
4,625
   
5,561
   
5,986
   
8,253
   
9,481
   
105
%
  
15
%
Provision for consumer loan losses
    
135
   
209
   
224
   
310
   
155
   
15
%
  
(50
%)
Net revenues
    
6,838
   
6,031
   
6,947
   
6,962
   
8,483
   
24
%
  
22
%
                                             
Compensation and benefits
    
2,854
   
2,622
   
3,165
   
2,672
   
4,183
   
47
%
  
57
%
Occupancy and equipment
    
332
   
232
   
239
   
243
   
232
   
(30
%)
  
(5
%)
Brokerage, clearing and exchange fees
    
260
   
276
   
267
   
267
   
292
   
12
%
  
9
%
Information processing and communications
    
342
   
349
   
349
   
365
   
347
   
1
%
  
(5
%)
Marketing and business development
    
257
   
298
   
276
   
331
   
238
   
(7
%)
  
(28
%)
Professional services
    
379
   
438
   
505
   
581
   
434
   
15
%
  
(25
%)
Other
    
570
   
422
   
404
   
373
   
310
   
(46
%)
  
(17
%)
September 11th related insurance recoveries, net
    
(251
)
  
0
   
0
   
0
   
0
   
*
   
--
 
Total non-interest expenses
    
4,743
   
4,637
   
5,205
   
4,832
   
6,036
   
27
%
  
25
%
                                             
Income from continuing operations before losses
                                           
from unconsolidated investees, taxes
                                            
and cumulative effect of accounting change
    
2,095
   
1,394
   
1,742
   
2,130
   
2,447
   
17
%
  
15
%
Losses from unconsolidated investees
    
73
   
67
   
105
   
66
   
69
   
(5
%)
  
5
%
Provision for income taxes
    
673
   
396
   
471
   
318
   
784
   
16
%
  
147
%
Income from continuing operations
   
1,349
   
931
   
1,166
   
1,746
   
1,594
   
18
%
  
(9
%)
Discontinued operations
                                            
Gain/(loss) from discontinued operations
   
7
   
(5
)
  
(1,700
)
  
1,212
   
70
   
*
   
(94
%)
Income tax benefit/(provision)
    
(3
)
  
2
   
678
   
(493
)
  
(28
)
  
*
   
94
%
Gain/(loss) from discontinued operations
    
4
   
(3
)
  
(1,022
)
  
719
   
42
   
*
   
(94
%)
Cumulative effect of accounting change (1)
    
49
   
0
   
0
   
0
   
0
   
*
   
--
 
Net income
  
$
1,402
  
$
928
  
$
144
  
$
2,465
  
$
1,636
    
17
%
  
(34
%)
                                             
Return on average common equity
                                            
from continuing operations
    
20.0
%
  
13.8
%
  
17.1
%
  
24.9
%
  
21.5
%
            
Return on average common equity
    
19.7
%
  
13.1
%
  
2.0
%
  
34.6
%
  
22.1
%
            
Compensation and benefits as a % of net revenues
    
42
%
  
44
%
  
46
%
  
38
%
  
49
%
            
                                             
 
(1)
Represents the effects of the adoption of SFAS 123R in the first quarter of fiscal 2005.
Note:
Certain reclassifications have been made to prior period amounts to conform to the current presentation.
 
Refer to Legal Notice page 25.
 
 
2
 
 
MORGAN STANLEY
  
Quarterly Consolidated Financial Information and Statistical Data
  
(unaudited)
  
                               
                               
   
Quarter Ended
  
Percentage Change From:
  
   
Feb 28, 2005
  
May 31, 2005
  
Aug 31, 2005
  
Nov 30, 2005
  
Feb 28, 2006
  
1Q06 vs. 1Q05
  
1Q06 vs. 4Q05
  
Morgan Stanley
                              
Total assets (millions)
 
$
802,210
  
$
818,711
 
$
837,391
 
$
898,523
 
$
959,688
   
20
%
  
7
%
Adjusted assets (millions) (1)
  
$
447,221
 
$
440,283
 
$
458,190
 
$
481,869
 
$
528,211
   
18
%
  
10
%
Period end common shares outstanding (millions)
    
1,103.3
   
1,086.7
   
1,082.7
   
1,057.7
   
1,070.4
   
(3
%)
  
1
%
Book value per common share
  
$
25.83
  
$
26.07
  
$
26.07
  
$
27.59
  
$
28.21
    
9
%
  
2
%
Shareholders' equity (millions) (2)
  
$
31,328
  
$
31,224
  
$
31,107
  
$
31,946
  
$
33,850
    
8
%
  
6
%
Total capital (millions) (3)
  
$
122,230
  
$
113,324
  
$
118,415
  
$
125,891
  
$
134,330
    
10
%
  
7
%
Worldwide employees
    
53,718
   
54,142
   
53,760
   
53,218
   
53,870
   
--
   
1
%
                                             
Average Daily 99%/One-Day Value-at-Risk ("VaR") (4)
                                            
Primary Market Risk Category ($ millions, pre-tax)
                                            
Interest rate and credit spread
  
$
66
  
$
62
  
$
51
  
$
53
  
$
53
              
Equity price
    
41
   
31
   
33
   
34
   
36
             
Foreign exchange rate
    
12
   
12
   
12
   
12
   
14
             
Commodity price
  
$
34
  
$
35
  
$
38
  
$
46
  
$
49
              
                                             
Trading VaR
  
$
96
  
$
87
  
$
78
  
$
81
  
$
84
              
Non - trading VaR
  
$
28
  
$
21
  
$
24
  
$
29
  
$
33
              
Aggregate trading and non - trading VaR
  
$
105
  
$
99
  
$
87
  
$
92
  
$
94
              
                                             
 
(1)
Adjusted assets exclude certain self-funded assets considered to have minimal market, credit and/or liquidity risk that are generally attributable to matched book and securities lending businesses as measured by aggregate resale agreements and securities borrowed less non-derivative short positions. See page 23 for further information.
(2)
Includes common equity and junior subordinated debt issued to capital trusts.
(3)
Includes common equity, junior subordinated debt issued to capital trusts, capital units and the non-current portion of long-term debt.
(4)
99%/One-Day VaR represents the loss amount that one would not expect to exceed, on average, more than one time every one hundred trading days in the Company's trading positions if the portfolio were held constant for a one day period. The Company's VaR incorporates substantially all financial instruments generating market risk that are managed by the Company's trading businesses. For a further discussion of the calculation of VaR and the limitations of the Company's VaR methodology, see Part II, Item 7A "Quantitative and Qualitative Disclosures about Market Risk" in the Company's Form 10-K for fiscal 2005.
Note:
Certain reclassifications have been made to prior period amounts to conform to the current presentation.
 
Refer to Legal Notice page 25.
 
 
3
 
 
MORGAN STANLEY
  
Quarterly Consolidated Financial Information and Statistical Data
  
(unaudited)
  
                                           
 
 
Quarter Ended
  
   
Feb 28, 2005
  
May 31, 2005
  
Aug 31, 2005
  
Nov 30, 2005
  
Feb 28, 2006
  
   
Average
 common equity (billions) (1)
 
Return on
average common equity
 
Average
common equity (billions) (1)
 
Return on
average common equity
 
Average
 common equity (billions) (1)
 
Return on
average common equity
 
Average
common equity (billions) (1)
 
Return on
average common equity
 
Average
 common equity (billions) (1)
 
Return on
average common equity
 
Institutional Securities
  
$
13.8
    
21
%
$
14.3
    
16
%
$
14.6
    
24
%
$
15.6
    
35
%
$
16.2
    
29
%
Global Wealth Management Group
    
3.8
   
23
%
  
3.6
   
8
%
  
3.5
   
2
%
  
3.7
   
9
%
  
3.5
   
2
%
Asset Management
    
1.8
   
41
%
  
1.7
   
25
%
  
1.7
   
24
%
  
1.7
   
55
%
  
2.0
   
21
%
Securities Business
    
19.4
   
23
%
  
19.6
   
16
%
  
19.8
   
21
%
  
21.0
   
32
%
  
21.7
   
24
%
Discover
    
4.3
   
20
%
  
4.2
   
16
%
  
4.6
   
13
%
  
4.6
   
4
%
  
4.6
   
26
%
Capital surplus (unallocated)
    
3.2
         
3.1
         
3.0
         
2.5
         
3.3
       
Total - continuing operations
    
26.9
   
20
%
  
26.9
   
14
%
  
27.4
   
17
%
  
28.1
   
25
%
  
29.6
   
22
%
Discontinued operations
    
1.5
         
1.5
         
1.2
         
0.4
         
0.0
       
Firm
  
$
28.4
    
20
%
$
28.4
    
13
%
$
28.6
    
2
%
$
28.5
    
35
%
$
29.6
    
22
%
                                                               
 
(1)
The Company uses an economic capital model to determine the amount of equity capital needed to support the risk of its business activities and to ensure that the Company remains adequately capitalized. Economic capital is defined as the amount of capital needed to run the business through the business cycle and satisfy the requirements of regulators, rating agencies and the market. The Company's methodology is based on a going concern approach that assigns economic capital to each segment based on regulatory capital usage plus additional capital for stress losses, goodwill and principal investment risk. The economic capital model and allocation methodology may be enhanced over time in response to changes in the business and regulatory environment.
Note:
Certain reclassifications have been made to prior period amounts to conform to the current presentation.
 
Refer to Legal Notice page 25.
 
 
4
 
MORGAN STANLEY
  
Quarterly Financial Information  
  
Consolidated Investment Assets  
  
(unaudited, dollars in millions)  
  
                        
                        
   
 Feb 28, 2006
  
        
Global Wealth
              
   
 Institutional Securities
  
Management Group
  
Asset Management
  
Discover
  
Total
  
                        
Business facilitation:
                       
Private equity funds
  
$
4
  
$
-
  
$
156
  
$
-
  
$
160
  
Real estate funds
    
366
   
-
   
-
   
-
   
366
 
Asset management seed capital
    
-
   
-
   
353
   
-
   
353
 
Industry utilities (1)
    
587
   
-
   
-
   
-
   
587
 
Other
    
227
   
35
   
-
   
8
   
270
 
Total business facilitation
    
1,184
   
35
   
509
   
8
   
1,736
 
Principal investments
    
1,337
   
-
   
-
   
-
   
1,337
 
Total investments
  
$
2,521
  
$
35
  
$
509
  
$
8
  
$
3,073
  
                                 
                                 
                                 
 
    
Nov 30, 2005 
  
 
          
Global Wealth 
                    
 
    
Institutional Securities 
    
Management Group
    
Asset Management
    
Discover
    
Total
  
                                 
Business facilitation:
                                
Private equity funds
  
$
3
  
$
-
  
$
185
  
$
-
  
$
188
  
Real estate funds
    
359
   
-
   
-
   
-
   
359
 
Asset management seed capital
    
-
   
-
   
248
   
-
   
248
 
Industry utilities (1)
    
371
   
-
   
-
   
-
   
371
 
Other
    
149
   
37
   
-
   
9
   
195
 
Total business facilitation
    
882
   
37
   
433
   
9
   
1,361
 
Principal investments
    
1,190
   
-
   
-
   
-
   
1,190
 
Total investments
  
$
2,072
  
$
37
  
$
433
  
$
9
  
$
2,551
  
                                 
 
Note:
The above tables include investments made by the Company that represent business facilitation or principal investing activities.  Business facilitation investments are strategic investments undertaken by the Company to facilitate core business activities.  Principal investing activities are capital commitments provided to private companies, generally, for proprietary purposes to maximize total returns to the Company. 
(1)
Any investment made to participate in an industry consortium or an industry service with the intention to support core business activities and advance business growth.
Note:
Certain reclassifications have been made to prior period amounts to conform to the current presentation.
 
Refer to Legal Notice page 25.
 
 
5
 
MORGAN STANLEY
  
Quarterly Institutional Securities Income Statement Information
  
(unaudited, dollars in millions)
  
                               
                               
   
Quarter Ended
  
Percentage Change From:
  
   
Feb 28, 2005
  
May 31, 2005
  
Aug 31, 2005
  
Nov 30, 2005
  
Feb 28, 2006
  
1Q06 vs. 1Q05
  
1Q06 vs. 4Q05
  
                               
Investment banking
  
$
742
  
$
735
  
$
898
  
$
1,102
  
$
903
    
22
%
  
(18
%)
Principal transactions:
                                            
Trading
    
1,727
   
1,684
   
2,035
   
1,460
   
2,945
   
71
%
  
102
%
Investments
    
91
   
226
   
69
   
270
   
284
   
*
   
5
%
Commissions
    
503
   
538
   
501
   
618
   
610
   
21
%
  
(1
%)
Asset management, distribution and admin. fees
    
34
   
39
   
46
   
33
   
44
   
29
%
  
33
%
Interest and dividends
    
5,275
   
5,379
   
6,263
   
8,538
   
9,791
   
86
%
  
15
%
Other
    
66
   
78
   
69
   
88
   
78
   
18
%
  
(11
%)
Total revenues
    
8,438
   
8,679
   
9,881
   
12,109
   
14,655
   
74
%
  
21
%
Interest expense
    
4,423
   
5,339
   
5,717
   
7,955
   
9,181
   
108
%
  
15
%
Net revenues
    
4,015
   
3,340
   
4,164
   
4,154
   
5,474
   
36
%
  
32
%
                                             
Total non-interest expenses
    
2,938
   
2,527
   
2,876
   
2,578
   
3,720
   
27
%
  
44
%
                                             
Income from continuing operations before losses
                                           
from unconsolidated investees, taxes,
                                           
and cumulative effect of accounting change
    
1,077
   
813
   
1,288
   
1,576
   
1,754
   
63
%
  
11
%
Losses from unconsolidated investees
    
73
   
67
   
105
   
66
   
68
   
(7
%)
  
3
%
Income before taxes
    
1,004
   
746
   
1,183
   
1,510
   
1,686
   
68
%
  
12
%
Provision for income taxes
    
284
   
172
   
305
   
148
   
523
   
84
%
  
*
 
Income from continuing operations (1)
  
$
720
  
$
574
  
$
878
  
$
1,362
  
$
1,163
    
62
%
  
(15
%)
                                             
Return on average common equity (2)
    
21
%
  
16
%
  
24
%
  
35
%
  
29
%
            
Pre-tax profit margin (3)
    
27
%
  
24
%
  
31
%
  
38
%
  
32
%
            
                                             
                                             
                                             
(1)
Excludes gain/(loss) from discontinued operations and cumulative effect of accounting change.
(2)
Refer to page 4 for the allocation of average common equity.
(3)
Income before taxes, excluding losses from unconsolidated investees, as a % of net revenues.
Note:
Certain reclassifications have been made to prior period amounts to conform to the current presentation.
 
Refer to Legal Notice page 25.
 
 
6
 
 MORGAN STANLEY
  
Quarterly Financial Information and Statistical Data
  
Institutional Securities
  
(unaudited, dollars in millions) 
  
                                       
                                       
                                       
   
Quarter Ended
  
Percentage Change From:
          
   
Feb 28, 2005
  
May 31, 2005
  
Aug 31, 2005
  
Nov 30, 2005
  
Feb 28, 2006
  
1Q06 vs. 1Q05
  
1Q06 vs. 4Q05
          
                                       
Investment Banking
                                      
Advisory revenue
  
$
254
  
$
357
  
$
388
  
$
479
  
$
355
    
40
%
  
(26
%)
            
Underwriting revenue
                                                        
Equity 
    
202
   
145
   
200
   
358
   
197
   
(2
%)
  
(45
%)
            
Fixed income
    
286
   
233
   
310
   
265
   
351
   
23
%
  
32
%
            
Total underwriting revenue
  
$
488
  
$
378
  
$
510
  
$
623
  
$
548
    
12
%
  
(12
%)
            
                                                         
Sales and Trading
                                                       
Sales and trading net revenue (1)
                                                        
Equity
    
1,214
   
1,119
   
1,280
   
1,191
   
1,654
   
36
%
  
39
%
            
Fixed income
    
1,998
   
1,211
   
1,964
   
1,609
   
2,724
   
36
%
  
69
%
            
Total sales and trading net revenue
  
$
3,212
  
$
2,330
  
$
3,244
  
$
2,800
  
$
4,378
    
36
%
  
56
%
            
                                                         
                                                         
 
  
Fiscal View  
                
Calendar View
 
 
  
Quarter Ended (2) 
                
Two Months Ended (2)
  
 
 Feb 28, 2005 
  
 May 31, 2005
  
 Aug 31, 2005
  
 Nov 30, 2005
  
 Feb 28, 2006
              
 Feb 28, 2005
  
 Feb 28, 2006
  
                                                         
Mergers and acquisitions announced transactions
                                                        
Morgan Stanley global market volume (billions)
  
$
169.4
  
$
208.9
  
$
104.4
  
$
133.3
  
$
279.3
              
$
117.7
  
$
115.0
  
Market share
    
25.5
%
  
34.8
%
  
20.6
%
  
19.6
%
  
34.8
%
              
30.6
%
  
23.7
%
Rank
    
3
   
1
   
3
   
6
   
4
               
3
   
9
 
                                                         
Mergers and acquisitions completed transactions
                                                        
Morgan Stanley global market volume (billions)
  
$
43.0
  
$
95.5
  
$
154.8
  
$
178.1
  
$
146.3
              
$
30.2
  
$
92.6
  
Market share
    
12.3
%
  
25.6
%
  
23.4
%
  
30.6
%
  
26.9
%
              
13.2
%
  
27.2
%
Rank
    
7
   
2
   
5
   
2
   
3
               
7
   
3
 
                                                         
Global equity and related issues
                                                        
Morgan Stanley global market volume (billions)
  
$
13.8
  
$
5.7
  
$
9.0
  
$
15.5
  
$
10.8
              
$
8.9
  
$
4.8
  
Market share
    
11.2
%
  
6.3
%
  
6.2
%
  
10.2
%
  
7.7
%
              
12.5
%
  
6.2
%
Rank
    
2
   
6
   
5
   
1
   
4
               
2
   
5
 
                                                         
Global IPO's
                                                       
Morgan Stanley global market volume (billions)
  
$
2.7
  
$
2.1
  
$
3.2
  
$
5.4
  
$
2.7
              
$
2.0
  
$
1.4
  
MarketShare 
    
8.6
%
  
8.6
%
  
6.6
%
  
9.9
%
  
6.7
%
              
11.0
%
  
6.3
%
Rank 
    
4
   
2
   
4
   
2
   
5
               
1
   
4
 
                                                         
Global debt
                                                        
Morgan Stanley global market volume (billions)
  
$
81.6
  
$
82.7
  
$
90.8
  
$
80.7
  
$
93.6
              
$
68.8
  
$
73.8
  
MarketShare 
    
6.0
%
  
5.7
%
  
6.1
%
  
5.1
%
  
6.2
%
              
6.6
%
  
7.2
%
Rank
    
4
   
5
   
5
   
7
   
4
               
3
   
2
 
                                                         
 
(1)
Includes principal transactions trading, commissions and net interest revenue.
(2)
Source: Thomson Financial, data as of March 8, 2006.
Note:
Certain reclassifications have been made to prior period amounts to conform to the current presentation.
 
Refer to Legal Notice page 25.
 
 
7
 
MORGAN STANLEY 
  
Quarterly Financial Information and Statistical Data 
  
Institutional Securities
  
(unaudited, dollars in billions)
  
                               
   
Quarter Ended
  
Percentage Change From:
  
   
Feb 28, 2005
  
May 31, 2005
  
Aug 31, 2005
  
Nov 30, 2005
  
Feb 28, 2006
  
1Q06 vs. 1Q05
  
1Q06 vs. 4Q05
  
                               
                               
Loans
                              
Investment grade
  
$
1.5
  
$
1.8
  
$
3.0
  
$
5.0
  
$
5.6
    
*
   
12
%
Non-investment grade
    
1.0
   
1.9
   
2.8
   
2.3
   
2.9
   
*
   
26
%
Total loans 
  
$
2.5
  
$
3.7
  
$
5.8
  
$
7.3
  
$
8.5
    
*
   
16
%
                                             
Commitments
                                            
Investment grade
  
$
18.7
  
$
21.1
  
$
27.6
  
$
23.9
  
$
29.2
    
56
%
  
22
%
Non-investment grade
    
2.0
   
5.6
   
3.0
   
13.1
   
5.3
   
*
   
(60
%)
Total commitments 
  
$
20.7
  
$
26.7
  
$
30.6
  
$
37.0
  
$
34.5
    
67
%
  
(7
%)
                                             
Loans plus commitments
                                            
Investment grade
  
$
20.2
  
$
22.9
  
$
30.6
  
$
28.9
  
$
34.8
    
72
%
  
20
%
Non-investment grade
  
$
3.0
  
$
7.5
  
$
5.8
  
$
15.4
  
$
8.2
    
*
   
(47
%)
% investment grade 
    
87
%
  
75
%
  
84
%
  
65
%
  
81
%
            
% non-investment grade
    
13
%
  
25
%
  
16
%
  
35
%
  
19
%
            
                                             
Total loans and commitments
  
$
23.2
  
$
30.4
  
$
36.4
  
$
44.3
  
$
43.0
    
85
%
  
(3
%)
Hedges (1)
  
$
13.1
  
$
14.3
  
$
16.1
  
$
17.8
  
$
17.7
    
35
%
  
(1
%)
Total loans and commitments net of hedges
  
$
10.1
  
$
16.1
  
$
20.3
  
$
26.5
  
$
25.3
    
*
   
(5
%)
                                             
 
(1)
Includes both internal and external hedges utilized by the lending business.
Note:
Certain reclassifications have been made to prior period amounts to conform to the current presentation.
 
Refer to Legal Notice page 25.
 
 
8
 
MORGAN STANLEY
  
Quarterly Global Wealth Management Group Income Statement Information
  
(unaudited, dollars in millions)
  
                               
                               
   
Quarter Ended
  
Percentage Change From:
  
   
Feb 28, 2005
  
May 31, 2005
  
Aug 31, 2005
  
Nov 30, 2005
  
Feb 28, 2006
  
1Q06 vs. 1Q05
  
1Q06 vs. 4Q05
  
Investment banking
  
$
71
  
$
68
  
$
81
  
$
100
  
$
67
    
(6
%)
  
(33
%)
Principal transactions:
                                            
Trading
    
120
   
111
   
116
   
117
   
124
   
3
%
  
6
%
Investments
    
(2
)
  
(2
)
  
1
   
2
   
0
   
*
   
*
 
Commissions
    
329
   
295
   
306
   
298
   
319
   
(3
%)
  
7
%
Asset management, distribution and admin fees
    
607
   
632
   
629
   
649
   
649
   
7
%
  
--
 
Interest and dividends
    
135
   
149
   
174
   
204
   
206
   
53
%
  
1
%
Other
    
38
   
45
   
38
   
46
   
36
   
(5
%)
  
(22
%)
Total revenues
    
1,298
   
1,298
   
1,345
   
1,416
   
1,401
   
8
%
  
(1
%)
Interest expense
    
60
   
70
   
90
   
118
   
117
   
95
%
  
(1
%)
Net revenues
    
1,238
   
1,228
   
1,255
   
1,298
   
1,284
   
4
%
  
(1
%)
Total non-interest expenses
    
885
   
1,110
   
1,225
   
1,214
   
1,261
   
42
%
  
4
%
Income before taxes
    
353
   
118
   
30
   
84
   
23
   
(93
%)
  
(73
%)
Provision for income taxes
    
139
   
48
   
11
   
(1
)
  
9
   
(94
%)
  
*
 
Income from continuing operations (1)
  
$
214
  
$
70
  
$
19
  
$
85
  
$
14
    
(93
%)
  
(84
%)
                                             
Return on average common equity (2)
    
23
%
  
8
%
  
2
%
  
9
%
  
2
%
            
Pre-tax profit margin (3)
    
29
%
  
10
%
  
2
%
  
7
%
  
2
%
            
                                             
 
(1)
Excludes cumulative effect of accounting change.
(2)
Refer to page 4 for the allocation of average common equity.
(3)
Income before taxes as a % of net revenues.
Note:
Certain reclassifications have been made to prior period amounts to conform to the current presentation.
 
Refer to Legal Notice page 25.
 
 
9
 
MORGAN STANLEY
  
Quarterly Financial Information and Statistical Data 
  
Global Wealth Management Group 
  
(unaudited) 
  
                               
                               
                               
   
Quarter Ended
  
Percentage Change From:
  
   
Feb 28, 2005
  
May 31, 2005
  
Aug 31, 2005
  
Nov 30, 2005
  
Feb 28, 2006
  
1Q06 vs. 1Q05
  
1Q06 vs. 4Q05
  
                               
                               
Global representatives
    
10,471
   
10,438
   
9,311
   
9,526
   
9,000
   
(14
%)
  
(6
%)
                                             
Annualized revenue per global
                                            
representative (thousands) (1)
  
$
462
  
$
470
  
$
508
  
$
551
  
$
554
    
20
%
  
1
%
                                             
Retail brokerage assets by client segment (billions)
                                            
$10m or more
    
117
   
117
   
120
   
124
   
129
   
10
%
  
4
%
$1m - $10m
    
196
   
196
   
201
   
204
   
208
   
6
%
  
2
%
$100k - $1m
    
186
   
184
   
182
   
174
   
174
   
(6
%)
  
--
 
< $100k
    
37
   
35
   
33
   
31
   
31
   
(16
%)
  
--
 
Total U.S. retail brokerage assets
    
536
   
532
   
536
   
533
   
542
   
1
%
  
2
%
International
    
55
   
54
   
55
   
56
   
63
   
15
%
  
13
%
Corporate / other
    
27
   
27
   
28
   
28
   
28
   
4
%
  
--
 
Total client assets (billions)
  
$
618
  
$
613
  
$
619
  
$
617
  
$
633
    
2
%
  
3
%
                                             
Fee-based client account assets (billions) (2)
 
$
166
  
$
165
  
$
170
  
$
173
  
$
182
    
10
%
  
5
%
Fee-based assets as a % of client assets
    
27
%
  
27
%
  
27
%
  
28
%
  
29
%
            
                                             
Bank deposit program (millions)
  
$
496
  
$
446
  
$
449
  
$
1,689
  
$
7,319
    
*
   
*
 
                                             
Client assets per global
                                           
representative (millions) (3)
  
$
59
  
$
59
  
$
66
  
$
65
  
$
70
    
19
%
  
8
%
                                             
Domestic retail net new assets (billions) (4)
  
$
3.7
  
$
3.8
  
$
(2.1
)
$
(8.1
)
$
-
    
*
   
*
 
                                             
Domestic retail locations
    
524
   
526
   
517
   
485
   
484
   
(8
%)
  
--
 
                                             
                                             
 
(1)
Annualized revenue divided by average global representative headcount.
(2)
Represents the amount of assets in client accounts where the basis of payment for services is a fee calculated on those assets.
(3)
Total client assets divided by period end global representative headcount.
(4)
Represents net new assets in the U.S. broad-based branch system.
Note:
Certain reclassifications have been made to prior period amounts to conform to the current presentation.
 
Refer to Legal Notice page 25.
 
 
10
 
MORGAN STANLEY
  
Quarterly Asset Management Income Statement Information
  
(unaudited, dollars in millions)
  
                               
                               
   
Quarter Ended
  
Percentage Change From:
  
   
Feb 28, 2005
  
May 31, 2005
  
Aug 31, 2005
  
Nov 30, 2005
  
Feb 28, 2006
  
1Q06 vs. 1Q05
  
1Q06 vs. 4Q05
  
Investment banking
  
$
11
  
$
11
  
$
13
  
$
15
  
$
12
    
9
%
  
(20
%)
Principal transactions:
                                            
Investments
    
64
   
2
   
33
   
227
   
30
   
(53
%)
  
(87
%)
Commissions
    
7
   
7
   
9
   
6
   
7
   
--
   
17
%
Asset management, distribution and admin fees
    
605
   
615
   
612
   
628
   
639
   
6
%
  
2
%
Interest and dividends
    
3
   
3
   
4
   
13
   
5
   
67
%
  
(62
%)
Other
    
8
   
6
   
11
   
5
   
6
   
(25
%)
  
20
%
Total revenues
    
698
   
644
   
682
   
894
   
699
   
--
   
(22
%)
Interest expense
    
2
   
2
   
3
   
4
   
4
   
100
%
  
--
 
Net revenues
    
696
   
642
   
679
   
890
   
695
   
--
   
(22
%)
                                             
Total non-interest expenses
    
409
   
467
   
517
   
507
   
523
   
28
%
  
3
%
Income before taxes
    
287
   
175
   
162
   
383
   
172
   
(40
%)
  
(55
%)
Provision for income taxes
    
107
   
68
   
57
   
146
   
67
   
(37
%)
  
(54
%)
Income from continuing operations (1)
  
$
180
  
$
107
  
$
105
  
$
237
  
$
105
    
(42
%)
  
(56
%)
                                             
Return on average common equity (2)
    
41
%
  
25
%
  
24
%
  
55
%
  
21
%
            
Pre-tax profit margin (3)
    
41
%
  
27
%
  
24
%
  
43
%
  
25
%
            
                                             
 
(1)
Excludes cumulative effect of accounting change.
(2)
Refer to page 4 for the allocation of average common equity.
(3)
Income before taxes as a % of net revenues.
Note:
Certain reclassifications have been made to prior period amounts to conform to the current presentation.
 
Refer to Legal Notice page 25.
 
 
11
 
 MORGAN STANLEY
  
 Quarterly Financial Information and Statistical Data
  
 Asset Management
  
 (unaudited, dollars in billions)
  
           
           
   
Quarter Ended 
  
Percentage Change From: 
  
 
 
Feb 28, 2005 
 
May 31, 2005 
 
Aug 31, 2005 
 
Nov 30, 2005 
 
Feb 28, 2006 
 
1Q06 vs. 1Q05 
 
1Q06 vs. 4Q05 
 
Assets under management or supervision
 
                            
Net flows
                              
Retail
  
$
(0.7
)
$
(0.9
)
$
(1.0
)
$
(2.5
)
$
(3.1
)
  
*
   
(24
%)
Institutional
    
(7.3
)
  
(3.0
)
  
(1.4
)
  
2.3
   
(2.1
)
  
71
%
  
*
 
Net flows excluding money markets
    
(8.0
)
  
(3.9
)
  
(2.4
)
  
(0.2
)
  
(5.2
)
  
35
%
  
*
 
Money markets
    
0.9
   
(3.2
)
  
2.2
   
(3.9
)
  
(1.7
)
  
*
   
56
%
                                             
Assets under management or supervision by distribution channel
                                            
Retail
  
$
201
  
$
199
  
$
201
  
$
199
  
$
195
    
(3
%)
  
(2
%)
Institutional
    
226
   
217
   
227
   
232
   
247
   
9
%
  
7
%
Total assets under management or supervision
  
$
427
  
$
416
  
$
428
  
$
431
  
$
442
    
4
%
  
3
%
                                             
Assets under management or supervision by asset class
                                            
Equity
  
$
207
  
$
205
  
$
212
  
$
218
  
$
230
    
11
%
  
6
%
Fixed income
    
97
   
92
   
92
   
91
   
90
   
(7
%)
  
(1
%)
Money market
    
83
   
80
   
83
   
79
   
78
   
(6
%)
  
(1
%)
Alternatives
    
19
   
18
   
18
   
19
   
18
   
(5
%)
  
(5
%)
Real estate
    
10 
    
10
   
11
   
12
   
14
   
40
%
  
17
%
Total assets under management
    
416
   
405
   
416
   
419
   
430
   
3
%
  
3
%
Unit investment trust
    
11
   
11
   
12
   
12
   
12
   
9
%
  
-
 
Total assets under management or supervision
  
$
427
  
$
416
  
$
428
  
$
431
  
$
442
    
4
%
  
3
%
                                             
                                             
 
Note:
Certain reclassifications have been made to prior period amounts to conform to the current presentation.
 
Refer to Legal Notice page 25.
 
 
12
 
 

   
 MORGAN STANLEY
  
 Quarterly Financial Information and Statistical Data
  
 Consolidated Assets Under Management or Supervision
  
 (unaudited, dollars in billions)
  
           
           
   
Quarter Ended 
  
Percentage Change From: 
  
   
Feb 28, 2005 
  
May 31, 2005 
  
Aug 31, 2005 
  
Nov 30, 2005 
  
Feb 28, 2006 
  
1Q06 vs. 1Q05 
  
1Q06 vs. 4Q05 
  
Consolidated assets under management or supervision by distribution channel
                                     
Retail
  
$
321
  
$
319
  
$
327
  
$
331
  
$
337
    
5
%
  
2
%
Institutional
    
255
   
246
   
260
   
268
   
285
   
12
%
  
6
%
Total assets under management or supervision (1)
  
$
576
  
$
565
  
$
587
  
$
599
  
$
622
    
8
%
  
4
%
                                             
Consolidated assets under management or supervision by asset class
                                            
Equity
  
$
267
  
$
265
  
$
276
  
$
285
  
$
301
    
13
%
  
6
%
Fixed income
    
111
   
106
   
107
   
108
   
108
   
(3
%)
  
–
  
Money market
    
87
    
84
   
87
   
83
   
83
   
(5
%)
  
–
  
Alternatives
    
19
   
18
   
18
   
19
   
18
   
(5
%)
  
(5
%)
Real estate
    
32
   
33
   
38
   
41
   
45
   
41
%
  
10
%
Total assets under management
    
516
   
506
   
526
   
536
   
555
   
8
%
  
4
%
Unit investment trust
    
11
   
11
   
12
   
12
   
12
   
9
%
  
–
 
Other (2)
    
49
   
48
   
49
   
51
   
55
   
12
%
  
8
%
Total assets under management or supervision (1)
  
$
576
  
$
565
  
$
587
  
$
599
  
$
622
    
8
%
  
4
%
                                             
                                             
 
(1)
 Revenues and expenses associated with customer assets of $149 billion, $127 billion and $139 billion as of Feb 28, 2006, Feb 28, 2005 and Nov 30, 2005, respectively, are included in the Company's Global Wealth Management Group segment, and $31 billion, $22 billion and $29 billion as of Feb 28, 2006, Feb 28, 2005 and Nov 30, 2005, respectively, are included in the Company's Institutional Securities segment.
(2)
 Includes assets under management or supervision associated with the Global Wealth Management Group.
Note:
 Certain reclassifications have been made to prior period amounts to conform to the current presentation.
 
 Refer to Legal Notice page 25.
 
 
13


Quarterly Discover Income Statement Information
(unaudited, dollars in millions)
 
   
 Quarter Ended 
  
 Percentage Change From: 
  
   
 Feb 28, 2005 
  
 May 31, 2005 
  
 Aug 31, 2005 
  
 Nov 30, 2005 
  
 Feb 28, 2006 
  
 1Q06 vs. 1Q05 
  
 1Q06 vs. 4Q05 
  
Merchant, cardmember and other fees
  
$
308
  
$
318
  
$
357
  
$
340
  
$
289
    
(6
%)
  
(15
%)
Servicing and securitization income
    
494
   
423
   
398
   
294
   
596
   
21
%
  
103
%
Other
    
2
   
2
   
(1
)
  
2
   
4
   
100
%
  
100
%
Total non-interest revenues
    
804
   
743
   
754
   
636
   
889
   
11
%
  
40
%
                                             
Interest revenue
    
458
   
536
   
593
   
587
   
586
   
28
%
  
–
  
Interest expense
    
168
   
182
   
212
   
219
   
231
   
38
%
  
5
%
Net interest income
    
290
   
354
   
381
   
368
   
355
   
22
%
  
(4
%)
                                             
Provision for consumer loan losses
    
135
   
209
   
224
   
310
   
155
   
15
%
  
(50
%)
Net credit income
    
155
   
145
   
157
   
58
   
200
   
29
%
  
*
 
Net revenues
    
959
   
888
   
911
   
694
   
1,089
   
14
%
  
57
%
                                             
Total non-interest expenses
    
605
   
625
   
672
   
629
   
610
   
1
%
  
(3
%)
                                             
Income before losses from unconsolidated
                                            
investees and taxes
    
354
   
263
   
239
   
65
   
479
   
35
%
  
*
 
Losses from unconsolidated investees
    
0
   
0
   
0
   
0
   
1
   
*
   
*
 
Income before taxes
    
354
   
263
   
239
   
65
   
478
   
35
%
  
*
 
Provision for income taxes
    
134
   
99
   
89
   
18
   
178
   
33
%
  
*
 
Income from continuing operations (1)
  
$
220
  
$
164
  
$
150
  
$
47
  
$
300
    
36
%
  
*
 
                                             
Return on average common equity (2)
    
20
%
  
16
%
  
13
%
  
4
%
  
26
%
            
Pre-tax profit margin (3)
    
37
%
  
30
%
  
26
%
  
9
%
  
44
%
            
                                             
 
(1)
Excludes cumulative effect of accounting change.
(2)
Refer to page 4 for the allocation of average common equity.
(3)
Income before taxes as a % of net revenues.
Note:
Certain reclassifications have been made to prior period amounts to conform to the current presentation.
 
Refer to Legal Notice page 25.
 
 
14
 

MORGAN STANLEY
Quarterly Discover Income Statement Information
(Managed loan basis)
(unaudited, dollars in millions)
 
 
   
 Quarter Ended
  
 Percentage Change From:
  
   
 Feb 28, 2005
  
 May 31, 2005 
  
 Aug 31, 2005 
  
 Nov 30, 2005 
  
 Feb 28, 2006 
  
 1Q06 vs. 1Q05 
  
 1Q06 vs. 4Q05 
  
Merchant, cardmember and other fees
  
$
481
  
$
484
  
$
532
  
$
520
  
$
519
    
8
%
  
–
  
Servicing and securitization income
    
0
   
0
   
0
   
0
   
0
   
–
    
– 
  
Other
    
34
   
(14
)
  
(19
)
  
(74
)
  
143
   
*
   
*
 
Total non-interest revenues
    
515
   
470
   
513
   
446
   
662
   
29
%
  
48
%
                                             
Interest revenue
    
1,383
   
1,426
   
1,463
   
1,432
   
1,475
   
7
%
  
3
%
Interest expense
    
401
   
433
   
475
   
497
   
541
   
35
%
  
9
%
Net interest income
    
982
   
993
   
988
   
935
   
934
   
(5
%)
  
–
  
                                             
Provision for consumer loan losses
    
538
   
575
   
590
   
687
   
507
   
(6
%)
  
(26
%)
Net credit income
    
444
   
418
   
398
   
248
   
427
   
(4
%)
  
72
%
Net revenues
    
959
   
888
   
911
   
694
   
1,089
   
14
%
  
57
%
                                             
Total non-interest expenses
    
605
   
625
   
672
   
629
   
610
   
1
%
  
(3
%)
                                             
Income before losses from unconsolidated
                                            
investees and taxes
    
354
   
263
   
239
   
65
   
479
   
35
%
  
*
 
Losses from unconsolidated investees
    
0
   
0
   
0
   
0
   
1
   
*
   
*
 
Income before taxes
    
354
   
263
   
239
   
65
   
478
   
35
%
  
*
 
Provision for income taxes
    
134
   
99
   
89
   
18
   
178
   
33
%
  
*
 
Income from continuing operations (1)
  
$
220
  
$
164
  
$
150
  
$
47
  
$
300
    
36
%
  
*
 
                                             
Return on average common equity (2)
    
20
%
  
16
%
  
13
%
  
4
%
  
26
%
            
Pre-tax profit margin (3)
    
37
%
  
30
%
  
26
%
  
9
%
  
44
%
            
                                             
 
(1)
Excludes cumulative effect of accounting change.
(2)
Refer to page 4 for the allocation of average common equity.
(3)
Income before taxes as a % of net revenues.
Note:
Certain reclassifications have been made to prior period amounts to conform to the current presentation.
 
Refer to Legal Notice page 25.
 
 
15
 

MORGAN STANLEY
Quarterly Financial Information and Statistical Data
Discover
(unaudited, dollars in millions)
  
   
Quarter Ended 
  
Percentage Change From: 
  
   
Feb 28, 2005 
  
May 31, 2005 
  
Aug 31, 2005 
  
Nov 30, 2005
  
Feb 28, 2006
  
1Q06 vs. 1Q05 
  
1Q06 vs. 4Q05 
  
Total owned credit card loans
                              
Period end
  
$
18,908
  
$
19,385
  
$
20,570
  
$
22,496
  
$
19,924
    
5
%
  
(11
%)
Average
  
$
19,210
  
$
18,753
  
$
19,835
  
$
21,934
  
$
21,976
    
14
%
  
–
  
                                             
Total managed credit card loans (1)(2)
                                            
Period end
  
$
47,770
  
$
46,845
  
$
47,105
  
$
46,936
  
$
47,825
    
–
    
2
%
Average
  
$
48,930
  
$
47,146
  
$
46,769
  
$
46,502
  
$
47,575
    
(3
%)
  
2
%
Interest yield
    
11.23
%
  
11.69
%
  
12.04
%
  
11.94
%
  
12.13
%
  
90 bp
   
19 bp
 
Interest spread
    
7.79
%
  
7.96
%
  
7.95
%
  
7.55
%
  
7.44
%
  
(35 bp
)
  
(11 bp
)
Transaction volume (billions)
  
$
25.9
  
$
25.4
  
$
26.7
  
$
26.1
  
$
26.8
    
3
%
  
3
%
Net Sales
    
20.8
   
21.1
   
22.4
   
21.6
   
22.5
   
8
%
  
4
%
Other transaction volume
    
5.1
   
4.3
   
4.3
   
4.5
   
4.3
   
(16
%)
  
(4
%)
Accounts (millions)
    
45.9
   
45.9
   
45.6
   
45.5
   
46.1
   
–
    
1
%
Active accounts (millions)
    
19.5
   
19.3
   
19.2
   
19.2
   
19.6
   
1
%
  
2
%
Average receivables per avg. active account (actual $)
  
$
2,476
  
$
2,426
  
$
2,429
  
$
2,420
  
$
2,457
    
(1
%)
  
2
%
Trans volume per avg. active account (actual $)
  
$
1,311
  
$
1,306
  
$
1,387
  
$
1,360
  
$
1,385
    
6
%
  
2
%
Net gain on securitization
  
$
32
  
$
(16
)
$
(18
)
$
(76
)
$
139
    
*
   
*
 
Return on managed receivables (3)
    
1.82
%
  
1.38
%
  
1.28
%
  
0.40
%
  
2.56
%
  
74 bp
   
216 bp
 
Credit quality
                                            
Net charge-off rate
    
5.11
%
  
4.94
%
  
5.12
%
  
5.76
%
  
5.06
%
  
(5 bp
)
  
(70 bp
)
Delinquency rate (over 30 days)
    
4.24
%
  
3.90
%
  
3.91
%
  
3.98
%
  
3.45
%
  
(79 bp
)
  
(53 bp
)
Delinquency rate (over 90 days)
    
2.05
%
  
1.83
%
  
1.80
%
  
1.75
%
  
1.61
%
  
(44 bp
)
  
(14 bp
)
Allowance for loan losses at period end
  
$
840
  
$
828
  
$
817
  
$
829
  
$
777
    
(8
%)
  
(6
%)
                                             
International managed credit card loans (2)
                                            
Period end
  
$
2,648
  
$
2,479
  
$
2,684
  
$
2,675
  
$
4,183
    
58
%
  
56
%
Average
  
$
2,606
  
$
2,578
  
$
2,523
  
$
2,667
  
$
2,911
    
12
%
  
9
%
Accounts (millions)
    
1.4
   
1.4
   
1.5
   
1.5
   
2.6
   
86
%
  
73
%
                                             
Payment services (millions of transactions)
                                            
Discover network transaction volume
    
314
   
315
   
338
   
334
   
339
   
8
%
  
1
%
PULSE network transaction volume (4)
    
216
   
457
   
466
   
417
   
425
   
97
%
  
2
%
Total network transaction volume
    
530
   
772
   
804
   
751
   
764
   
44
%
  
2
%
                                             
                                             
 
(1)
Includes domestic and international credit card businesses.
(2)
Includes owned and securitized credit card loans.
(3)
Annualized net income divided by average managed receivables.
(4)
Reflects volume subsequent to date of acquisition.
Note:
Certain reclassifications have been made to prior period amounts to conform to the current presentation.
 
Refer to Legal Notice page 25.
 
 
16


MORGAN STANLEY
Quarterly Intersegment Eliminations Income Statement Information
(unaudited, dollars in millions)
 
   
 Quarter Ended
  
 Percentage Change  From:
  
   
 Feb 28, 2005
 
 May 31, 2005
 
 Aug 31, 2005
 
 Nov 30, 2005
 
 Feb 28, 2006
 
 1Q06 vs. 1Q05
 
 1Q06 vs. 4Q05
  
Investment banking
  
$
(3
)
$
0
  
$
0
  
$
(1
)
$
0
    
*
   
*
 
Principal transactions:
                                            
Trading
    
(1
)
  
(1
)
  
(1
)
  
(2
)
  
(2
)
  
(100
%)
  
–
  
Investments
    
0
   
0
   
0
   
0
   
0
   
–
    
–
  
Commissions
    
(15
)
  
(16
)
  
(12
)
  
(11
)
  
(7
)
  
53
%
  
36
%
Asset management, distribution and admin. fees
    
(42
)
  
(40
)
  
(38
)
  
(51
)
  
(53
)
  
(26
%)
  
(4
%)
Interest and dividends
    
(28
)
  
(32
)
  
(36
)
  
(43
)
  
(39
)
  
(39
%)
  
9
%
Other
    
(9
)
  
(10
)
  
(11
)
  
(9
)
  
(10
)
  
(11
%)
  
(11
%)
Total revenues
    
(98
)
  
(99
)
  
(98
)
  
(117
)
  
(111
)
  
(13
%)
  
5
%
Interest expense
    
(28
)
  
(32
)
  
(36
)
  
(43
)
  
(52
)
  
(86
%)
  
(21
%)
Net revenues
    
(70
)
  
(67
)
  
(62
)
  
(74
)
  
(59
)
  
16
%
  
20
%
                                             
Total non-interest expenses
    
(94
)
  
(92
)
  
(85
)
  
(96
)
  
(78
)
  
17
%
  
19
%
                                             
Income before taxes
    
24
   
25
   
23
   
22
   
19
   
(21
%)
  
(14
%)
Provision for income taxes
    
9
   
10
   
8
   
7
   
7
   
(22
%)
  
–
  
Income from continuing operations (1)
  
$
15
  
$
15
  
$
15
  
$
15
  
$
12
    
(20
%)
  
(20
%)
                                             
                                             
                                             
 
(1)
Excludes cumulative effect of accounting change.
Note:
Certain reclassifications have been made to prior period amounts to conform to the current presentation.
 
Refer to Legal Notice page 25.
 
 
17
 
 
 
 MORGAN STANLEY
 
 
 
 
 
The following (page 18) presents more detailed financial information regarding the results of operations for the combined
Institutional Securities, Global Wealth Management Group and Asset Management businesses. Morgan Stanley believes that a
combined presentation is informative due to certain synergies among these businesses, as well as to facilitate comparisons of
the Company’s results with those of other companies in the financial services industry that have securities and asset
management businesses. Morgan Stanley also provides this type of presentation for its Discover business (page 19)
in order to provide helpful comparison to other credit card issuers.
 
 
 
 
 
 MORGAN STANLEY
  
 Quarterly Institutional Securities, Global Wealth Management Group and Asset Management (1)
  
 Combined Income Statement Information
  
 (unaudited, dollars in millions)
  
                               
                               
   
Quarter Ended
  
Percentage Change From:
  
   
Feb 28, 2005
  
May 31, 2005
  
Aug 31, 2005
  
Nov 30, 2005
  
Feb 28, 2006
  
1Q06 vs. 1Q05
  
1Q06 vs. 4Q05
  
                               
Investment banking
  
$
824
  
$
814
  
$
992
  
$
1,216
  
$
982
    
19
%
  
(19
%)
Principal transactions:
                                            
Trading
    
1,847
   
1,795
   
2,151
   
1,577
   
3,069
   
66
%
  
95
%
Investments
    
153
   
226
   
103
   
499
   
314
   
105
%
  
(37
%)
Commissions
    
824
   
824
   
804
   
911
   
929
   
13
%
  
2
%
Asset management, distribution and administration fees
    
1,204
   
1,246
   
1,249
   
1,259
   
1,279
   
6
%
  
2
%
Interest and dividends
    
5,405
   
5,521
   
6,429
   
8,738
   
9,991
   
85
%
  
14
%
Other
    
103
   
119
   
107
   
130
   
110
   
7
%
  
(16
%)
Total  revenues
    
10,360
   
10,545
   
11,835
   
14,330
   
16,674
   
61
%
  
16
%
Interest expense
    
4,477
   
5,401
   
5,798
   
8,060
   
9,278
   
107
%
  
15
%
Net  revenues
    
5,883
   
5,144
   
6,037
   
6,270
   
7,396
   
26
%
  
18
%
                                             
Compensation and benefits
    
2,639
   
2,413
   
2,923
   
2,473
   
3,939
   
49
%
  
59
%
Occupancy and equipment
    
308
   
209
   
217
   
220
   
209
   
(32
%)
  
(5
%)
Brokerage, clearing and exchange fees
    
260
   
276
   
267
   
267
   
292
   
12
%
  
9
%
Information processing and communications
    
260
   
265
   
263
   
269
   
259
   
- 
    
(4
%)
Marketing and business development
    
112
   
143
   
143
   
177
   
119
   
6
%
  
(33
%)
Professional services
    
315
   
365
   
425
   
507
   
370
   
17
%
  
(27
%)
Other
    
499
   
342
   
296
   
292
   
240
   
(52
%)
  
(18
%)
September 11th related insurance recoveries, net
    
(251
)
  
0
   
0
   
0
   
0
   
*
   
-
 
Total  non-interest expenses
    
4,142
   
4,013
   
4,534
   
4,205
   
5,428
   
31
%
  
29
%
                                             
Income from continuing operations before losses
                                            
from unconsolidated investees, taxes
                                            
and cumulative effect of accounting change
    
1,741
   
1,131
   
1,503
   
2,065
   
1,968
   
13
%
  
(5
%)
Losses from unconsolidated investees
    
73
   
67
   
105
   
66
   
68
   
(7
%)
  
3
%
Income before taxes
    
1,668
   
1,064
   
1,398
   
1,999
   
1,900
   
14
%
  
(5
%)
Provision for income taxes
    
539
   
298
   
381
   
300
   
606
   
12
%
  
102
%
Income from continuing operations (2)
  
$
1,129
  
$
766
  
$
1,017
  
$
1,699
  
$
1,294
    
15
%
  
(24
%)
                                             
Return on average common equity (3)
    
23
%
  
16
%
  
21
%
  
32
%
  
24
%
            
Compensation and benefits as a % of net revenues
    
45
%
  
47
%
  
48
%
  
39
%
  
53
%
            
Non-compensation expenses as a % of net revenues
    
26
%
  
31
%
  
27
%
  
28
%
  
20
%
            
                                             
Pre-tax profit margin (4)
    
30
%
  
22
%
  
25
%
  
33
%
  
27
%
            
                                             
                                             
Number of employees (5)
    
39,641
   
40,267
   
40,226
   
39,723
   
40,188
   
1
%
  
1
%
                                             
                                             
 
(1) 
Includes the elimination of intersegment activity between Institutional Securities, Global Wealth Management Group and Asset Management.
(2) 
Excludes gain/(loss) from discontinued operations and cumulative effect of accounting change.
(3) 
Refer to page 4 for the allocation of average common equity.
(4) 
Income before taxes, excluding losses from unconsolidated investees, as a % of net revenues.
(5) 
Includes Institutional Securities, Global Wealth Management Group, Asset Management and Infrastructure / Company areas.
Note:
Certain reclassifications have been made to prior period amounts to conform to the current presentation.
 
Refer to Legal Notice page 25.
 
 
 
18
 
 MORGAN STANLEY
 Quarterly Discover Income Statement Information
 (Managed loan basis)
 (unaudited, dollars in millions)
                               
   
Quarter Ended
  
Percentage Change From:
  
   
Feb 28, 2005
  
May 31, 2005
  
Aug 31, 2005
  
Nov 30, 2005
  
Feb 28, 2006
  
1Q06 vs. 1Q05
  
1Q06 vs. 4Q05
  
                               
Merchant, cardmember and other fees
  
$
481
  
$
484
  
$
532
  
$
520
  
$
519
    
8
%
  
-
 
Servicing and securitization income
    
0
   
0
   
0
   
0
   
0
   
-
    
-
 
Other
    
34
   
(14
)
  
(19
)
  
(74
)
  
143
   
*
   
*
 
Total non-interest revenues
    
515
   
470
   
513
   
446
   
662
   
29
%
  
48
%
                                             
Interest revenue
    
1,383
   
1,426
   
1,463
   
1,432
   
1,475
   
7
%
  
3
%
Interest expense
    
401
   
433
   
475
   
497
   
541
   
35
%
  
9
%
Net interest income
    
982
   
993
   
988
   
935
   
934
   
(5
%)
  
-
  
                                             
Provision for consumer loan losses
    
538
   
575
   
590
   
687
   
507
   
(6
%)
  
(26
%)
Net credit income
    
444
   
418
   
398
   
248
   
427
   
(4
%)
  
72
%
Net revenues
    
959
   
888
   
911
   
694
   
1,089
   
14
%
  
57
%
           
                               
Compensation and benefits
    
215
   
209
   
242
   
199
   
244
   
13
%
  
23
%
Occupancy and equipment
    
24
   
23
   
22
   
23
   
23
   
(4
%)
  
-
 
Information processing and communications
    
83
   
85
   
87
   
98
   
90
   
8
%
  
(8
%)
Marketing and business development
    
145
   
155
   
133
   
154
   
119
   
(18
%)
  
(23
%)
Professional services
    
67
   
73
   
80
   
74
   
64
   
(4
%)
  
(14
%)
Other
    
71
   
80
   
108
   
81
   
70
   
(1
%)
  
(14
%)
Total non-interest expenses
    
605
   
625
   
672
   
629
   
610
   
1
%
  
(3
%)
                                   
       
Income before losses from unconsolidated
                                            
investees and taxes
    
354
   
263
   
239
   
65
   
479
   
35
%
  
*
 
Losses from unconsolidated investees
    
0
   
0
   
0
   
0
   
1
   
*
   
*
 
Income before taxes
    
354
   
263
   
239
   
65
   
478
   
35
%
  
*
 
Provision for income taxes
    
134
   
99
   
89
   
18
   
178
   
33
%
  
*
 
Income from continuing operations (1)
  
$
220
  
$
164
  
$
150
  
$
47
  
$
300
    
36
%
  
*
 
                                             
Return on average common equity (2)
    
20
%
  
16
%
  
13
%
  
4
%
  
26
%
            
Compensation and benefits as a % of net revenues
    
22
%
  
24
%
  
27
%
  
29
%
  
22
%
            
Non-compensation expenses as a % of net revenues
    
41
%
  
47
%
  
47
%
  
62
%
  
34
%
            
Pre-tax profit margin (3)
    
37
%
  
30
%
  
26
%
  
9
%
  
44
%
            
                                             
Number of employees
    
14,077
   
13,875
   
13,534
   
13,495
   
13,683
   
(3
%)
  
1
%
                                             
                                             
 
(1) 
Excludes cumulative effect of accounting change.
(2)
Refer to page 4 for the allocation of average common equity.
(3) 
Income before taxes as a % of net revenues.
Note:
Certain reclassifications have been made to prior period amounts to conform to the current presentation.
 
Refer to Legal Notice page 25. 
 
19
 
MORGAN STANLEY
 
 
 
 

The following (pages 20 - 22) present a reconciliation for certain information disclosed on pages 14, 15, 16 and 19.
 
The data is presented on both a "managed" loan basis and as reported under generally accepted accounting principles ("owned" loan basis).
Managed loan data assume that the Company's securitized loan receivables have not been sold and presents the results of securitized loan
receivables in the same manner as the Company's owned loans. The Company operates its Discover business and analyzes its financial
performance on a managed basis. Accordingly, underwriting and servicing standards are comparable for both owned and securitized loans.
The Company believes that managed loan information is useful to investors because it provides information regarding the quality of loan
origination and credit performance of the entire managed portfolio and allows investors to understand the related credit risks inherent in owned
loans and retained interests in securitizations. In addition, investors often request information on a managed basis, which provides a more
meaningful comparison to industry competitors.
 
 
 
 
 

MORGAN STANLEY
  
Quarterly Discover Reconciliation of General Purpose Credit Card Loan Data (1)
  
(unaudited, dollars in millions)
  
                                           
                                           
 
  
 Quarter Ended Feb 28, 2006
  
                           
Delinquency Rate
  
General Purpose Credit Card Loans:
  
 Period End
  
 Average
  
 Return on
Receivables
  
 Interest Yield
  
 Interest Spread
  
 Net
Charge-offs
  
 30 Days
  
 90 Days
  
Owned
  
$
19,924
  
$
21,976
    
5.54
%
  
9.87
%
  
5.41
%
  
4.54
%
  
2.97
%
  
1.36
%
Securitized
    
27,901
   
25,599
   
4.75
%
  
14.08
%
  
9.20
%
  
5.51
%
  
3.79
%
  
1.79
%
Managed
  
$
47,825
  
$
47,575
    
2.56
%
  
12.13
%
  
7.44
%
  
5.06
%
  
3.45
%
  
1.61
%
                                                   
                                                   
                                                   
 
(1)
The table provides a reconciliation of certain managed and owned basis statistical data (period-end and average loan balances, return on receivables, interest yield, interest spread, net charge-off rates, and 30-and 90-day delinquency rates) for the periods indicated.    
Note:
Certain reclassifications have been made to prior period amounts to conform to the current presentation. 
 
Refer to Legal Notice page 25.
 
20
 

MORGAN STANLEY
  
Quarterly Discover Reconciliation of General Purpose Credit Card Loan Data (1)
  
(unaudited, dollars in millions)
  
                                    
                                    
   
 Quarter Ended Nov 30, 2005
  
                            
Delinquency Rate
  
General Purpose Credit Card Loans:
  
 Period End
  
Average
  
Return on
Receivables
  
Interest Yield
  
Interest Spread
  
Net
Charge-offs
  
30 Days
  
90 Days
  
Owned
  
$
22,496
  
$
21,934
    
0.86
%
  
9.89
%
  
5.53
%
  
5.35
%
  
3.69
%
  
1.62
%
Securitized
    
24,440
   
24,568
   
0.77
%
  
13.77
%
  
9.36
%
  
6.13
%
  
4.24
%
  
1.87
%
Managed
  
$
46,936
  
$
46,502
    
0.40
%
  
11.94
%
  
7.55
%
  
5.76
%
  
3.98
%
  
1.75
%
                                                   
 
  
Quarter Ended Aug 31, 2005
 
                                      
Delinquency Rate
General Purpose Credit Card Loans:
    
Period End
    
Average
    
Return on Receivables
    
Interest Yield
    
Interest Spread
    
Net
Charge-offs
    
30 Days
  
 
90 Days
  
Owned
  
$
20,570
  
$
19,835
    
3.01
%
  
10.96
%
  
6.63
%
  
4.69
%
  
3.62
%
  
1.67
%
Securitized
    
26,535
   
26,934
   
2.21
%
  
12.83
%
  
8.93
%
  
5.43
%
  
4.13
%
  
1.90
%
Managed
  
$
47,105
  
$
46,769
    
1.28
%
  
12.04
%
  
7.95
%
  
5.12
%
  
3.91
%
  
1.80
%
                                                   
 
  
Quarter Ended May 31, 2005
 
                                      
Delinquency Rate
General Purpose Credit Card Loans:
    
Period End
    
Average
    
Return on Receivables
    
Interest Yield
    
Interest Spread
    
Net
Charge-offs
    
30 Days
    
90 Days
  
Owned
  
$
19,385
  
$
18,753
    
3.48
%
  
10.56
%
  
6.47
%
  
4.62
%
  
3.48
%
  
1.64
%
Securitized
    
27,460
   
28,393
   
2.30
%
  
12.43
%
  
8.92
%
  
5.15
%
  
4.19
%
  
1.97
%
Managed
  
$
46,845
  
$
47,146
    
1.38
%
  
11.69
%
  
7.96
%
  
4.94
%
  
3.90
%
  
1.83
%
                                                   
 
  
Quarter Ended Feb 28, 2005
 
                                      
Delinquency Rate
General Purpose Credit Card Loans:
    
Period End
    
Average
    
Return on Receivables
    
Interest Yield
    
Interest Spread
    
Net
Charge-offs
    
30 Days
    
90 Days
  
Owned
  
$
18,908
  
$
19,210
    
4.64
%
  
9.07
%
  
5.15
%
  
4.62
%
  
3.75
%
  
1.81
%
Securitized
    
28,862
   
29,720
   
3.00
%
  
12.63
%
  
9.47
%
  
5.43
%
  
4.55
%
  
2.20
%
Managed
  
$
47,770
  
$
48,930
    
1.82
%
  
11.23
%
  
7.79
%
  
5.11
%
  
4.24
%
  
2.05
%
                                                   
                                                   
                                                   
                                                   
(1)            The tables provide a reconciliation of certain managed and owned basis statistical data (period-end and average loan balances, return on receivables, interest yield, interest spread, net charge-off rates, and 30- and 90-day delinquency rates) for the
  
        periods indicated. 
Notes:    Certain reclassifications have been made to prior period amounts to conform to the current presentation.
                  Refer to Legal Notice page 25.
 
21
 

MORGAN STANLEY
Quarterly Discover Reconciliation of Managed Income Statement Data (1)
(unaudited, dollars in millions)
                       
                       
   
Quarter Ended
  
   
Feb 28, 2005
  
May 31, 2005
  
Aug 31, 2005
  
Nov 30, 2005
  
Feb 28, 2006
  
                       
Merchant, cardmember and other fees:
                      
Owned
  
$
308
  
$
318
  
$
357
  
$
340
  
$
289
  
Securitization adjustment
    
173
   
166
   
175
   
180
   
230
 
Managed
  
$
481
  
$
484
  
$
532
  
$
520
  
$
519
  
                                 
Servicing and securitizations income:
                                
Owned
  
$
494
  
$
423
  
$
398
  
$
294
  
$
596
  
Securitization adjustment
    
(494
)
  
(423
)
  
(398
)
  
(294
)
  
(596
)
Managed
  
$
-
  
$
-
  
$
-
  
$
-
  
$
-
  
                                 
Other:
                                
Owned
  
$
2
  
$
2
  
$
(1
)
$
2
  
$
4
  
Securitization adjustment
    
32
   
(16
)
  
(18
)
  
(76
)
  
139
 
Managed
  
$
34
  
$
(14
)
$
(19
)
$
(74
)
$
143
  
                                 
Interest revenue:
                                
Owned
  
$
458
  
$
536
  
$
593
  
$
587
  
$
586
  
Securitization adjustment
    
925
   
890
   
870
   
845
   
889
 
Managed
  
$
1,383
  
$
1,426
  
$
1,463
  
$
1,432
  
$
1,475
  
                                 
Interest expense:
                                
Owned
  
$
168
  
$
182
  
$
212
  
$
219
  
$
231
  
Securitization adjustment
    
233
   
251
   
263
   
278
   
310
 
Managed
  
$
401
  
$
433
  
$
475
  
$
497
  
$
541
  
                                 
Provision for consumer loan losses:
                                
Owned
  
$
135
  
$
209
  
$
224
  
$
310
  
$
155
  
Securitization adjustment
    
403
   
366
   
366
   
377
   
352
 
Managed
  
$
538
  
$
575
  
$
590
  
$
687
  
$
507
  
                                 
                                 
 
(1)
 The tables provide a reconciliation of certain managed and owned basis income statement data (merchant, cardmember and other fees, servicing fees, other revenue, interest revenue, interest expense and provision for consumer loan losses) for the periods indicated.
Note:
 Certain reclassifications have been made to prior period amounts to conform to the current presentation.
 
Refer to Legal Notice page 25.
 
 
22
 
MORGAN STANLEY
 
 
 
 

The following (page 23) presents a reconciliation for adjusted assets.
 
Balance sheet leverage ratios are one indicator of capital adequacy when viewed in the context of a company's
overall liquidity and capital policies. The Company views the adjusted leverage ratio as a more relevant measure of
financial risk when comparing financial services firms and evaluating leverage trends. Adjusted assets exclude
certain self-funded assets considered to have minimal market, credit and/or liquidity risk that are generally
attributable to matched book and securities lending businesses as measured by aggregate resale agreements
and securities borrowed less non-derivative short positions. In addition, the adjusted leverage ratio reflects
the deduction from shareholders' equity of the amount of equity used to support goodwill and intangible assets,
as the Company does not view this amount of equity as available to support its risk capital needs.
 
 
 
 
 

MORGAN STANLEY
  
Quarterly Reconciliation of Adjusted Assets
  
(unaudited, dollars in millions, except ratios)
  
                            
                            
 
  
 Quarter Ended
  
   
Feb 28, 2005
  
May 31, 2005
  
Aug 31, 2005
  
Nov 30, 2005
  
Feb 28, 2006
  
                            
Total assets
 
$
802,210
  
$
818,711
  
$
837,391
  
$
898,523
  
$
959,688
  
                                 
Less:       Securities purchased under agreements to resell
    
(143,462
)
  
(145,579
)
  
(143,642
)
  
(174,330
)
  
(176,260
)
Securities borrowed
    
(207,985
)
  
(228,454
)
  
(227,098
)
  
(244,241
)
  
(252,896
)
Add:        Financial instruments sold, not yet purchased
   
119,913
   
131,901
   
137,443
   
147,000
   
149,561
 
Less:       Derivative contracts sold, not yet purchased
   
(37,389
)
  
(39,835
)
  
(48,395
)
  
(44,952
)
  
(42,928
)
Subtotal
    
533,287
   
536,744
   
555,699
   
582,000
   
637,165
 
Less:        Segregated customer cash and securities balances
    
(26,461
)
  
(36,539
)
  
(30,912
)
  
(30,540
)
  
(27,156
)
Assets recorded under certain provisions of SFAS No.140 and FIN 46
    
(57,042
)
  
(57,394
)
  
(64,066
)
  
(67,091
)
  
(78,925
)
Goodwill and intangible assets
    
(2,563
)
  
(2,528
)
  
(2,531
)
  
(2,500
)
  
(2,873
)
                                 
Adjusted assets
  
$
447,221
  
$
440,283
  
$
458,190
  
$
481,869
  
$
528,211
  
                                 
Shareholders' equity
  
$
28,495
  
$
28,330
  
$
28,226
  
$
29,182
  
$
30,198
  
Junior subordinated debt issued to capital trusts (1)
    
2,833
   
2,894
   
2,881
   
2,764
   
3,652
 
Subtotal
    
31,328
   
31,224
   
31,107
   
31,946
   
33,850
 
Less: Goodwill and intangible assets
    
(2,563
)
  
(2,528
)
  
(2,531
)
  
(2,500
)
  
(2,873
)
Tangible shareholders' equity
  
$
28,765
  
$
28,696
  
$
28,576
  
$
29,446
  
$
30,977
  
                                 
Leverage ratio (2)
    
27.9x
    
28.5x
    
29.3x
    
30.5x
    
31.0x
  
                                 
Adjusted leverage ratio (3)
    
15.5x
    
15.3x
    
16.0x
    
16.4x
    
17.1x
  
                                 
                                 
 
(1)
 The Company views the junior subordinated debt issued to capital trusts as a component of its equity capital base given the inherent characteristics of the securities. These characteristics include the long dated nature (final maturity at issuance of
  thirty years extendable at the Company's option by a further nineteen years), the Company's ability to defer coupon interest for up to 20 consecutive quarters, and the subordinated nature of the obligations in the capital structure. The
  Company also receives rating agency equity credit for these securities.
(2)
 Leverage ratio equals total assets divided by tangible shareholders' equity.
(3)
 Adjusted leverage ratio equals adjusted total assets divided by tangible shareholders' equity.
Note:
 Certain reclassifications have been made to prior period amounts to conform to the current presentation.
 
Refer to Legal Notice page 25.
 
23
 
MORGAN STANLEY
 
 
 
 
 
 
This page represents an addendum to the 1Q 2006 Financial Supplement.
 
In accordance with SFAS 123R, fiscal 2005 compensation expense included the amortization of fiscal 2003 and fiscal 2004 awards but did not include any amortization for fiscal 2005 year-end awards. Compensation expense for fiscal 2006 will include the full cost of equity awards granted to retirement-eligible employees during fiscal 2006, which includes the fiscal 2005 year-end awards granted in December 2005. Additionally, in fiscal 2006 the firm will expense the equity awards to be granted to retirement-eligible employees in December 2006. As a result, fiscal 2006 compensation expense includes amortization related to fiscal 2003, 2004 and 2005 equity awards as well as the estimated cost of 2006 year-end awards to be granted to retirement-eligible employees in December 2006. Fiscal 2005 and Fiscal 2006 year-end awards to non-retirement-eligible employees will be amortized over the period from the grant date to the earlier of the employee's retirement eligibility date or the vesting date specified in the award terms. The tables below illustrate the percentage of each year-end award, to both non-retirement-eligible and retirement-eligible employees, amortized into compensation expense in a given fiscal year.
 
For a further discussion of the Company's previous accounting for stock-based compensation, see the Company's Form 10-K for the fiscal year ended November 30, 2005
 
 
Illustration of Standard Equity Award Amortization to Non-Retirement-Eligible and Retirement-Eligible Employees
                                   
     
Non-Retirement-Eligible Employees - Fiscal Year Ended
    
 
Year of
                             
Cumulative Amort.
 
Award
  
Nov 30, 2003
  
Nov 30, 2004
  
Nov 30, 2005
  
Nov 30, 2006
  
Nov 30, 2007
  
Nov 30, 2008
  
Nov 30, 2009
  
By Grant
                                   
 
2003
  
28%
  
28%
  
28%
  
15%
  
1%
  
0%
  
0%
  
100%
                 
 
                
 
2004
      
28%
  
28%
  
28%
 
15%
 
1%
  
0%
  
100%
                     
 
            
 
2005
              
39%
  
39%
  
20%
  
2%
  
100%
                                   
 
2006
                  
39%
  
39%
  
20%
  
98%
                                   
 
2007
                      
39%
  
39%
  
78%
                                   
 
2008
                          
39%
  
39%
                                   
                                   
                                   
                                   
     
Retirement-Eligible Employees - Fiscal Year Ended
    
 
Year of
                             
Cumulative Amort.
 
Award
  
Nov 30, 2003
  
Nov 30, 2004
  
Nov 30, 2005
  
Nov 30, 2006
  
Nov 30, 2007
  
Nov 30, 2008
  
Nov 30, 2009
  
By Grant
                                   
 
2003
  
28%
  
28%
  
28%
  
15%
  
1%
  
0%
  
0%
  
100%
                                   
 
2004
      
28%
  
28%
  
28%
  
15%
  
1%
  
0%
  
100%
                                   
 
2005
              
100%
  
0%
  
0%
  
0%
  
100%
                                   
 
2006
              
100%
  
0%
  
0%
  
0%
  
100%
                                   
 
2007
                  
100%
  
0%
  
0%
  
100%
                                   
 
2008
                      
100%
  
0%
  
100%
                                   
 
2009
                          
100%
  
100%
                                   
Note:   The actual fiscal impact depends on several factors including, but not limited to, forfeitures, award terms and modifications.
                
              Refer to Legal Notice page 25.                            
 
24
 
MORGAN STANLEY
Legal Notice
 
 
 
 
 
This Financial Supplement contains financial, statistical and business-related information, as well as business and segment trends.
The information should be read in conjunction with the Company's first quarter earnings press release issued March 22, 2006.
 

 
25