8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): September 20, 2006

Morgan Stanley 

(Exact name of Registrant as specified

in its charter)

Delaware	1-11758	36-3145972
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

1585 Broadway, New York, New York 10036

 (Address of principal executive offices, including zip code)

Registrant's telephone number, including area code: (212) 761-4000

(Former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.  Results of Operations and Financial Condition
On September 20, 2006, Morgan Stanley (the "Registrant") released financial information with respect to its quarter ended August 31, 2006. A copy of the press release containing this information is annexed as Exhibit 99.1 to this Report and by this reference incorporated herein and made a part hereof. In addition, a copy of the Registrant's Quarterly Financial Data Supplement for its quarter ended August 31, 2006 is annexed as Exhibit 99.2 to this Report and by this reference incorporated herein and made a part hereof.
The information furnished under Item 2.02 of this Report, including Exhibit 99.1 and Exhibit 99.2, shall be deemed to be "filed" for purposes of the Securities Exchange Act of 1934, as amended.
Item 9.01.  Financial Statements and Exhibits
99.1	Press release of the Registrant dated September 20, 2006 containing financial information for the third quarter ended August 31, 2006.
99.2	Quarterly Financial Data Supplement of the Registrant for the third quarter ended August 31, 2006.

SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
	MORGAN STANLEY
	(Registrant)
	By: /s/ Paul C. Wirth
	Paul C. Wirth
	Controller and Principal Accounting Officer
Dated: September 20, 2006

EX-99.1

Contact: Media Relations Jeanmarie McFadden
212-761-0553


Investor Relations William Pike
212-761-0008

Morgan Stanley Reports Third Quarter Results

Quarterly EPS from Continuing Operations Up 61% to $1.75

ROE Increases to 23 Percent in Quarter

Best Third Quarter Ever in Revenues, Net Income and EPS

First Nine Months of FY06 Best Ever in Revenues, Net Income and EPS

NEW YORK, September 20, 2006 - Morgan Stanley (NYSE: MS) today reported income from continuing operations for the third quarter ended August 31, 2006 of $1,851 million, an increase of 59 percent from $1,166 million in the third quarter of 2005. The annualized return on average common equity from continuing operations was 22.7 percent in the current quarter, compared with 17.1 percent in the third quarter of 2005. Diluted earnings per share from continuing operations were $1.75 compared with $1.09 a year ago. Net revenues (total revenues less interest expense and the provision for loan losses) were $8.0 billion, 15 percent above last year’s third quarter. Non-interest expenses of $5.3 billion increased 2 percent from last year.

For the first nine months of 2006, income from continuing operations was $5,291 million, a 54 percent increase from $3,446 million a year ago. The annualized return on average common equity from continuing operations was 22.7 percent compared with 17.0 percent a year ago. Diluted earnings per share from continuing operations were $5.01 compared with $3.19 last year.

Net income for the quarter, including discontinued operations, was $1,851 million, compared with $144 million in the third quarter of 2005. For the first nine months of 2006, net income, including discontinued operations, was $5,266 million, a 113 percent increase from $2,474 million a year ago. Results for the third quarter and first nine months of 2005 include an after-tax charge of approximately $1 billion for discontinued operations related to the sale of the Company’s aircraft financing business.¹ Diluted earnings per share, including discontinued operations, were $1.75 for the quarter, compared with $0.13 in the third quarter of 2005, and the annualized return on average common equity, including discontinued operations, for the third quarter was 22.7 percent compared with 2.0 percent a year ago. For the first nine months, diluted earnings per share, including discontinued operations, were $4.99 compared with $2.29 a year ago and the annualized return on average common equity, including discontinued operations, was 22.6 percent compared with 11.6 percent last year.

1 The actual after-tax loss upon finalization of the sale was approximately $400 million.

Business Highlights

·   Institutional Securities delivered its best third quarter results ever, with net revenues of $5.0 billion and income before taxes of $2.0 billion, up 55 percent from last year.

·   Equities sales and trading revenues of $1.5 billion included record results in Prime Brokerage. Fixed Income sales and trading revenues of $2.2 billion reflected record third quarter results in commodities and credit products.

·   The Firm reached agreements on several “bolt-on” acquisitions, including the acquisition of TransMontaigne and Heidenreich Marine, Inc. in our commodities business and Saxon Capital in our residential mortgage business.

·   Global Wealth Management Group achieved record average annualized revenue and total client assets per global representative of $675,000 and $81 million, respectively, and it recorded $5.4 billion in net new domestic assets during the quarter.

·   Asset Management continued to expand its product offerings with the launch of 23 new products primarily targeted at the Company’s institutional and non-US client bases, including 10 in Alternatives, 10 in Equities and 3 in Fixed Income.

·   Discover achieved record third quarter net revenues and income before taxes and continued its strategy of broadening acceptance of the Discover Card through agreements with merchant acquirers First Data, Global Payments, Inc. and RBS Lynk. Discover also entered a strategic partnership with JCB, the leading card issuer in Japan.

John J. Mack, Chairman and CEO, said, “Despite challenging market conditions, Morgan Stanley achieved its best third quarter ever, demonstrating the continued progress we’re making in executing on our plan to improve financial performance. Building on our positive momentum in recent quarters, the people of Morgan Stanley delivered record revenues and earnings in the first nine months of 2006 and an ROE of more than 20% for the fourth quarter in a row. Just as important, we have made substantial progress strengthening key businesses and investing in key areas where we see significantopportunities to further improve our performance and create additional shareholder value.”

2

INSTITUTIONAL SECURITIES

Institutional Securities posted income before taxes²  of $2.0 billion, up 55 percent from $1.3 billion in the third quarter of 2005. Net revenues of $5.0 billion were 20 percent higher, driven by strong results across all businesses. The quarter’s pre-tax margin was 40 percent, compared with 31 percent in last year’s third quarter. The quarter’s return on average common equity was 30 percent compared with 24 percent a year ago.

·   Advisory revenues were $461 million, a 19 percent increase from last year’s third quarter.

·   Underwriting revenues were $548 million, a 7 percent increase from last year’s third quarter. Equity underwriting revenues increased 19 percent to $237 million and fixed income underwriting revenues were virtually unchanged at $311 million.

·   Fixed income sales and trading net revenues were $2.2 billion, a 13 percent increase over the third quarter of 2005. The increase was driven by strong results in commodities and credit products, partially offset by lower results in interest rate & currency products. The increase in commodities was driven by strong results in oil liquids, electricity and natural gas due to strong client activity including revenues recognized on a few large structured transactions as a result of increased visibility of market value. Credit products had a record third quarter benefiting from activity in structured products, particularly in Europe. Interest rate & currency products were adversely affected by a less favorable environment as customer driven flow and volatility declined and the yield curve flattened. In addition, emerging markets revenues were significantly lower due to slower customer flow and market conditions. These factors more than offset an increase in revenues recognized on structured transactions in interest rate & currency products.

·   Equity sales and trading net revenues of $1.5 billion were a record third quarter and increased 18 percent from last year’s third quarter. Increased client flows across both the cash and derivatives markets and record results in Prime Brokerage drove revenues higher.

·   Investment revenues were $188 million compared with $69 million in the third quarter of last year and included significant gains from investments in the Company’s real estate funds, IntercontinentalExchange and Grifols S.A.

·   The Company’s aggregate average trading VaR measured at the 95% confidence level³ was $56 million compared with $52 million in the third quarter of 2005 and $63 million in the second quarter of 2006. Total aggregate average trading and non-trading VaR was $66 million compared with $58 million in the third quarter of 2005 and $70 million in the second quarter of 2006. At quarter end, the Company’s aggregate trading VaR was $61 million, and the aggregate trading and non-trading VaR was $75 million.

·   Non-interest expenses were $3.0 billion, a 4 percent increase from a year ago. Non-compensation expenses increased as a result of higher levels of business activity and charges for legal and regulatory matters. Compensation costs declined slightly from a year ago reflecting the Company’s current estimate of 2006 full year compensation based on forecasted full year performance and market conditions. In addition, the prior year included charges for senior management severance and new hires.

2 Represents income from continuing operations before losses from unconsolidated investees, taxes and cumulative effect of an accounting change.

3 The Company has changed the confidence level at which VaR is utilized for limit and other management purposes from a 99% confidence level to a 95% confidence level. The Company believes this change will facilitate comparisons to other companies in the financial services industry. Under the 99% confidence level the aggregate average trading VaR and aggregate average trading and non-trading VaR would have been $91 million and $103 million, respectively. Under the 99% confidence level the quarter end aggregate trading VaR and aggregate trading and non-trading VaR would have been $97 million and $108 million, respectively. Going forward the Company will report VaR under the 95% confidence level.

3

For the first eight months of calendar 2006, the Company ranked first in global IPOs with an 11 percent market share, third in global equity and equity-related issuances with a 9 percent market share, third in global completed M&A with a 26 percent market share, fourth in global announced M&A with a 25 percent market share and fifth in global debt issuance with a 6 percent market share.⁴

GLOBAL WEALTH MANAGEMENT GROUP

Global Wealth Management Group’s pre-tax income for the third quarter was $158 million compared with $30 million in the third quarter of last year. The quarter's pre-tax margin was 12 percent compared with 2 percent in last year’s third quarter. The quarter’s return on average common equity was 14 percent compared with 2 percent a year ago.

·   Net revenues of $1.4 billion were up 9 percent from a year ago, reflecting higher net interest revenue primarily resulting from the bank deposit sweep program, an increase in revenues from fee-based products and higher investment banking revenues. These increases were partially offset by a decline in commissions.

·   Non-interest expenses declined 1 percent to $1.2 billion, reflecting a significant reduction in legal and regulatory costs, which more than offset increased compensation expense due in part to higher revenues.

·   Total client assets were $652 billion, a 5 percent increase from last year’s third quarter. Client assets in fee-based accounts rose 14 percent to $193 billion over the last 12 months and increased as a percentage of total assets to 30 percent from 27 percent.

·   The 8,069 global representatives at quarter-end achieved record average annualized revenue and total client assets per global representative of $675,000 and $81 million, respectively.

4 Source: Thomson Financial–for the period January 1, 2006 to August 31, 2006.

4

ASSET MANAGEMENT

Asset Management reported pre-tax income of $125 million, 23 percent lower than last year's $162 million.  The quarter's pre-tax margin was 20 percent compared with 24 percent a year ago and the return on average common equity was 13 percent compared with 24 percent in last year’s third quarter. Net revenues fell 7 percent to $634 million primarily reflecting lower Private Equity revenues. Higher management and administration fees, driven by higher assets under management, were offset by a decline in distribution and other fees. Non-interest expenses decreased 2 percent to $509 million. Excluding results from the Private Equity business, pre-tax income declined by 8 percent from last year and the pre-tax margin was 21 percent compared with 22 percent a year ago.

Assets under management or supervision at August 31, 2006 were $448 billion, up $20 billion, or 5 percent, from a year ago. The increase resulted from market appreciation partly offset by customer out-flows. The percent of the Company’s long-term fund assets performing in the top half of the Lipper rankings was 39 percent over one year, 58 percent over three years, 74 percent over five years and 81 percent over 10 years.

DISCOVER

Discover’s third quarter pre-tax income was $368 million on a managed basis, up 54 percent from $239 million in the third quarter of 2005. Net revenues of $1,047 million were 15 percent higher than last year’s third quarter. The quarter’s pre-tax margin was 35 percent compared with 26 percent a year ago. The quarter’s return on average common equity was 19 percent compared with 13 percent a year ago. The current quarter includes the results of the Goldfish credit card business.

·   Net sales volume was a record $25.7 billion, a 15 percent increase from a year ago, reflecting increased cardmember usage and the acquisition of the Goldfish credit card business.

·   Managed credit card loans of $49.6 billion were up 5 percent from a year ago and up 2 percent from the end of the second quarter.

·   Managed merchant, cardmember and other fees were $579 million, up 9 percent from a year ago. The increase was primarily due to higher merchant discount and other revenues, partially offset by higher cardmember rewards. The increase in merchant discount revenue was primarily driven by record sales activity.

·   The provision for consumer loan losses on a managed basis was $496 million, down 16 percent from last year, reflecting significantly lower bankruptcy charge-offs and improved credit quality.

·   Managed net interest income declined $35 million from a year ago, reflecting a narrowing of the interest rate spread as a higher yield was more than offset by a higher cost of funds, partially offset by higher average loans.

·   Non-interest expenses increased 1 percent to $679 million, primarily due to higher operating expenses associated with the Goldfish credit card business, partially offset by lower compensation.

·   The credit card net charge-off rate was 3.81 percent, 131 basis points lower than last year’s third quarter, but 51 basis points higher than this year’s second quarter. The managed credit card over-30-day delinquency rate was 3.41 percent, a decrease of 50 basis points from the third quarter of 2005. The managed credit card over-90-day delinquency rate was 1.59 percent, 21 basis points lower than a year ago.

5

OTHER MATTERS

The quarter’s results reflect a decrease in the Company’s annual effective tax rate from 35.0 percent in the second quarter to 33.5 percent, primarily due to the estimated impact of overseas tax planning strategies on the full year.

The Company has adjusted its opening financial position for fiscal 2006 and its financial results for the first two quarters of 2006 to reflect a change in its hedge accounting under SFAS No. 133, Accounting for Derivatives Instruments and Hedging Activities. The change is being made following a recent technical clarification by the U.S. Securities and Exchange Commission (SEC) of its interpretation of SFAS No. 133 related to the accounting for fair value hedges of fixed-rate trust preferred securities. The same periods noted also reflect the adjustment of two cumulative compensation and benefit accruals. The Company has elected early application of Staff Accounting Bulletin 108 that was recently released by the SEC (refer to page 24 of the Financial Supplement available online in the Investor Relations section at www.morganstanley.com).

As of August 31, 2006, the Company repurchased approximately 39 million shares of its common stock since the end of fiscal 2005. The Company also announced that its Board of Directors declared a $0.27 quarterly dividend per common share. The dividend is payable on October 31, 2006 to common shareholders of record on October 13, 2006.

Total capital as of August 31, 2006 was $150.0 billion, including $38.0 billion of common shareholders’ equity, preferred equity and junior subordinated debt issued to capital trusts. Book value per common share was $31.24, based on 1.1 billion shares outstanding.

6

Morgan Stanley is a leading global financial services firm providing a wide range of investment banking, securities, investment management, wealth management and credit services. The Firm's employees serve clients worldwide including corporations, governments, institutions and individuals from more than 600 offices in 30 countries. For further information about Morgan Stanley, please visit www.morganstanley.com.

A financial summary follows. Financial, statistical and business-related information, as well as information regarding business and segment trends, is included in the Financial Supplement. Both the earnings release and the Financial Supplement are available online in the Investor Relations section at www.morganstanley.com.

# # #

(See Attached Schedules)

The information above contains forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made and which reflect management’s current estimates, projections, expectations or beliefs and which are subject to risks and uncertainties that may cause actual results to differ materially. For a discussion of additional risks and uncertainties that may affect the future results of the Company, please see “Forward-Looking Statements” immediately preceding Part I, Item 1, “Competition” and “Regulation” in Part I, Item 1, “Risk Factors” in Part I, Item 1A and “Certain Factors Affecting Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2005, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2006 Quarterly Reports on Form 10-Q and in other items throughout the Form 10-K, the Forms 10-Q and the Company’s 2006 Current Reports on Form 8-K.

7

MORGAN STANLEY

Quarterly Financial Summary

(unaudited, dollars in millions)

	Quarter Ended									Percentage Change From:						Nine Months Ended						Percentage
	Aug 31, 2006			Aug 31, 2005			May 31, 2006 (1)			Aug 31, 2005			May 31, 2006			Aug 31, 2006 (1)			Aug 31, 2005			Change
Net revenues
Institutional Securities	$	4,989		$	4,164		$	5,545			20	%		(10	%)	$	16,007		$	11,519			39	%
Global Wealth Management Group		1,371			1,255			1,402			9	%		(2	%)		4,057			3,721			9	%
Asset Management		634			679			723			(7	%)		(12	%)		2,052			2,017			2	%
Discover		1,047			911			1,191			15	%		(12	%)		3,327			2,758			21	%
Intersegment Eliminations		(53	)		(62	)		(98	)		15	%		46	%		(210	)		(199	)		(6	%)
Consolidated net revenues	$	7,988		$	6,947		$	8,763			15	%		(9	%)	$	25,233		$	19,816			27	%
Income before taxes (2)
Institutional Securities	$	2,001		$	1,288		$	2,087			55	%		(4	%)	$	5,863		$	3,178			84	%
Global Wealth Management Group		158			30			157			*			1	%		338			501			(33	%)
Asset Management		125			162			224			(23	%)		(44	%)		521			624			(17	%)
Discover		368			239			541			54	%		(32	%)		1,388			856			62	%
Intersegment Eliminations		15			23			(13	)		(35	%)		*			21			72			(71	%)
Consolidated income before taxes	$	2,667		$	1,742		$	2,996			53	%		(11	%)	$	8,131		$	5,231			55	%
Earnings per basic share:
Income from continuing operations	$	1.83		$	1.12		$	1.81			63	%		1	%	$	5.21		$	3.26			60	%
Discontinued operations	$	-		$	(0.98	)	$	0.01			*			*		$	(0.02	)	$	(0.97	)		98	%
Cumulative effect of accounting change (3)	$	-		$	-		$	-			--			--		$	-		$	0.05			*
Earnings per basic share	$	1.83		$	0.14		$	1.82			*			1	%	$	5.19		$	2.34			122	%
Earnings per diluted share:
Income from continuing operations	$	1.75		$	1.09		$	1.74			61	%		1	%	$	5.01		$	3.19			57	%
Discontinued operations	$	-		$	(0.96	)	$	0.01			*			*		$	(0.02	)	$	(0.95	)		98	%
Cumulative effect of accounting change (3)	$	-		$	-		$	-			--			--		$	-		$	0.05			*
Earnings per diluted share	$	1.75		$	0.13		$	1.75			*			--		$	4.99		$	2.29			118	%
Average common shares outstanding
Basic		1,010,468,365			1,045,874,085			1,013,241,715									1,014,846,804			1,056,211,084
Diluted		1,055,664,392			1,072,033,275			1,054,733,745									1,055,811,711			1,080,279,276
Period end common shares outstanding		1,058,664,567			1,082,727,000			1,071,786,172									1,058,664,567			1,082,727,000
Return on average common equity
from continuing operations		22.7	%		17.1	%		23.6	%								22.7	%		17.0	%
Return on average common equity		22.7	%		2.0	%		23.7	%								22.6	%		11.6	%

(1)	As adjusted, see pages 25-27 on the firm's 3Q2006 Financial Supplement available on our website, www.morganstanley.com.
(2)	Represents consolidated income from continuing operations before losses from unconsolidated investees, taxes, gain/(loss) from discontinued operations and cumulative effect of accounting change.
(3)	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.

8

MORGAN STANLEY

Quarterly Consolidated Income Statement Information

(unaudited, dollars in millions)

	Quarter Ended									Percentage Change From:						Nine Months Ended						Percentage
	Aug 31, 2006			Aug 31, 2005			May 31, 2006 (1)			Aug 31, 2005			May 31, 2006			Aug 31, 2006 (1)			Aug 31, 2005			Change
Investment banking	$	1,138		$	992		$	1,132			15	%		1	%	$	3,252		$	2,627			24	%
Principal transactions:
Trading		2,824			2,150			3,565			31	%		(21	%)		9,469			5,790			64	%
Investments		202			103			690			96	%		(71	%)		1,206			482			150	%
Commissions		888			804			1,005			10	%		(12	%)		2,822			2,452			15	%
Fees:
Asset management, distribution and admin.		1,326			1,249			1,333			6	%		(1	%)		3,938			3,699			6	%
Merchant, cardmember and other		312			357			277			(13	%)		13	%		878			983			(11	%)
Servicing and securitizations income		565			398			651			42	%		(13	%)		1,812			1,315			38	%
Interest and dividends		12,670			6,998			10,114			81	%		25	%		33,333			18,876			77	%
Other		130			106			123			23	%		6	%		368			332			11	%
Total revenues		20,055			13,157			18,890			52	%		6	%		57,078			36,556			56	%
Interest expense		11,835			5,986			9,997			98	%		18	%		31,328			16,172			94	%
Provision for consumer loan losses		232			224			130			4	%		78	%		517			568			(9	%)
Net revenues		7,988			6,947			8,763			15	%		(9	%)		25,233			19,816			27	%
Compensation and benefits		3,149			3,165			3,723			(1	%)		(15	%)		11,033			8,641			28	%
Occupancy and equipment		255			239			237			7	%		8	%		724			803			(10	%)
Brokerage, clearing and exchange fees		339			267			340			27	%		0	%		971			803			21	%
Information processing and communications		371			349			365			6	%		2	%		1,083			1,040			4	%
Marketing and business development		292			276			298			6	%		(2	%)		828			831			--
Professional services		549			505			538			9	%		2	%		1,521			1,322			15	%
Other		366			404			266			(9	%)		38	%		942			1,396			(33	%)
September 11th related insurance recoveries, net		0			0			0			--			--			0			(251	)		*
Total non-interest expenses		5,321			5,205			5,767			2	%		(8	%)		17,102			14,585			17	%
Income from continuing operations before losses
from unconsolidated investees, taxes
and cumulative effect of accounting change		2,667			1,742			2,996			53	%		(11	%)		8,131			5,231			55	%
Losses from unconsolidated investees		2			105			103			(98	%)		(98	%)		174			245			(29	%)
Provision for income taxes		814			471			1,060			73	%		(23	%)		2,666			1,540			73	%
Income from continuing operations		1,851			1,166			1,833			59	%		1	%		5,291			3,446			54	%
Discontinued operations
Gain/(loss) from discontinued operations		0			(1,700	)		14			*			*			(42	)		(1,698	)		98	%
Income tax benefit/(provision)		0			678			(6	)		*			*			17			677			(97	%)
Gain/(loss) from discontinued operations		0			(1,022	)		8			*			*			(25	)		(1,021	)		98	%
Cumulative effect of accounting change (2)		0			0			0			--			--			0			49			*
Net income	$	1,851		$	144		$	1,841			*			1	%	$	5,266		$	2,474			113	%
Return on average common equity
from continuing operations		22.7	%		17.1	%		23.6	%								22.7	%		17.0	%
Return on average common equity		22.7	%		2.0	%		23.7	%								22.6	%		11.6	%
Pre-tax profit margin (3)		33	%		25	%		34	%								32	%		26	%
Compensation and benefits as a % of net revenues		39	%		46	%		43	%								44	%		44	%

(1)	As adjusted, see pages 25-27 on the firm's 3Q2006 Financial Supplement available on our website, www.morganstanley.com.
(2)	Represents the effects of the adoption of SFAS 123R in the first quarter of fiscal 2005.
(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.

9

EX-99.2

Exhibit 99.2

MORGAN STANLEY
Financial Supplement - 3Q 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	…………….	Quarterly Institutional Securities Income Statement Information
6-7	…………….	Quarterly Institutional Securities Financial Information and Statistical Data
8	…………….	Quarterly Global Wealth Management Group Income Statement Information
9	…………….	Quarterly Global Wealth Management Group Financial Information and Statistical Data
10	…………….	Quarterly Asset Management Income Statement Information
11	…………….	Quarterly Asset Management Financial Information and Statistical Data
12	…………….	Quarterly Consolidated Assets Under Management or Supervision
13	…………….	Quarterly Discover Income Statement Information
14	…………….	Quarterly Discover Income Statement Information (Managed Loan Basis)
15	…………….	Quarterly Discover Financial Information and Statistical Data
16	…………….	Quarterly Intersegment Eliminations Income Statement Information
17	…………….	Quarterly Inst'l. Securities, Global Wealth Management Group and Asset Mgmt. Combined Income Statement Information
18	…………….	Quarterly Discover Financial Information (Managed Loan Basis)
19	…………….	Quarterly Discover Reconciliation of General Purpose Credit Card Loan Data (Current Year)
20	…………….	Quarterly Discover Reconciliation of General Purpose Credit Card Loan Data (Prior Year)
21	…………….	YTD Reconciliation of General Credit Card Loan Data
22	…………….	Quarterly Discover Reconciliation of Managed Income Statement Data
23	…………….	Quarterly Reconciliation of Adjusted Assets
24	…………….	Description of Adjustments to Previously Reported Financial Information
25	…………….	Quarterly Consolidated Firm Reconciliation to Previously Reported Financial Information
26	…………….	Quarterly Institutional Securities Reconciliation to Previously Reported Financial Information
27	…………….	Quarterly Inst'l Securities, Global Wealth Management and Asset Mgmt. Reconciliation to Previously Reported Financial Information
28	…………….	Illustration of Standard Equity Award Amortization
29	…………….	Legal Notice

MORGAN STANLEY

Quarterly Financial Summary

(unaudited, dollars in millions)

	Quarter Ended																					Percentage Change From:						Nine Months Ended						Percentage
	Feb 28, 2005			May 31, 2005			Aug 31, 2005			Nov 30, 2005			Feb 28, 2006 (1)			May 31, 2006 (1)			Aug 31, 2006			3Q06 vs. 3Q05			3Q06 vs. 2Q06			Aug 31, 2005			Aug 31, 2006 (1)			Change
Net revenues
Institutional Securities	$	4,015		$	3,340		$	4,164		$	4,154		$	5,473		$	5,545		$	4,989			20	%		(10	%)	$	11,519		$	16,007			39	%
Global Wealth Management Group		1,238			1,228			1,255			1,298			1,284			1,402			1,371			9	%		(2	%)		3,721			4,057			9	%
Asset Management		696			642			679			890			695			723			634			(7	%)		(12	%)		2,017			2,052			2	%
Discover		959			888			911			694			1,089			1,191			1,047			15	%		(12	%)		2,758			3,327			21	%
Intersegment Eliminations		(70	)		(67	)		(62	)		(74	)		(59	)		(98	)		(53	)		15	%		46	%		(199	)		(210	)		(6	%)
Consolidated net revenues	$	6,838		$	6,031		$	6,947		$	6,962		$	8,482		$	8,763		$	7,988			15	%		(9	%)	$	19,816		$	25,233			27	%
Income before taxes (2)
Institutional Securities	$	1,077		$	813		$	1,288		$	1,576		$	1,775		$	2,087		$	2,001			55	%		(4	%)	$	3,178		$	5,863			84	%
Global Wealth Management Group		353			118			30			84			23			157			158			*			1	%		501			338			(33	%)
Asset Management		287			175			162			383			172			224			125			(23	%)		(44	%)		624			521			(17	%)
Discover		354			263			239			65			479			541			368			54	%		(32	%)		856			1,388			62	%
Intersegment Eliminations		24			25			23			22			19			(13	)		15			(35	%)		*			72			21			(71	%)
Consolidated income before taxes	$	2,095		$	1,394		$	1,742		$	2,130		$	2,468		$	2,996		$	2,667			53	%		(11	%)	$	5,231		$	8,131			55	%
Earnings per basic share: (3)
Income from continuing operations	$	1.26		$	0.88		$	1.12		$	1.69		$	1.57		$	1.81		$	1.83			63	%		1	%	$	3.26		$	5.21			60	%
Discontinued operations	$	-		$	-		$	(0.98	)	$	0.70		$	(0.03	)	$	0.01		$	-			*			*		$	(0.97	)	$	(0.2	)		98	%
Cumulative effect of accounting change (4)	$	0.05		$	-		$	-		$	-		$	-		$	-		$	-			--			--		$	0.05		$	-			*
Earnings per basic share	$	1.31		$	0.88		$	0.14		$	2.39		$	1.54		$	1.82		$	1.83			*			1	%	$	2.34		$	5.19			122	%
Earnings per diluted share: (3)
Income from continuing operations	$	1.24		$	0.86		$	1.09		$	1.64		$	1.51		$	1.74		$	1.75			61	%		1	%	$	3.19		$	5.01			57	%
Discontinued operations	$	-		$	-		$	(0.96	)	$	0.68		$	(0.03	)	$	0.01		$	-			*			*		$	(0.95	)	$	(0.02	)		98	%
Cumulative effect of accounting change (4)	$	0.05		$	-		$	-		$	-		$	-		$	-		$	-			--			--		$	0.05		$	-			*
Earnings per diluted share	$	1.29		$	0.86		$	0.13		$	2.32		$	1.48		$	1.75		$	1.75			*			--		$	2.29		$	4.99			118	%
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			1,013,241,715			1,010,468,365									1,056,211,084			1,014,846,804
Diluted		1,090,166,326			1,079,811,172			1,072,033,275			1,063,147,962			1,061,764,798			1,054,733,745			1,055,664,392									1,080,279,276			1,055,811,711
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			1,071,786,172			1,058,664,567									1,082,727,000			1,058,664,567
Return on average common
equity from continuing operations		20.0	%		13.8	%		17.1	%		24.9	%		21.8	%		23.6	%		22.7	%								17.0	%		22.7	%
Return on average common equity		19.7	%		13.1	%		2.0	%		34.6	%		21.3	%		23.7	%		22.7	%								11.6	%		22.6	%

(1)	See page 24 for a description of certain adjustments affecting previously reported amounts for the quarters ended Feb 28, 2006 and May 31, 2006 and the nine months ended Aug 31, 2006. See pages 25 - 27 for a reconciliation to previously reported financial information for these periods.
(2)	Represents consolidated income from continuing operations before losses from unconsolidated investees, taxes, gain/(loss) from discontinued operations and cumulative effect of accounting change.
(3)	Summation of the quarters' earnings per common share may not equal the annual amounts due to the averaging effect of the number of shares and share equivalents throughout the year.
(4)	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 29.

1

MORGAN STANLEY

Quarterly Consolidated Income Statement Information

(unaudited, dollars in millions)

	Quarter Ended																					Percentage Change From:						Nine Months Ended						Percentage
	Feb 28, 2005			May 31, 2005			Aug 31, 2005			Nov 30, 2005			Feb 28, 2006 (1)			May 31, 2006 (1)			Aug 31, 2006			3Q06 vs. 3Q05			3Q06 vs. 2Q06			Aug 31, 2005			Aug 31, 2006 (1)			Change
Investment banking	$	821		$	814		$	992		$	1,216		$	982		$	1,132		$	1,138			15	%		1	%	$	2,627		$	3,252			24	%
Principal transactions:
Trading		1,846			1,794			2,150			1,575			3,080			3,565			2,824			31	%		(21	%)		5,790			9,469			64	%
Investments		153			226			103			499			314			690			202			96	%		(71	%)		482			1,206			150	%
Commissions		824			824			804			911			929			1,005			888			10	%		(12	%)		2,452			2,822			15	%
Fees:
Asset management, distribution  and admin.		1,204			1,246			1,249			1,259			1,279			1,333			1,326			6	%		(1	%)		3,699			3,938			6	%
Merchant, cardmember and other		308			318			357			340			289			277			312			(13	%)		13	%		983			878			(11	%)
Servicing and securitization income		494			423			398			294			596			651			565			42	%		(13	%)		1,315			1,812			38	%
Interest and dividends		5,843			6,035			6,998			9,299			10,549			10,114			12,670			81	%		25	%		18,876			33,333			77	%
Other		105			121			106			132			115			123			130			23	%		6	%		332			368			11	%
Total revenues		11,598			11,801			13,157			15,525			18,133			18,890			20,055			52	%		6	%		36,556			57,078			56	%
Interest expense		4,625			5,561			5,986			8,253			9,496			9,997			15,835			98	%		18	%		16,172			31,328			94	%
Provision for consumer loan losses		135			209			224			310			155			130			232			4	%		78	%		568			517			(9	%)
Net revenues		6,838			6,031			6,947			6,962			8,482			8,763			7,988			15	%		(9	%)		19,816			25,233			27	%
Compensation and benefits		2,854			2,622			3,165			2,672			4,161			3,723			3,149			(1	%)		(15	%)		8,641			11,033			28	%
Occupancy and equipment		332			232			239			243			232			237			255			7	%		8	%		803			724			(10	%)
Brokerage, clearing and exchange fees		260			276			267			267			292			340			339			27	%		--			803			971			21	%
Information processing and communications		342			349			349			365			347			365			371			6	%		2	%		1,040			1,083			4	%
Marketing and business development		257			298			276			331			238			298			292			6	%		(2	%)		831			828			--
Professional services		379			438			505			581			434			538			549			9	%		2	%		1,322			1,521			15	%
Other		570			422			404			373			310			266			366			(9	%)		38	%		1,396			942			(33	%)
September 11th related insurance recoveries, net		(251	)		0			0			0			0			0			0			--			--			(251	)		0			*
Total non-interest expenses		4,743			4,637			5,205			4,832			6,014			5,767			5,321			2	%		(8	%)		14,585			17,102			17	%
Income from continuing operations  before losses from unconsolidated
investees, taxesand cumulative effect of accounting change		2,095			1,394			1,742			2,130			2,468			2,996			2,667			53	%		(11	%)		5,231			8,131			55	%
Losses from unconsolidated investees		73			67			105			66			69			103			2			(98	%)		(98	%)		245			174			(29	%)
Provision for income taxes		673			396			471			318			792			1,060			814			73	%		(23	%)		1,540			2,666			73	%
Income from continuing operations		1,349			931			1,166			1,746			1,607			1,833			1,851			59	%		1	%		3,446			5,291			54	%
Discontinued operations
Gain/(loss) from discontinued operations		7			(5	)		(1,700	)		1,212			(55	)		14			0			*			*			(1,698	)		(42	)		98	%
Income tax benefit/(provision)		(3	)		2			678			(493	)		22			(6	)		0			*			*			677			17			(97	%)
Gain/(loss) from discontinued operations		4			(3	)		(1,022	)		719			(33	)		8			0			*			*			(1,021	)		(25	)		98	%
Cumulative effect of accounting change (2)		49			0			0			0			0			0			0			--			--			49			0			*
Net income	$	1,402		$	928		$	144		$	2,465		$	1,574		$	1,841		$	1,851			*			1	%	$	2,474		$	5,266			113	%
Return on average common equity
from continuing operations		20.0	%		13.8	%		17.1	%		24.9	%		21.8	%		23.6	%		22.7	%								17.0	%		22.7	%
Return on average common equity		19.7	%		13.1	%		2.0	%		34.6	%		21.3	%		23.7	%		22.7	%								11.6	%		22.6	%
Pre-tax profit margin (3)		31	%		23	%		25	%		31	%		29	%		34	%		33	%								26	%		32	%
Compensation and benefits as a % of net revenues		42	%		44	%		46	%		38	%		49	%		43	%		39	%								44	%		44	%

(1)	See page 24 for a description of certain adjustments affecting previously reported amounts for the quarters ended Feb 28, 2006 and May 31, 2006 and the nine months ended Aug 31, 2006. See pages 25 - 27 for a reconciliation to previously reported financial information for these periods.
(2)	Represents the effects of the adoption of SFAS 123R in the first quarter of fiscal 2005.
(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 29.

2

MORGAN STANLEY

Quarterly Consolidated Financial Information and Statistical Data

	Quarter Ended														Percentage Change From:
	Feb 28, 2005		May 31, 2005		Aug 31, 2005		Nov 30, 2005		Feb 28, 2006 (1)		May 31, 2006 (1)		Aug 31, 2006		3Q06 vs. 3Q05			3Q06 vs. 2Q06
Morgan Stanley
Total assets (millions)	$	802,210	$	818,711	$	837,391	$	898,523	$	959,625	$	1,027,054	$	1,028,872		23	%		--
Adjusted assets (millions) (2)	$	447,221	$	440,283	$	458,190	$	481,869	$	528,148	$	548,596	$	556,754		22	%		1	%
Period end common shares outstanding (millions)		1,103.3		1,086.7		1,082.7		1,057.7		1,070.4		1,071.8		1,058.7		(2	%)		(1	%)
Book value per common share	$	25.83	$	26.07	$	26.07	$	27.59	$	28.12	$	29.97	$	31.24		20	%		4	%
Shareholders' equity (millions) (3)	$	31,328	$	31,224	$	31,107	$	31,946	$	33,886	$	35,902	$	37,956		22	%		6	%
Total capital (millions) (4)	$	122,230	$	113,324	$	118,415	$	125,891	$	134,366	$	145,849	$	149,956		27	%		4	%
Worldwide employees		53,718		54,142		53,760		53,218		53,870		53,163		54,349		1	%		2	%
Average Daily 95%/One-Day Value-at-Risk ("VaR") (5)
Primary Market Risk Category ($ millions, pre-tax)
Interest rate and credit spread	$	42	$	41	$	31	$	37	$	35	$	39	$	33
Equity price	$	29	$	22	$	24	$	25	$	25	$	29	$	26
Foreign exchange rate	$	8	$	8	$	8	$	8	$	9	$	9	$	7
Commodity price	$	23	$	24	$	25	$	26	$	31	$	28	$	33
Trading VaR	$	66	$	59	$	52	$	57	$	58	$	63	$	56
Non - trading VaR	$	16	$	12	$	14	$	15	$	20	$	26	$	24
Aggregate trading and non - trading VaR	$	76	$	67	$	58	$	65	$	65	$	70	$	66

(1)	See page 24 for a description of certain adjustments affecting previously reported amounts for the quarters ended Feb 28, 2006 and May 31, 2006. See pages 25 - 27 for a reconciliation to previously reported financial information for these periods.
(2)	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 24 for further information.
(3)	Includes common equity, preferred equity and junior subordinated debt issued to capital trusts.
(4)	Includes common equity, preferred equity, junior subordinated debt issued to capital trusts, capital units and the non-current portion of long-term debt.
(5)	95% / One-Day VaR represents the loss amount that one would not expect to exceed, on average, more than five times 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. The Company has changed the confidence level at which VaR is utilized for limit and other management purposes from a 99% confidence level to a 95% confidence level. In addition, the Company believes this change will facilitate comparisons to other companies in the financial services industry. Under the 99% confidence level the aggregate average trading VaR, aggregate average trading and non-trading VaR would have been $97 million and $108 million, respectively. Under the 99% confidence level the quarter end aggregate trading VaR and aggregate trading and non-trading VaR would have been $97 million and $108 million, respectively. Going forward the Company will calculate VaR under the 95% confidence level. 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 29.

3

MORGAN STANLEY

Quarterly Consolidated Financial Information and Statistical Data

(unaudited)

	Quarter Ended																				Nine Months Ended
	Feb 28, 2006 (1)					May 31, 2006 (1)					Aug 31, 2006										Aug 31, 2006 (1)
	Average common equity  (billions) (2)		Return on  average common equity			Average common equity  (billions) (2)		Return on average common equity			Average common equity  (billions) (2)		Return on average common equity								Average common equity  (billions) (2)		Return on average common equity
Institutional Securities	$	16.2		29	%	$	18.1		28	%	$	18.8		30	%						$	17.7		29	%
Global Wealth Management Group		3.5		2	%		3.3		13	%		3.0		14	%							3.3		9	%
Asset Management		2.0		21	%		2.1		26	%		2.3		13	%							2.1		20	%
Securities Business		21.7		24	%		23.5		26	%		24.1		27	%							23.1		26	%
Discover		4.6		26	%		5.0		27	%		5.1		19	%							4.9		24	%
Capital surplus (unallocated)		3.2					2.6					3.4										3.1
Total - continuing operations		29.5		22	%		31.1		24	%		32.6		23	%							31.1		23	%
Discontinued operations		0.0					0.0					0.0										0.0
Firm	$	29.5		21	%	$	31.1		24	%	$	32.6		23	%						$	31.1		23	%
	Quarter Ended																					Nine Months Ended
	Feb 28, 2005					May 31, 2005					Aug 31, 2005					Nov 30, 2005					Aug 31, 2005
	Average common equity  (billions) (2)		Return on  average common equity			Average common equity  (billions) (2)		Return on average common equity			Average common equity  (billions) (2)		Return on  average common equity			Average common equity  (billions) (2)		Return on average common equity			Average  common equity  (billions) (2)		Return on average common equity
Institutional Securities	$	13.8		21	%	$	14.3		16	%	$	14.6		24	%	$	15.6		35	%	$	14.2		20	%
Global Wealth Management Group		3.8		23	%		3.6		8	%		3.5		2	%		3.7		9	%		3.7		11	%
Asset Management		1.8		41	%		1.7		25	%		1.7		24	%		1.7		55	%		1.7		30	%
Securities Business		19.4		23	%		19.6		16	%		19.8		20	%		21.0		32	%		19.6		20	%
Discover		4.3		20	%		4.2		16	%		4.6		13	%		4.6		4	%		4.4		16	%
Capital surplus (unallocated)		3.2					3.1					2.9					2.5					3.1
Total - continuing operations		26.9		20	%		26.9		14	%		27.3		17	%		28.1		25	%		27.1		17	%
Discontinued operations		1.5					1.5					1.3					0.4					1.4
Firm	$	28.4		20	%	$	28.4		13	%	$	28.6		2	%	$	28.5		35	%	$	28.5		12	%

(1)	See page 24 for a description of certain adjustments affecting previously reported amounts for the quarters ended Feb 28, 2006 and May 31, 2006 and nine months ended Aug 31, 2006. See pages 25 - 27 for a reconciliation to previously reported financial information for these periods.
(2)	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 29.

4

MORGAN STANLEY

Quarterly Institutional Securities Income Statement Information

(unaudited, dollars in millions)

	Quarter Ended																					Percentage Change From:						Nine Months Ended						Percentage
	Feb 28, 2005			May 31, 2005			Aug 31, 2005			Nov 30, 2005			Feb 28, 2006 (1)			May 31, 2006 (1)			Aug 31, 2006			3Q06 vs. 3Q05			3Q06 vs. 2Q06			Aug 31, 2005			Aug 31, 2006 (1)			Change
Investment banking	$	742		$	735		$	898		$	1,102		$	903		$	1,055		$	1,009			12	%		(4	%)	$	2,375		$	2,967			25	%
Principal transactions:
Trading		1,727			1,684			2,035			1,460			2,958			3,447			2,713			33	%		(21	%)		5,446			9,118			67	%
Investments		91			226			69			270			284			595			188			172	%		(68	%)		386			1,067			176	%
Commissions		503			538			501			618			610			694			629			26	%		(9	%)		1,542			1,933			25	%
Asset management, distribution and admin. fees		34			39			46			33			44			73			72			57	%		(1	%)		119			189			59	%
Interest and dividends		5,275			5,379			6,263			8,538			9,791			9,318			11,826			89	%		27	%		16,917			30,935			83	%
Other		66			78			69			88			79			83			88			28	%		6	%		213			250			17	%
Total revenues		8,438			8,679			9,881			12,109			14,669			15,265			16,525			67	%		8	%		26,998			46,459			72	%
Interest expense		4,423			5,339			5,717			7,955			9,196			9,720			11,536			102	%		19	%		15,479			30,452			97	%
Net revenues		4,015			3,340			4,164			4,154			5,473			5,545			4,989			20	%		(10	%)		11,519			16,007			39	%
Total non-interest expenses		2,938			2,527			2,876			2,578			3,698			3,458			2,988			4	%		(14	%)		8,341			10,144			22	%
Income from continuing operations before losses from unconsolidated
investees, taxes, and cumulative
effect of accounting change		1,077			813			1,288			1,576			1,775			2,087			2,001			55	%		(4	%)		3,178			5,863			84	%
Losses from unconsolidated investees		73			67			105			66			68			103			1			(99	%)		(99	%)		245			172			(30	%)
Income before taxes		1,004			746			1,183			1,510			1,707			1,984			2,000			69	%		1	%		2,933			5,691			94	%
Provision for income taxes		284			171			306			148			531			722			580			90	%		(20	%)		761			1,833			141	%
Income from continuing operations (2)	$	720		$	575		$	877		$	1,362		$	1,176		$	1,262		$	1,420			62	%		13	%	$	2,172		$	3,858			78	%
Return on average common equity (3)		21	%		16	%		24	%		35	%		29	%		28	%		30	%								20	%		29	%
Pre-tax profit margin (4)		27	%		24	%		31	%		38	%		32	%		38	%		40	%								28	%		37	%

(1)	See page 24 for a description of certain adjustments affecting previously reported amounts for the quarters ended Feb 28, 2006 and May 31, 2006 and nine months ended Aug 31, 2006. See pages 25 - 27 for a reconciliation to previously reported financial information for these periods.
(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.
Note:	Certain reclassifications have been made to prior period amounts to conform to the current presentation.
	Refer to Legal Notice page 29.

5

MORGAN STANLEY

Quarterly Financial Information and Statistical Data

Institutional Securities

(unaudited, dollars in millions)

	Quarter Ended																					Percentage Change From:						Nine Months Ended						Percentage
	Feb 28, 2005			May 31, 2005			Aug 31, 2005			Nov 30, 2005			Feb 28, 2006			May 31, 2006			Aug 31, 2006			3Q06 vs. 3Q05			3Q06 vs. 2Q06			Aug 31, 2005			Aug 31,  2006			Change
Investment Banking
Advisory revenue	$	254		$	357		$	388		$	479		$	355		$	385		$	461			19	%		20	%	$	999		$	1,201			20	%
Underwriting revenue
Equity		202			145			200			358			197			371			237			19	%		(36	%)		547			805			47	%
Fixed income		286			233			310			265			351			299			311			--			4	%		829			961			16	%
Total underwriting revenue	$	488		$	378		$	510		$	623		$	548		$	670		$	548			7	%		(18	%)	$	1,376		$	1,766			28	%
Total investment banking revenue	$	742		$	735		$	898		$	1,102		$	903		$	1,055		$	1,009			12	%		(4	%)	$	2,375		$	2,967			25	%
Sales and Trading
Sales and trading net revenue (1)
Equity		1,214			1,119			1,280			1,191			1,654			1,724			1,509			18	%		(12	%)		3,613			4,887			35	%
Fixed income		1,998			1,211			1,964			1,609			2,724			2,366			2,221			13	%		(6	%)		5,173			7,311			41	%
Total sales and trading net revenue	$	3,212		$	2,330		$	3,244		$	2,800		$	4,378		$	4,090		$	3,730			15	%		(9	%)	$	8,786		$	12,198			39	%
	Fiscal View																											Calendar View
	Quarter Ended (2)																											Eight Months Ended (2)
	Feb 28, 2005			May 31, 2005			Aug 31, 2005			Nov 30, 2005			Feb 28, 2006			May 31, 2006			Aug 31, 2006									Aug 31, 2005			Aug 31, 2006
Mergers and acquisitions announced transactions
Morgan Stanley global market volume (billions)	$	174.5		$	201.1		$	109.7		$	124.5		$	334.8		$	206.8		$	164.2								$	434.0		$	525.5
Market share		26.7	%		35.7	%		19.4	%		18.1	%		40.6	%		22.4	%		23.3	%								28.7	%		24.9	%
Rank		3			1			5			6			3			3			4									1			4
Mergers and acquisitions completed transactions
Morgan Stanley global market volume (billions)	$	41.5		$	94.9		$	155.2		$	169.5		$	177.9		$	181.3		$	109.9								$	278.8		$	401.0
Market share		11.6	%		25.5	%		22.7	%		29.3	%		28.1	%		30.4	%		21.2	%								21.6	%		26.4	%
Rank		7			2			5			2			2			2			5									4			3
Global equity and related issues
Morgan Stanley global market volume (billions)	$	14.7		$	5.7		$	9.0		$	15.5		$	10.8		$	19.1		$	10.4								$	24.5		$	34.4
Market share		11.8	%		6.2	%		6.2	%		10.2	%		7.5	%		9.5	%		8.8	%								7.9	%		8.6	%
Rank		1			6			5			1			4			2			3									4			3
Global IPO's
Morgan Stanley global market volume (billions)	$	3.5		$	2.1		$	3.2		$	5.4		$	2.7		$	7.5		$	5.2								$	8.0		$	14.2
Market Share		10.4	%		8.6	%		6.6	%		9.9	%		6.8	%		11.2	%		11.7	%								8.7	%		10.6	%
Rank		1			2			4			2			5			2			1									1			1
Global debt
Morgan Stanley global market volume (billions)	$	82.9		$	84.1		$	91.2		$	81.7		$	94.4		$	98.8		$	80.9								$	245.4		$	254.3
Market share		6.1	%		5.8	%		6.1	%		5.1	%		5.8	%		5.8	%		5.5	%								6.1	%		5.9	%
Rank		4			5			5			7			5			5			7									5			5

(1)	Includes principal transactions trading, commissions and net interest revenue.
(2)	Source: Thomson Financial, data as of September 6, 2006.
Note:	Certain reclassifications have been made to prior period amounts to conform to the current presentation.
	Refer to Legal Notice page 29.

6

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			May 31, 2006			Aug 31, 2006			3Q06 vs. 3Q05			3Q06 vs. 2Q06
Loans
Investment grade	$	1.5		$	1.8		$	3.0		$	5.0		$	5.6		$	6.2		$	7.4			147	%		19	%
Non-investment grade		1.0			1.9			2.8			2.3			2.9			2.9			5.4			93	%		86	%
Total loans	$	2.5		$	3.7		$	5.8		$	7.3		$	8.5		$	9.1		$	12.8			121	%		41	%
Commitments
Investment grade	$	18.7		$	21.1		$	27.6		$	23.9		$	29.2		$	27.1		$	26.2			(5	%)		(3	%)
Non-investment grade		2.0			5.6			3.0			13.1			5.3			8.2			18.4			*			124	%
Total commitments	$	20.7		$	26.7		$	30.6		$	37.0		$	34.5		$	35.3		$	44.6			46	%		26	%
Loans plus commitments
Investment grade	$	20.2		$	22.9		$	30.6		$	28.9		$	34.8		$	33.3		$	33.6			10	%		1	%
Non-investment grade	$	3.0		$	7.5		$	5.8		$	15.4		$	8.2		$	11.1		$	23.8			*			114	%
% investment grade		87	%		75	%		84	%		65	%		81	%		75	%		59	%
% non-investment grade		13	%		25	%		16	%		35	%		19	%		25	%		42	%
Total loans and commitments	$	23.2		$	30.4		$	36.4		$	44.3		$	43.0		$	44.4		$	57.4			58	%		29	%
Hedges (1)	$	13.1		$	14.3		$	16.1		$	17.8		$	17.7		$	23.8		$	24.3			51	%		2	%
Total loans and commitments net of hedges	$	10.1		$	16.1		$	20.3		$	26.5		$	25.3		$	20.6		$	33.1			63	%		61	%

(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 29.

7

MORGAN STANLEY

Quarterly Global Wealth Management Group Income Statement Information

(unaudited, dollars in millions)

	Quarter Ended																					Percentage Change From:						Nine Months Ended						Percentage
	Feb 28, 2005			May 31, 2005			Aug 31, 2005			Nov 30, 2005			Feb 28, 2006			May 31, 2006			Aug 31, 2006			3Q06 vs. 3Q05			3Q06 vs. 2Q06			Aug 31, 2005			Aug 31, 2006			Change
Investment banking	$	71		$	68		$	81		$	100		$	67		$	95		$	120			48	%		26	%	$	220		$	282			28	%
Principal transactions:
Trading		120			111			116			117			124			121			113			(3	%)		(7	%)		347			358			3	%
Investments		(2	)		(2	)		1			2			0			26			16			*			(38	%)		(3	)		42			*
Commissions		329			295			306			298			319			312			261			(15	%)		(16	%)		930			892			(4	%)
Asset management, distribution and admin fees		607			632			629			649			649			674			688			9	%		2	%		1,868			2,011			8	%
Interest and dividends		135			149			174			204			206			246			270			55	%		10	%		458			722			58	%
Other		38			45			38			46			36			44			33			(13	%)		(25	%)		121			113			(7	%)
Total revenues		1,298			1,298			1,345			1,416			1,401			1,518			1,501			12	%		(1	%)		3,941			4,420			12	%
Interest expense		60			70			90			118			117			116			130			44	%		12	%		220			363			65	%
Net revenues		1,238			1,228			1,255			1,298			1,284			1,402			1,371			9	%		(2	%)		3,721			4,057			9	%
Total non-interest expenses		885			1,110			1,225			1,214			1,261			1,245			1,213			(1	%)		(3	%)		3,220			3,719			15	%
Income before taxes		353			118			30			84			23			157			158			*			1	%		501			338			(33	%)
Provision for income taxes		139			48			11			(1	)		9			51			53			*			4	%		198			113			(43	%)
Income from continuing operations (1)	$	214		$	70		$	19		$	85		$	14		$	106		$	105			*			(1	%)	$	303		$	225			(26	%)
Return on average common equity (2)		23	%		8	%		2	%		9	%		2	%		13	%		14	%								11	%		9	%
Pre-tax profit margin (3)		29	%		10	%		2	%		7	%		2	%		11	%		12	%								14	%		8	%

(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 29.

8

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			May 31, 2006			Aug 31, 2006			3Q06 vs. 3Q05			3Q06 vs. 2Q06
Global representatives		10,471			10,438			9,311			9,526			9,000			8,179			8,069			(13	%)		(1	%)
Annualized revenue per global
representative (thousands) (1)	$	462		$	470		$	508		$	551		$	554		$	653		$	675			33	%		3	%
Assets by client segment (billions)
$10m or more		148			148			153			157			167			172			178			16	%		3	%
$1m - $10m		211			211			215			218			224			225			234			9	%		4	%
Subtotal - > $1m		359			359			368			375			391			397			412			12	%		4	%
$100k - $1m		193			190			188			181			181			183			183			(3	%)		--
< $100k		38			36			34			32			32			29			28			(18	%)		(3	%)
Client assets excluding corporate/other		590			585			590			588			604			609			623			6	%		2	%
Corporate / other		28			28			29			29			29			30			29			--			(3	%)
Total client assets (billions)	$	618		$	613		$	619		$	617		$	633		$	639		$	652			5	%		2	%
Fee-based client account assets (billions) (2)	$	166		$	165		$	170		$	173		$	182		$	190		$	193			14	%		2	%
Fee-based assets as a % of client assets		27	%		27	%		27	%		28	%		29	%		30	%		30	%
Bank deposit program (millions)	$	496		$	446		$	449		$	1,689		$	7,319		$	9,114		$	9,839			*			8	%
Client assets per global
representative (millions) (3)	$	59		$	59		$	66		$	65		$	70		$	78		$	81			23	%		4	%
Domestic retail net new assets (billions) (4)	$	3.7		$	3.8		$	(2.1	)	$	(8.1	)	$	-		$	2.4		$	5.4			*			125	%
Domestic retail locations		524			526			517			485			484			473			460			(11	%)		(3	%)

(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 29.

9

MORGAN STANLEY

Quarterly Asset Management Income Statement Information

(unaudited, dollars in millions)

	Quarter Ended																					Percentage Change From:						Nine Months Ended						Percentage
	Feb 28, 2005			May 31, 2005			Aug 31, 2005			Nov 30, 2005			Feb 28, 2006			May 31, 2006			Aug 31, 2006			3Q06 vs. 3Q05			3Q06 vs. 2Q06			Aug 31, 2005			Aug 31, 2006			Change
Investment banking	$	11		$	11		$	13		$	15		$	12		$	15		$	9			(31	%)		(40	%)	$	35		$	36			3	%
Principal transactions:
Investments		64			2			33			227			30			69			(2	)		(106	%)		(103	%)		99			97			(2	%)
Commissions		7			7			9			6			7			7			5			(44	%)		(29	%)		23			19			(17	%)
Asset management, distribution and admin fees		605			615			612			628			639			621			606			(1	%)		(2	%)		1,832			1,866			2	%
Interest and dividends		3			3			4			13			5			10			19			*			90	%		10			34			*
Other		8			6			11			5			6			6			6			(45	%)		--			25			18			(28	%)
Total revenues		698			644			682			894			699			728			643			(6	%)		(12	%)		2,024			2,070			2	%
Interest expense		2			2			3			4			4			5			9			200	%		80	%		7			18			157	%
Net revenues		696			642			679			890			695			723			634			(7	%)		(12	%)		2,017			2,052			2	%
Total non-interest expenses		409			467			517			507			523			499			509			(2	%)		2	%		1,393			1,531			10	%
Income before taxes		287			175			162			383			172			224			125			(23	%)		(44	%)		624			521			(17	%)
Provision for income taxes		107			68			57			146			67			89			50			(12	%)		(44	%)		232			206			(11	%)
Income from continuing operations (1)	$	180		$	107		$	105		$	237		$	105		$	135		$	75			(29	%)		(44	%)	$	392		$	315			(20	%)
Return on average common equity (2)		41	%		25	%		24	%		55	%		21	%		26	%		13	%								30	%		20	%
Pre-tax profit margin (3)		41	%		27	%		24	%		43	%		25	%		31	%		20	%								31	%		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 29.

10

MORGAN STANLEY

Quarterly Financial Information and Statistical Data

Asset Management

(unaudited, dollars in billions)

	Quarter Ended																					Percentage Change From:						Nine Months Ended						Percentage
	Feb 28, 2005			May 31, 2005			Aug 31, 2005			Nov 30, 2005			Feb 28, 2006			May 31, 2006			Aug 31, 2006			3Q06 vs. 3Q05			3Q06 vs. 2Q06			Aug 31, 2005			Aug 31, 2006			Change
Assets under management or supervision
Net flows by distribution channel
Americas Retail Morgan Stanley Brand		(3.0	)		(2.2	)		(2.6	)		(2.9	)		(3.0	)		(2.2	)		(2.2	)		15	%		--			(7.8	)		(7.4	)		5	%
Americas Retail Van Kampen Brand		1.1			0.6			0.7			0.7			(0.7	)		(0.4	)		(0.8	)		*			(100	%)		2.4			(1.9	)		(179	%)
Americas Intermediary		(3.9	)		0.2			1.6			0.4			1.7			4.0			1.5			(6	%)		(63	%)		(2.1	)		7.2			*
U.S. Institutional		(4.1	)		(4.1	)		(2.0	)		(2.2	)		(4.3	)		(4.6	)		(2.3	)		(15	%)		50	%		(10.2	)		(11.2	)		(10	%)
Non- U.S.		1.9			1.6			(0.1	)		3.8			1.1			2.0			0.2			*			(90	%)		3.4			3.3			(3	%)
Net flows excluding money markets		(8.0	)		(3.9	)		(2.4	)		(0.2	)		(5.2	)		(1.2	)		(3.6	)		(50	%)		*			(14.3	)		(10.0	)		30	%
Money Market Net Flows
Institutional		1.7			(0.9	)		2.9			(1.2	)		4.0			(1.4	)		2.8			(3	%)		*			3.7			5.4			46
Retail		(0.8	)		(2.3	)		(0.7	)		(2.7	)		(5.7	)		(3.0	)		(0.7	)		--			77	%		(3.8	)		(9.4	)		(147	%)
Total money market net flows		0.9			(3.2	)		2.2			(3.9	)		(1.7	)		(4.4	)		2.1			(5	%)		148	%		(0.1	)		(4.0	)		*
Assets under management or supervision by distribution channel
Americas Retail Morgan Stanley Brand	$	68		$	65		$	64		$	62		$	60		$	58		$	56			(13	%)		(3	%)
Americas Retail Van Kampen Brand		81			83			86			88			90			89			90			5	%		1	%
Americas Intermediary		44			43			46			48			51			55			59			28	%		7	%
U.S. Institutional		92			86			87			87			88			86			85			(2	%)		(1	%)
Non- U.S.		59			59			62			67			75			77			80			29	%		4	%
Total long term assets under management or supervision		344			336			345			352			364			365			370			7	%		1	%
Institutional money markets/liquidity		32			31			34			33			37			37			40			18	%		8	%
Retail money markets		51			49			49			46			41			38			38			(22	%)		--
Total Money Markets		83			80			83			79			78			75			78			(6	%)		4	%
Total assets under management or supervision	$	427		$	416		$	428		$	431		$	442		$	440		$	448			5	%		2	%
Assets under management or supervision by asset class
Equity	$	207		$	205		$	212		$	218		$	230		$	226		$	226			7	%		--
Fixed income		97			92			92			91			90			91			93			1	%		2	%
Money market		83			80			83			79			78			75			78			(6	%)		4	%
Alternatives		19			18			18			19			18			20			20			11	%		--
Real estate		10			10			11			12			14			15			18			64	%		20	%
Total assets under management		416			405			416			419			430			427			435			5	%		2	%
Unit investment trust		11			11			12			12			12			13			13			8	%		--
Total assets under management or supervision	$	427		$	416		$	428		$	431		$	442		$	440		$	448			5	%		2	%

Note:	Certain reclassifications have been made to prior period amounts to conform to the current presentation.
	Refer to Legal Notice page 29.

11

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		May 31, 2006		Aug 31, 2006		3Q06 vs. 3Q05			3Q06 vs. 2Q06
Assets under management or supervision by distribution channel
Americas Retail Morgan Stanley Brand	$	68	$	65	$	64	$	62	$	60	$	58	$	56		(13	%)		(3	%)
Americas Retail Van Kampen Brand		81		83		86		88		90		89		90		5	%		1	%
Americas Intermediary		44		43		46		48		51		55		59		28	%		7	%
U.S. Institutional		92		86		87		87		88		86		85		(2	%)		(1	%)
Non- U.S.		59		59		62		67		75		77		80		29	%		4	%
Total long term assets under management or supervision		344		336		345		352		364		365		370		7	%		1	%
Institutional money markets/liquidity		32		31		34		33		37		37		40		18	%		8	%
Retail money markets		51		49		49		46		41		38		38		(22	%)		--
Total Money Markets		83		80		83		79		78		75		78		(6	%)		4	%
Sub-total assets under management or supervision		427		416		428		431		442		440		448		5	%		2	%
Global wealth management group		127		126		132		139		149		148		161		22	%		9	%
Institutional securities		22		23		27		29		31		37		38		41	%		3	%
Total assets under management or supervision	$	576	$	565	$	587	$	599	$	622	$	625	$	647		10	%		4	%
Consolidated assets under management or supervision by asset class
Equity	$	267	$	265	$	276	$	285	$	301	$	303	$	306		11	%		1	%
Fixed income		111		106		107		108		108		109		111		4	%		2	%
Money market		87		84		87		83		83		80		83		(5	%)		4	%
Alternatives		19		18		18		19		18		20		20		11	%		--
Real estate		32		33		38		41		45		52		56		47	%		8	%
Total assets under management		516		506		526		536		555		564		576		10	%		2	%
Unit investment trust		11		11		12		12		12		13		13		8	%		--
Other (1)		49		48		49		51		55		48		58		18	%		21	%
Total assets under management or supervision	$	576	$	565	$	587	$	599	$	622	$	625	$	647		10	%		4	%

(1)	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 29.

12

MORGAN STANLEY

Quarterly Discover Income Statement Information

(unaudited, dollars in millions)

	Quarter Ended																					Percentage Change From:						Nine Months Ended						Percentage
	Feb 28, 2005			May 31, 2005			Aug 31, 2005			Nov 30, 2005			Feb 28, 2006			May 31, 2006			Aug 31, 2006			3Q06 vs. 3Q05			3Q06 vs. 2Q06			Aug 31, 2005			Aug 31, 2006			Change
Merchant, cardmember and other fees	$	308		$	318		$	357		$	340		$	289		$	277		$	312			(13	%)		13	%	$	983		$	878			(11	%)
Servicing and securitization income		494			423			398			294			596			651			565			42	%		(13	%)		1,315			1,812			38	%
Other		2			2			(1	)		2			4			5			13			*			160	%		3			22			*
Total non-interest revenues		804			743			754			636			889			933			890			18	%		(5	%)		2,301			2,712			18	%
Interest revenue		458			536			593			587			586			608			642			8	%		6	%		1,587			1,836			16	%
Interest expense		168			182			212			219			231			220			253			19	%		15	%		562			704			25	%
Net interest income		290			354			381			368			355			388			389			2	%		--			1,025			1,132			10	%
Provision for consumer loan losses		135			209			224			310			155			130			232			4	%		78	%		568			517			(9	%)
Net credit income		155			145			157			58			200			258			157			--			(39	%)		457			615			35	%
Net revenues		959			888			911			694			1,089			1,191			1,047			15	%		(12	%)		2,758			3,327			21	%
Total non-interest expenses		605			625			672			629			610			650			679			1	%		4	%		1,902			1,939			2	%
Income before losses from
unconsolidated investees and taxes		354			263			239			65			479			541			368			54	%		(32	%)		856			1,388			62	%
Losses from unconsolidated investees		0			0			0			0			1			0			1			*			*			0			2			*
Income before taxes		354			263			239			65			478			541			367			54	%		(32	%)		856			1,386			62	%
Provision for income taxes		134			99			89			18			178			203			125			40	%		(38	%)		322			506			57	%
Income from continuing operations (1)	$	220		$	164		$	150		$	47		$	300		$	338		$	242			61	%		(28	%)	$	534		$	880			65	%
Return on average common equity (2)		20	%		16	%		13	%		4	%		26	%		27	%		19	%								16	%		24	%
Pre-tax profit margin (3)		37	%		30	%		26	%		9	%		44	%		45	%		35	%								31	%		42	%

(1)	Excludes 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 29.

13

MORGAN STANLEY

Quarterly Discover Income Statement Information

(Managed loan basis)

(unaudited, dollars in millions)

	Quarter Ended																					Percentage Change From:						Nine Months Ended						Percentage
	Feb 28, 2005			May 31, 2005			Aug 31, 2005			Nov 30, 2005			Feb 28, 2006			May 31, 2006			Aug 31, 2006			3Q06 vs. 3Q05			3Q06 vs. 2Q06			Aug 31, 2005			Aug 31, 2006			Change
Merchant, cardmember and other fees	$	481		$	484		$	532		$	520		$	519		$	541		$	579			9	%		7	%	$	1,497		$	1,639			9	%
Servicing and securitization income		0			0			0			0			0			0			0			--			--			0			0			--
Other		34			(14	)		(19	)		(74	)		143			22			11			158	%		(50	%)		1			176			*
Total non-interest revenues		515			470			513			446			662			563			590			15	%		5	%		1,498			1,815			21	%
Interest revenue		1,383			1,426			1,463			1,432			1,475			1,576			1,572			7	%		--			4,272			4,623			8	%
Interest expense		401			433			475			497			541			576			619			30	%		7	%		1,309			1,736			33	%
Net interest income		982			993			988			935			934			1,000			953			(4	%)		(5	%)		2,963			2,887			(3	%)
Provision for consumer loan losses		538			575			590			687			507			372			496			(16	%)		33	%		1,703			1,375			(19	%)
Net credit income		444			418			398			248			427			628			457			15	%		(27	%)		1,260			1,512			20	%
Net revenues		959			888			911			694			1,089			1,191			1,047			15	%		(12	%)		2,758			3,327			21	%
Total non-interest expenses		605			625			672			629			610			650			679			1	%		4	%		1,902			1,939			2	%
Income before losses from
investees and taxes		354			263			239			65			479			541			368			54	%		(32	%)		856			1,388			62	%
Losses/(gains) from unconsolidated investees		0			0			0			0			1			0			1			*			*			0			2			*
Income before taxes		354			263			239			65			478			541			367			54	%		(32	%)		856			1,386			62	%
Provision for income taxes		134			99			89			18			178			203			125			40	%		(38	%)		322			506			57	%
Income from continuing operations (1)	$	220		$	164		$	150		$	47		$	300		$	338		$	242			61	%		(28	%)	$	534		$	880			65	%
Return on average common equity (2)		20	%		16	%		13	%		4	%		26	%		27	%		19	%								16	%		24	%
Pre-tax profit margin (3)		37	%		30	%		26	%		9	%		44	%		45	%		35	%								31	%		42	%

(1)	Excludes 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 29.

14

MORGAN STANLEY

Quarterly Financial Information and Statistical Data

Discover

(unaudited, dollars in millions)

	Quarter Ended																					Percentage Change From:						Nine Months Ended						Percentage
	Feb 28, 2005			May 31, 2005			Aug 31, 2005			Nov 30, 2005			Feb 28, 2006			May 31, 2006			Aug 31, 2006			3Q06 vs. 3Q05			3Q06 vs. 2Q06			Aug 31, 2005			Aug 31, 2006			Change
Total owned credit card loans
Period end	$	18,908		$	19,385		$	20,570		$	22,496		$	19,924		$	21,764		$	22,922			11%			5%		$	20,570		$	22,922			11%
Average	$	19,210		$	18,753		$	19,835		$	21,934		$	21,976		$	19,664		$	22,424			13%			14%		$	19,267		$	21,350			11%
Total managed credit card loans (1)(2)
Period end	$	47,770		$	46,845		$	47,105		$	46,936		$	47,825		$	48,539		$	49,585			5%			2%		$	47,105		$	49,585			5%
Average	$	48,930		$	47,146		$	46,769		$	46,502		$	47,575		$	47,307		$	48,763			4%			3%		$	47,605		$	47,884			1%
Interest yield		11.23	%		11.69	%		12.04	%		11.94	%		12.13	%		12.69	%		12.38	%		34 bp			(31 bp	)		11.65	%		12.40	%		75 bp
Interest spread		7.79	%		7.96	%		7.95	%		7.55	%		7.44	%		7.78	%		7.07	%		(88 bp	)		(71 bp	)		7.90	%		7.43	%		(47 bp	)
Transaction volume (billions)	$	25.9		$	25.4		$	26.7		$	26.1		$	26.8		$	28.5		$	30.2			13%			6%		$	78.0		$	85.5			10%
Net Sales		20.8			21.1			22.4			21.6			22.5			24.0			25.7			15%			7%			64.3			72.2			12%
Other transaction volume		5.1			4.3			4.3			4.5			4.3			4.5			4.5			5%			--			13.7			13.3			(3%	)
Accounts (millions)		45.9			45.9			45.6			45.5			46.1			45.9			45.6			--			(1%	)		45.6			45.6			--
Active accounts (millions)		19.5			19.3			19.2			19.2			19.6			19.6			19.7			3%			1%			19.2			19.7			3%
Average receivables per avg. active account (actual $)	$	2,476		$	2,426		$	2,429		$	2,420		$	2,457		$	2,415		$	2,484			2%			3%		$	2,443		$	2,452			--
Trans volume per avg. active account (actual $)	$	1,311		$	1,306		$	1,387		$	1,360		$	1,385		$	1,457		$	1,538			11%			6%		$	4,004		$	4,381			9%
Net gain on securitization	$	32		$	(16	)	$	(18	)	$	(76	)	$	139		$	18		$	(2	)		89%			(111%	)	$	(2	)	$	154			*
Return on managed receivables (3)		1.82	%		1.38	%		1.28	%		0.40	%		2.56	%		2.84	%		1.96	%		68 bp			(88 bp	)		1.50	%		2.45	%		95 bp
Credit quality
Net charge-off rate		5.11	%		4.94	%		5.12	%		5.76	%		5.06	%		3.30	%		3.81	%		(131 bp	)		51 bp			5.06	%		4.06	%		(100 bp	)
Delinquency rate (over 30 days)		4.24	%		3.90	%		3.91	%		3.98	%		3.45	%		3.29	%		3.41	%		(50 bp	)		12 bp			3.91	%		3.41	%		(50 bp	)
Delinquency rate (over 90 days)		2.05	%		1.83	%		1.80	%		1.75	%		1.61	%		1.53	%		1.59	%		(21 bp	)		6 bp			1.80	%		1.59	%		(21 bp	)
Allowance for loan losses at period end	$	840		$	828		$	817		$	829		$	777		$	773		$	808			(1%	)		5%		$	817		$	808			(1%	)
International managed credit card loans (2)
Period end	$	2,648		$	2,479		$	2,684		$	2,675		$	4,183		$	4,406		$	4,522			68%			3%		$	2,684		$	4,522			68%
Average	$	2,606		$	2,578		$	2,523		$	2,667		$	2,911		$	4,049		$	4,361			73%			8%		$	2,569		$	3,780			47%
Accounts (millions)		1.4			1.4			1.5			1.5			2.6			2.9			2.9			93%			--			1.5			2.9			93%
Payment services (millions of transactions)
Discover network transaction volume		314			315			338			334			339			340			362			7%			6%			967			1,041			8%
PULSE network transaction volume (4)		216			457			466			417			425			471			473			2%			--			1,139			1,369			20%
Total network transaction volume		530			772			804			751			764			811			835			4%			3%			2,106			2,410			14%

(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 29.

15

MORGAN STANLEY

Quarterly Intersegment Eliminations Income Statement Information

(unaudited, dollars in millions)

	Quarter Ended																					Percentage Change From:						Nine Months Ended						Percentage
	Feb 28, 2005			May 31, 2005			Aug 31, 2005			Nov 30, 2005			Feb 28, 2006			May 31, 2006			Aug 31, 2006			3Q06 vs. 3Q05			3Q06 vs. 2Q06			Aug 31, 2005			Aug 31, 2006			Change
Investment banking (1)	$	(3	)	$	0		$	0		$	(1	)	$	0		$	(33	)	$	0			--			*		$	(3	)	$	(33	)		*
Principal transactions:
Trading		(1	)		(1	)		(1	)		(2	)		(2	)		(3	)		(2	)		(100	%)		33	%		(3	)		(7	)		(133	%)
Investments		0			0			0			0			0			0			0			--			--			0			0			--
Commissions		(15	)		(16	)		(12	)		(11	)		(7	)		(8	)		(7	)		42	%		13	%		(43	)		(22	)		49	%
Asset management, distribution and admin. fees		(42	)		(40	)		(38	)		(51	)		(53	)		(35	)		(40	)		(5	%)		(14	%)		(120	)		(128	)		(7	%)
Interest and dividends		(28	)		(32	)		(36	)		(43	)		(39	)		(68	)		(87	)		(142	%)		(28	%)		(96	)		(194	)		(102	%)
Other		(9	)		(10	)		(11	)		(9	)		(10	)		(15	)		(10	)		9	%		33	%		(30	)		(35	)		(17	%)
Total revenues		(98	)		(99	)		(98	)		(117	)		(111	)		(162	)		(146	)		(49	%)		10	%		(295	)		(419	)		(42	%)
Interest expense		(28	)		(32	)		(36	)		(43	)		(52	)		(64	)		(93	)		(158	%)		(45	%)		(96	)		(209	)		(118	%)
Net revenues		(70	)		(67	)		(62	)		(74	)		(59	)		(98	)		(53	)		15	%		46	%		(199	)		(210	)		(6	%)
Total non-interest expenses		(94	)		(92	)		(85	)		(96	)		(78	)		(85	)		(68	)		20	%		20	%		(271	)		(231	)		15	%
Income before taxes		24			25			23			22			19			(13	)		15			(35	%)		*			72			21			(71	%)
Provision for income taxes		9			10			8			7			7			(5	)		6			(25	%)		*			27			8			(70	%)
Income from continuing operations (2)	$	15		$	15		$	15		$	15		$	12		$	(8	)	$	9			(40	%)		*		$	45		$	13			(71	%)

(1)	Included in the May 31, 2006 amount is $30m related to the sale of the Company's aircraft leasing business.
(2)	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 29.

16

MORGAN STANLEY

The following (page 17) 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 on a managed basis for its Discover business

(page 18) 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:						Nine Months Ended						Percentage
	Feb 28, 2005			May 31, 2005			Aug 31, 2005			Nov 30, 2005			Feb 28, 2006 (2)			May 31, 2006 (2)			Aug 31, 2006			3Q06 vs. 3Q05			3Q06 vs. 2Q06			Aug 31, 2005			Aug 31, 2006 (2)			Change
Investment banking	$	824		$	814		$	992		$	1,216		$	982		$	1,165		$	1,138			15	%		(2	%)	$	2,630		$	3,285			25	%
Principal transactions:
Trading		1,847			1,795			2,151			1,577			3,082			3,568			2,826			31	%		(21	%)		5,793			9,476			64	%
Investments		153			226			103			499			314			690			202			96	%		(71	%)		482			1,206			150	%
Commissions		824			824			804			911			929			1,005			888			10	%		(12	%)		2,452			2,822			15	%
Asset management, distribution and administration fees		1,204			1,246			1,249			1,259			1,279			1,333			1,327			6	%		(1	%)		3,699			3,939			6	%
Interest and dividends		5,405			5,521			6,429			8,738			9,991			9,537			12,071			57	%		7	%		17,355			31,599			82	%
Other		103			119			107			130			111			118			117			9	%		--			329			346			5	%
Total revenues		10,360			10,545			11,835			14,330			16,688			17,416			18,568			88	%		27	%		32,740			52,673			61	%
Interest expense		4,477			5,401			5,798			8,060			9,293			9,808			11,625			101	%		19	%		15,676			30,727			96	%
Net revenues		5,883			5,144			6,037			6,270			7,395			7,608			6,943			15	%		(9	%)		17,064			21,946			29	%
Compensation and benefits		2,639			2,413			2,923			2,473			3,917			3,499			2,914			--			(17	%)		7,975			10,330			30	%
Occupancy and equipment		308			209			217			220			209			216			232			7	%		7	%		734			657			(10	%)
Brokerage, clearing and exchange fees		260			276			267			267			292			340			339			27	%		--			803			971			21	%
Information processing and communications		260			265			263			269			259			272			275			5	%		1	%		788			806			2	%
Marketing and business development		112			143			143			177			119			156			147			3	%		(6	%)		398			422			6	%
Professional services		315			365			425			507			370			449			456			7	%		2	%		1,105			1,275			15	%
Other		499			342			296			292			240			191			281			(5	%)		47	%		1,137			712			(37	%)
September 11th related insurance recoveries, net		(251	)		0			0			0			0			0			0			--			--			(251	)		0			*
Total non-interest expenses		4,142			4,013			4,534			4,205			5,406			5,123			4,644			2	%		(9	%)		12,689			15,173			20	%
Income from continuing operations before losses from unconsolidated investees, taxes and cumulative effect of accounting change		1,741			1,131			1,503			2,065			1,989			2,485			2,299			53	%		(7	%)		4,375			6,773			55	%
Losses from unconsolidated investees		73			67			105			66			68			103			1			(99	%)		(99	%)		245			172			(30	%)
Income before taxes		1,668			1,064			1,398			1,999			1,921			2,382			2,298			64	%		(4	%)		4,130			6,601			60	%
Provision for income taxes		539			297			382			300			614			857			689			80	%		(20	%)		1,218			2,160			77	%
Income from continuing operations (3)	$	1,129		$	767		$	1,016		$	1,699		$	1,307		$	1,525		$	1,609			58	%		6	%	$	2,912		$	4,441			53	%
Return on average common equity (4)		23	%		16	%		20	%		32	%		24	%		26	%		27	%								20	%		26	%
Compensation and benefits as a % of net revenues		45	%		47	%		48	%		39	%		53	%		46	%		42	%								47	%		47	%
Non-compensation expenses as a % of  net revenues		26	%		31	%		27	%		28	%		20	%		21	%		25	%								28	%		22	%
Pre-tax profit margin (5)		30	%		22	%		25	%		33	%		27	%		33	%		33	%								26	%		31	%
Number of employees (6)		39,641			40,267			40,226			39,723			40,188			40,088			41,416			3	%		3	%

(1)	Includes the elimination of intersegment activity between Institutional Securities, Global Wealth Management Group and Asset Management.
(2)	See page 24 for a description of certain adjustments affecting previously reported amounts for the quarters ended Feb 28, 2006 and May 31, 2006 and the nine months ended Aug 31, 2006. See pages 25 - 27 for a reconciliation to previously reported financial information for these periods.
(3)	Excludes gain/(loss) from discontinued operations and cumulative effect of accounting change.
(4)	Refer to page 4 for the allocation of average common equity.
(5)	Income before taxes, excluding losses from unconsolidated investees, as a % of net revenues.
(6)	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 29.

17

MORGAN STANLEY

Quarterly Discover Income Statement Information

(Managed loan basis)

(unaudited, dollars in millions)

	Quarter Ended																					Percentage Change From:						Nine Months Ended						Percentage
	Feb 28, 2005			May 31, 2005			Aug 31, 2005			Nov 30, 2005			Feb 28, 2006			May 31, 2006			Aug 31, 2006			3Q06 vs. 3Q05			3Q06 vs. 2Q06			Aug 31, 2005			Aug 31, 2006			Change
Merchant, cardmember and other fees	$	481		$	484		$	532		$	520		$	519		$	541		$	579			9	%		7	%	$	1,497		$	1,639			9	%
Servicing and securitization income		0			0			0			0			0			0			0			--			--			0			0			--
Other		34			(14	)		(19	)		(74	)		143			22			11			158	%		(50	%)		1			176			*
Total non-interest revenues		515			470			513			446			662			563			590			15	%		5	%		1,498			1,815			21	%
Interest revenue		1,383			1,426			1,463			1,432			1,475			1,576			1,572			7	%		--			4,272			4,623			8	%
Interest expense		401			433			475			497			541			576			619			30	%		7	%		1,309			1,736			33	%
Net interest income		982			993			988			935			934			1,000			953			(4	%)		(5	%)		2,963			2,887			(3	%)
Provision for consumer loan losses		538			575			590			687			507			372			496			(16	%)		33	%		1,703			1,375			(19	%)
Net credit income		444			418			398			248			427			628			457			15	%		(27	%)		1,260			1,512			20	%
Net revenues		959			888			911			694			1,089			1,191			1,047			15	%		(12	%)		2,758			3,327			21	%
Compensation and benefits		215			209			242			199			244			224			235			(3	%)		5	%		666			703			6	%
Occupancy and equipment		24			23			22			23			23			21			23			5	%		10	%		69			67			(3	%)
Information processing and communications		83			85			87			98			90			96			98			13	%		2	%		255			284			11	%
Marketing and business development		145			155			133			154			119			142			145			9	%		2	%		433			406			(6	%)
Professional services		67			73			80			74			64			92			93			16	%		1	%		220			249			13	%
Other		71			80			108			81			70			75			85			(21	%)		13	%		259			230			(11	%)
Total non-interest expenses		605			625			672			629			610			650			679			1	%		4	%		1,902			1,939			2	%
Income before losses from
unconsolidated investees and taxes		354			263			239			65			479			541			368			54	%		(32	%)		856			1,388			62	%
Losses from unconsolidated investees		0			0			0			0			1			0			1			*			*			0			2			*
Income before taxes		354			263			239			65			478			541			367			54	%		(32	%)		856			1,386			62	%
Provision for income taxes		134			99			89			18			178			203			125			40	%		(38	%)		322			506			57	%
Income from continuing operations (1)	$	220		$	164		$	150		$	47		$	300		$	338		$	242			61	%		(28	%)	$	534		$	880			65	%
Return on average common equity (2)		20	%		16	%		13	%		4	%		26	%		27	%		19	%								16	%		24	%
Compensation and benefits as a % of net revenues		22	%		24	%		27	%		29	%		22	%		19	%		22	%								24	%		21	%
Non-compensation expenses as a % of net revenues		41	%		47	%		47	%		62	%		34	%		36	%		42	%								45	%		37	%
Pre-tax profit margin (3)		37	%		30	%		26	%		9	%		44	%		45	%		35	%								31	%		42	%
Number of employees		14,077			13,875			13,534			13,495			13,683			13,075			12,933			(4	%)		(1	%)

(1)	Excludes 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 29.

18

MORGAN STANLEY

The following (pages 19 - 22) present a reconciliation for certain information disclosed on pages 13, 14, 15 and 18.

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 Aug 31, 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	$	22,922	$	22,424		4.27	%		10.45	%		5.40	%		3.57	%		3.17	%		1.48	%
Securitized		26,663		26,339		3.64	%		14.02	%		8.52	%		4.01	%		3.62	%		1.68	%
Managed	$	49,585	$	48,763		1.96	%		12.38	%		7.07	%		3.81	%		3.41	%		1.59	%
	Quarter Ended May 31, 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	$	21,764	$	19,664		6.83	%		11.01	%		6.41	%		3.02	%		2.97	%		1.38	%
Securitized		26,775		27,643		4.86	%		13.89	%		8.76	%		3.50	%		3.56	%		1.65	%
Managed	$	48,539	$	47,307		2.84	%		12.69	%		7.78	%		3.30	%		3.29	%		1.53	%
	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 29.

19

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.
Note:	Certain reclassifications have been made to prior period amounts to conform to the current presentation.
	Refer to Legal Notice page 29.

20

MORGAN STANLEY

Year to Date Discover Reconciliation of General Purpose Credit Card Loan Data ⁽¹⁾

(unaudited, dollars in millions)

	Nine Months Ended Aug 31, 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	$	22,922	$	21,350		5.49	%		10.43	%		5.72	%		3.74	%		3.17	%		1.48	%
Securitized		26,663		26,534		4.41	%		13.99	%		8.82	%		4.31	%		3.62	%		1.68	%
Managed	$	49,585	$	47,884		2.45	%		12.40	%		7.43	%		4.06	%		3.41	%		1.59	%
	Nine Months 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	$	19,267		3.70	%		10.21	%		6.09	%		4.64	%		3.62	%		1.67	%
Securitized		26,535		28,338		2.51	%		12.62	%		9.11	%		5.34	%		4.13	%		1.90	%
Managed	$	47,105	$	47,605		1.50	%		11.65	%		7.90	%		5.06	%		3.91	%		1.80	%

(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.
Note:	Certain reclassifications have been made to prior period amounts to conform to the current presentation.
	Refer to Legal Notice page 29.

21

MORGAN STANLEY

Quarterly Discover Reconciliation of Managed Income Statement Data ⁽¹⁾

(unaudited, dollars in millions)

	Quarter Ended																					Nine Months Ended
	Feb 28, 2005			May 31, 2005			Aug 31, 2005			Nov 30, 2005			Feb 28, 2006			May 31, 2006			Aug 31, 2006			Aug 31, 2005			Aug 31, 2006
Merchant, cardmember and other fees:
Owned	$	308		$	318		$	357		$	340		$	289		$	277		$	312		$	983		$	878
Securitization adjustment		173			166			175			180			230			264			267			514			761
Managed	$	481		$	484		$	532		$	520		$	519		$	541		$	579		$	1,497		$	1,639
Servicing and securitizations income:
Owned	$	494		$	423		$	398		$	294		$	596		$	651		$	565		$	1,315		$	1,812
Securitization adjustment		(494	)		(423	)		(398	)		(294	)		(596	)		(651	)		(565	)		(1,315	)		(1,812	)
Managed	$	-		$	-		$	-		$	-		$	-		$	-		$	-		$	-		$	-
Other:
Owned	$	2		$	2		$	(1	)	$	2		$	4		$	5		$	13		$	3		$	22
Securitization adjustment		32			(16	)		(18	)		(76	)		139			17			(2	)		(2	)		154
Managed	$	34		$	(14	)	$	(19	)	$	(74	)	$	143		$	22		$	11		$	1		$	176
Interest revenue:
Owned	$	458		$	536		$	593		$	587		$	586		$	608		$	642		$	1,587		$	1,836
Securitization adjustment		925			890			870			845			889			968			930			2,685			2,787
Managed	$	1,383		$	1,426		$	1,463		$	1,432		$	1,475		$	1,576		$	1,572		$	4,272		$	4,623
Interest expense:
Owned	$	168		$	182		$	212		$	219		$	231		$	220		$	253		$	562		$	704
Securitization adjustment		233			251			263			278			310			356			366			747			1,032
Managed	$	401		$	433		$	475		$	497		$	541		$	576		$	619		$	1,309		$	1,736
Provision for consumer loan losses:
Owned	$	135		$	209		$	224		$	310		$	155		$	130		$	232		$	568		$	517
Securitization adjustment		403			366			366			377			352			242			264			1,135			858
Managed	$	538		$	575		$	590		$	687		$	507		$	372		$	496		$	1,703		$	1,375

(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 29.

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 (1)			May 31, 2006 (1)			Aug 31, 2006
Total assets		$	802,210		$	818,711		$	837,391		$	898,523		$	959,625		$	1,027,054		$	1,028,872
Less:	Securities purchased under agreements to resell		(143,462	)		(145,579	)		(143,642	)		(174,330	)		(176,260	)		(190,289	)		(171,547	)
	Securities borrowed		(207,985	)		(228,454	)		(227,098	)		(244,241	)		(252,896	)		(274,581	)		(283,024	)
Add:	Financial instruments sold, not yet purchased		119,913			131,901			137,443			147,000			149,561			159,822			152,979
Less:	Derivative contracts sold, not yet purchased		(37,389	)		(39,835	)		(48,395	)		(44,952	)		(42,928	)		(48,747	)		(47,017	)
	Subtotal		533,287			536,744			555,699			582,000			673,102			673,259			680,263
Less:	Segregated customer cash and securities balances		(26,461	)		(36,539	)		(30,912	)		(30,540	)		(27,156	)		(31,685	)		(30,917	)
	Asets recorded under certain provisions of SFAS No.140 and FIN 46		(57,042	)		(57,394	)		(64,066	)		(67,091	)		(78,925	)		(90,046	)		(89,649	)
	Goodwill and intangible assets		(2,563	)		(2,528	)		(2,531	)		(2,500	)		(2,873	)		(2,932	)		(2,943	)
Adjusted assets		$	447,221		$	440,283		$	458,190		$	481,869		$	528,148		$	548,596		$	556,754
Common equity		$	28,495		$	28,330		$	28,226		$	29,182		$	30,103		$	32,118		$	33,072
Preferred equity			0			0			0			0			0			0			1,100
Shareholders' equity			28,495			28,330			28,226			29,182			30,103			32,118			34,172
Junior subordinated debt issued to capital trusts (2)			2,833			2,894			2,881			2,764			3,783			3,784			3,784
	Subtotal		31,328			31,224			31,107			31,946			33,886			35,902			37,956
Less: Goodwill and intangible assets			(2,563	)		(2,528	)		(2,531	)		(2,500	)		(2,873	)		(2,932	)		(2,943	)
Tangible shareholders' equity		$	28,765		$	28,696		$	28,576		$	29,446		$	31,013		$	32,970		$	35,013
Leverage ratio (3)			27.9x			28.5x			29.3x			30.5x			30.9x			31.2x			29.4x
Adjusted leverage ratio (4)			15.5x			15.3x			16.0x			16.4x			17.0x			16.6x			15.9x

(1)	See page 24 for a description of certain adjustments affecting previously reported amounts for the quarters ended Feb 28, 2006 and May 31, 2006. See pages 25 - 27 for a reconciliation to previously reported financial information for these periods.
(2)	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 (some have final maturity at issuance of thirty years extendible at the Company's option by a further nineteen years, others have a 40 year final maturity at issuance), 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.
(3)	Leverage ratio equals total assets divided by tangible shareholders' equity.
(4)	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 29.

23

MORGAN STANLEY

The following (pages 25 - 27) present a reconciliation for certain information disclosed on pages 1, 2, 3, 4, 5, 17 and 23 to previously reported financial information.

The Company has adjusted its opening financial position for fiscal 2006 and its financial results for the first two quarters of 2006 to reflect a change in its hedge

accounting under SFAS No. 133, Accounting for Derivatives Instruments and Hedging Activities. The change is being made following a recent technical clarification

by the SEC of itsinterpretation of SFAS No. 133 related to the accounting for fair value hedges of fixed-rate trust preferred securities. The same periods noted also

reflect the adjustment of two cumulative compensation and benefit accruals.

Since January 2005, Morgan Stanley has entered into various interest rate swaps to hedge the interest rate risk inherent in its trust preferred securities.

The terms of the interest rate swaps and the corresponding trust preferred securities mirrored one another, and the Company determined in the past that the

changes in the fair value of the swaps and hedged instruments were the same. The Company applied the commonly used “short-cut method” in accounting

for these fair value hedges and therefore did not reflect any gains or losses for any hedge ineffectiveness during the relevant periods. Based upon an interpretation

of SFAS No. 133 by the SEC, which it recently was made aware of, the Company has determined that since it has the ability at its election to defer interest

payments on its trust preferred securities, these swaps did not qualify for the short-cut method. These swaps performed as expected as effective economic hedges

of interest rate risk. The Company ended hedging of the interest risk on these trust preferred securities effective August 2006 and adjusted its financial results as if

hedge accounting never was applied. Prospectively, the Company will manage the interest rate risk on these securities as part of its overall asset liability management.

During the third quarter, the Company has elected early application of Staff Accounting Bulletin 108 (SAB 108) that was recently released by the U.S.

Securities and Exchange Commission (SEC). SAB 108 allows registrants to adjust prior year financial statements for immaterial errors in the carrying

amount of assets and liabilities as of the beginning of this fiscal year, with an offsetting adjustment being made to the opening balance of retained earnings.

The adjustment of prior period quarterly financial statements within the current fiscal year for immaterial errors is accomplished by adjusting the applicable

financial statement line items when such information is next presented. Such adjustments do not require previously filed reports with the SEC to be amended.

24

MORGAN STANLEY

Reconciliation to Previously Reported Consolidated Financial Information ⁽¹⁾

(unaudited, dollars in millions)

	Selected Financial Position Accounts
	Other		Other			Long-term		Shareholder's
	assets		liabilities			borrowings		equity (2)
Previously Reported - Nov. 30, 2005		12,798		16,836			110,465		29,182
Adjustments		12		(83	)		129		(34	)
Opening balance - Dec. 1, 2005		12,810		16,753			110,594		29,148

	Quarter Ended Feb 28, 2006
	Other		Other			Long-term		Shareholder's			Principal transactions:		Compensation							Earnings per		Return on average
	assets		liabilities			borrowings		equity(2)			trading		and benefits			Interest expense		Net income		diluted share		common equity
Previously Reported		15,988		14,984			121,395		30,124			3,067		4,183			9,481		1,561		1.47		21.1	%
Adjustments		12		(98	)		131		(21	)		13		(22	)		15		13		0.01		0.2	%
As Adjusted		16,000		14,886			121,526		30,103			3,080		4,161			9,496		1,574		1.48		21.3	%

	Quarter Ended May 31, 2006
	Other		Other			Long-term		Shareholder's			Principal transactions:			Compensation							Earnings per			Return on average
	assets		liabilities			borrowings		equity(2)			trading			and benefits		Interest expense		Net income			diluted share			common equity
Previously Reported		17,651		18,159			127,985		32,255			3,735			3,723		9,988		1,957			1.86			25.1	%
Adjustments		12		(162	)		311		(137	)		(170	)		-		9		(116	)		(0.11	)		(1.4	%)
As Adjusted		17,663		17,997			128,296		32,118			3,565			3,723		9,997		1,841			1.75			23.7	%

	Six Months Ended May 31, 2006
	Other		Other			Long-term		Shareholder's			Principal transactions:			Compensation								Earnings per			Return on average
	assets		liabilities			borrowings		equity(2)			trading			and benefits			Interest expense		Net income			diluted share			common equity
Previously Reported		17,651		18,159			127,985		32,255			6,802			7,906			19,469		3,518			3.33			23.1	%
Adjustments		12		(162	)		311		(137	)		(157	)		(22	)		24		(103	)		(0.10	)		(0.6	%)
As Adjusted		17,663		17,997			128,296		32,118			6,645			7,884			19,493		3,415			3.23			22.5	%

(1)	The tables provide a reconciliation to previously reported financial information for the periods indicated. Refer to page 24.
(2)	Includes common equity and preferred equity.
Note:	Certain reclassifications have been made to prior period amounts to conform to the current presentation. Refer to Legal Notice page 29.

25

MORGAN STANLEY

Reconciliation to Previously Reported Institutional Securities Financial Information ⁽¹⁾

(unaudited, dollars in millions)

	Quarter Ended Feb 28, 2006
	Principal transactions:		Total non-interest					Income from		Return on average
	trading		expenses			Interest expense		continuing operations		common equity
Previously Reported		2,945		3,720			9,181		1,163		29	%
Adjustments		13		(22	)		15		13		0	%
As Adjusted		2,958		3,698			9,196		1,176		29	%

	Quarter Ended May 31, 2006
	Principal transactions:			Total non-interest				Income from			Return on average
	trading			expenses		Interest expense		continuing operations			common equity
Previously Reported		3,617			3,458		9,711		1,378			30	%
Adjustments		(170	)		-		9		(116	)		(2	%)
As Adjusted		3,447			3,458		9,720		1,262			28	%

	Six Months Ended May 31, 2006
	Principal transactions:			Total non-interest					Income from			Return on average
	trading			expenses			Interest expense		continuing operations			common equity
Previously Reported		6,562			7,178			18,892		2,541			30	%
Adjustments		(157	)		(22	)		24		(103	)		(2	%)
As Adjusted		6,405			7,156			18,916		2,438			28	%

(1)	The tables provide a reconciliation to previously reported financial information for the periods indicated. Refer to page 24.
Note:	Certain reclassifications have been made to prior period amounts to conform to the current presentation. Refer to Legal Notice page 29.

26

MORGAN STANLEY

Reconciliation to Previously Reported Institutional Securities, Global Wealth Management Group and Asset Management Financial Information ⁽¹⁾

(unaudited, dollars in millions)

	Quarter Ended Feb 28, 2006
	Principal transactions:		Compensation					Income from		Return on average
	trading		and benefits			Interest expense		continuing operations		common equity
Previously Reported		3,069		3,939			9,278		1,294		24	%
Adjustments		13		(22	)		15		13		0	%
As Adjusted		3,082		3,917			9,293		1,307		24	%

	Quarter Ended May 31, 2006
	Principal transactions:			Compensation				Income from			Return on average
	trading			and benefits		Interest expense		continuing operations			common equity
Previously Reported		3,738			3,499		9,799		1,641			28	%
Adjustments		(170	)		-		9		(116	)		(2	%)
As Adjusted		3,568			3,499		9,808		1,525			26	%

	Six Months Ended May 31, 2006
	Principal transactions:			Compensation					Income from			Return on average
	trading			and benefits			Interest expense		continuing operations			common equity
Previously Reported		6,807			7,438			19,077		2,935			26	%
Adjustments		(157	)		(22	)		24		(103	)		(1	%)
As Adjusted		6,650			7,416			19,101		2,832			25	%

(1)	The tables provide a reconciliation to previously reported financial information for the periods indicated. Refer to page 24.
Note:	Certain reclassifications have been made to prior period amounts to conform to the current presentation. Refer to Legal Notice page 29.

27

MORGAN STANLEY

This page represents an addendum to the 3Q 2006 Financial Supplement.

In accordance with SFAS 123R, fiscal 2005 compensation expense included the amortization of fiscal 2003 and fiscal 2004 awards but excluded amortization for fiscal 2005 year-end awards. Fiscal 2006 compensation expense includes the amortization related to fiscal 2003 awards, fiscal 2004 awards, fiscal 2005 awards granted to non-retirement-eligible employees, the full cost of equity awards granted to retirement-eligible employees during fiscal 2006 (including fiscal 2005 year-end awards granted in December 2005) and the full cost of fiscal 2006 year-end equity awards to be granted to retirement-eligible employees in December 2006.

Based on interpretative guidance related to SFAS 123R, in the first quarter of 2006 the Company has changed its accounting policy for expensing the cost of year-end equity awards that will be granted to retirement-eligible employees. In fiscal 2006, the Company is accruing the estimated cost of these awards over the course of the current year rather than expensing the awards on the date of the grant.

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.

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 Award		Nov 30, 2003			Nov 30, 2004			Nov 30, 2005			Nov 30, 2006			Nov 30, 2007			Nov 30, 2008			Nov 30, 2009			Cumulative Amort. 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  Award		Nov 30, 2003			Nov 30, 2004			Nov 30, 2005			Nov 30, 2006			Nov 30, 2007			Nov 30, 2008			Nov 30, 2009			Cumulative Amort. 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 29.

28

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 third quarter earnings press release issued September 20, 2006.

29