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	%

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.

	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.

	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.

	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.

	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.

	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.

	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.

	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.

	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.

	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.

	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.

	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.

	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.

	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.

	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.

	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.

	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.

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.

	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.

	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.

	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.

	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.

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.

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.

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.

	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.

	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.

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	%

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

(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.

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.

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.