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): March 21, 2007

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)	(IRS Employer Identification No.)

1585 Broadway New York, New York	10036
(Address of principal executive offices)	(Zip Code)

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

Not Applicable

(Former name or 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 March 21, 2007, Morgan Stanley (the "Registrant") released financial information with respect to its fiscal quarter ended February 28, 2007. 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 Financial Data Supplement for its fiscal quarter ended February 28, 2007 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 March 21, 2007 containing financial information for the first quarter ended February 28, 2007.
99.2	Quarterly Financial Data Supplement of the Registrant for the first quarter ended February 28, 2007.

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 hereto duly authorized.

Dated: March 21, 2007
	MORGAN STANLEY (Registrant)
	By:	/s/ Paul C. Wirth
		Paul C. Wirth
		Controller and Principal Accounting Officer

EX-99.1

Contact:	Media Relations	Investor Relations
	Jeanmarie McFadden	William Pike
	212-761-0553	212-761-0008

Morgan Stanley Reports Record First Quarter Results

Record Quarterly EPS from Continuing Operations of $2.40, Up 59%

Record Net Revenues of $11.0 Billion, Up 29%

ROE from Continuing Operations of 29%

NEW YORK, March 21, 2007 - Morgan Stanley (NYSE: MS) today reported record income from continuing operations for the first quarter ended February 28, 2007 of $2,559 million, an increase of 60 percent from $1,602 million in the first quarter of 2006.¹  Diluted earnings per share from continuing operations were a record $2.40 compared with $1.51 a year ago. Net revenues were a record $11.0 billion, 29 percent above last year’s first quarter. Non-interest expenses of $7.1 billion increased 17 percent from last year. The annualized return on average common equity from continuing operations was 28.8 percent in the current quarter, compared with 21.9 percent in the first quarter of 2006.

Net income was a record $2,672 million, an increase of 70 percent from $1,574 million in the first quarter of 2006. This quarter’s results included an after-tax gain of $109 million reported in discontinued operations related to the sale of Quilter Holdings Ltd. Record diluted earnings per share were $2.51, compared with $1.48 in the first quarter of 2006, and the annualized return on average common equity for the first quarter was 29.9 percent compared with 21.3 percent a year ago.

Business Highlights

· Institutional Securities achieved record net revenues of $7.6 billion, up 37 percent from last year.  Pre-tax income rose 71 percent to a record $3.0 billion and return on average common equity was 40 percent.

· Equity sales and trading delivered record revenues of $2.2 billion, up 36 percent from last year. These results reflect record revenues in derivatives and Prime Brokerage, two key areas that the Company has invested in as part of its growth plans.

¹ The results for the first quarter of 2006 included $395 million of incremental compensation expense related to equity awards to retirement-eligible employees under SFAS 123R. These costs were allocated to the business segments as follows: Institutional Securities, $270 million; Global Wealth Management Group, $80 million; Asset Management, $28 million; and Discover, $17 million.

· Fixed income sales and trading achieved record revenues of $3.6 billion, up 31 percent from last year. These results reflect record revenues in credit products, up 94 percent, and strength across our interest rate & currency and commodities businesses.

· Global Wealth Management Group delivered a pre-tax margin of 15 percent and its highest quarterly revenues since 2000, as financial advisor productivity and client assets per global representative reached all time highs and client assets in our bank deposit sweep program exceeded $16 billion.

· Asset Management continued to make good progress in its plan for growth. The business delivered its second consecutive quarter of positive net flows and posted long-term inflows for the first time in two years, driven, in part, by new products launched during the past year.

· Discover delivered strong results, including record transaction volume and the fifth consecutive quarter of managed receivables growth, and it continues to be well-positioned for success as a stand-alone company. The spin-off of Discover remains on track for the third quarter of this year.

John J. Mack, Chairman and CEO, said, “Morgan Stanley delivered outstanding results this quarter - with record revenues and earnings along with ROE of more than 20 percent for the sixth quarter in a row. This strong performance was in large part the result of effective, disciplined risk-taking by our team in Institutional Securities, which helped deliver record results across our sales and trading businesses. Our Global Wealth Management business this quarter delivered its highest revenues since 2000 and we continued to make substantial progress in executing our growth plan in Asset Management. We see many opportunities to further improve our performance, and remain intensely focused on helping our clients navigate the constantly changing markets and leveraging our global franchise to create additional value for our shareholders.”

INSTITUTIONAL SECURITIES

Institutional Securities posted record pre-tax income²of $3.0 billion, up 71 percent from $1.8 billion in the first quarter of 2006. Record net revenues of $7.6 billion were 37 percent higher, driven by record results in fixed income and equities. The quarter’s pre-tax margin was 40 percent, compared with 32 percent in last year’s first quarter. The quarter’s return on average common equity was 40 percent compared with 29 percent a year ago.

· Advisory revenues were $390 million, a 10 percent increase from last year’s first quarter.

· Underwriting revenues were $659 million, a 20 percent increase from last year’s first quarter. Fixed income underwriting revenues were $359 million, a 2 percent increase from the prior year’s first quarter, and equity underwriting revenues increased 52 percent to $300 million over the same period.

² Represents income from continuing operations before losses from unconsolidated investees.

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· Fixed income sales and trading net revenues were a record $3.6 billion, a 31 percent increase over the previous record in the first quarter of 2006. Performance was broad based across credit products, interest rate & currency products and commodities. Credit products had record results driven by a significant increase in revenues from securitized products. Trading revenues were significantly higher, driven by favorable positioning in the residential mortgage markets, robust performance in corporate credit trading, and strong customer flows. Interest rate & currency products benefited from improved results in interest rate trading and record revenues in emerging markets. Commodities, although down from last year’s record first quarter, produced its second best quarter ever, benefiting from trading results in electricity, natural gas and oil liquids.

· Equity sales and trading net revenues were a record $2.2 billion, an increase of 36 percent from last year’s first quarter. Increased client flows and trading across both the cash and derivatives markets drove revenues higher. Rising stock market indices in the quarter fueled growth in client volumes across all regions. Prime Brokerage financed higher client balances for the 16th consecutive quarter, which contributed to record revenues for the business.

· Investment revenues were $801 million compared with $312 million in the first quarter of last year. The increase was driven by significant gains from investment banking’s interest in real estate funds and $237 million of investment revenue associated with returns in our employee deferred compensation and co-investment plans that are substantially offset by increased compensation expense related to these plans³. The quarter also included gains on fixed income’s investments in Grifols S.A. and IntercontinentalExchange.

· The Company’s aggregate average trading VaR measured at the 95 percent confidence level was $90 million compared with $58 million in the first quarter of 2006 and $61 million in the fourth quarter of 2006. Total aggregate average trading and non-trading VaR was $92 million compared with $65 million in the first quarter of 2006 and $67 million in the fourth quarter of 2006. The overall increase from last year was due, in part, to increases in the equities price and commodities price VaR. At quarter end, the Company’s aggregate trading VaR was $76 million, and the aggregate trading and non-trading VaR was $78 million.

· Non-interest expenses were $4.6 billion, an increase of 22 percent from the first quarter of last year. Compensation costs were higher compared with a year ago as increases resulting from higher revenues³were partly offset by the incremental compensation charges recorded in the first quarter of 2006¹. In addition, non-compensation expenses increased as a result of higher levels of business activity.  

³ The Company maintains various deferred compensation plans for the benefit of certain employees. Beginning in the quarter ended February 28, 2007, increases or decreases in assets or earnings associated with such plans are reflected in net revenues, and increases or decreases in liabilities associated with such plans are reflected in compensation expense. Previously, the increases or decreases in assets and liabilities associated with these plans were both recorded in net revenues. Prior period activity has been reclassified to conform to the current presentation.

3

For the first two months of calendar 2007, the Company ranked second in global completed M&A with a 34 percent market share, sixth in global announced M&A with a 26 percent market share, fifth in global IPOs with a 7 percent market share, eighth in global equity and equity-related issuances with a 6 percent market share and sixth 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 first quarter was $220 million, compared with $15 million in the first quarter of last year. The quarter's pre-tax margin was 15 percent compared with 1 percent in last year’s first quarter. The quarter’s return on average common equity was 32 percent compared with 1 percent a year ago, reflecting the increase in net income and lower capital allocated to the business.

· Net revenues of $1.5 billion were up 18 percent from a year ago reflecting stronger transactional revenues due to increased underwriting activity, higher asset management revenues reflecting growth in fee-based products and higher net interest revenue from the bank deposit sweep program.

· Non-interest expenses were $1.3 billion, up 2 percent from a year ago. Compensation costs increased from a year ago, due to higher revenues and investment in the business. This increase was partly offset by the incremental compensation charges recorded in the first quarter of 2006.¹ Non-compensation expenses declined reflecting lower charges for legal and regulatory matters.

· Total client assets were $690 billion, an 11 percent increase from last year’s first quarter. Client assets in fee-based accounts rose 17 percent to $202 billion over the last 12 months and represent 29 percent of total client assets.

· The 7,993 global representatives at quarter-end achieved record average annualized revenue and total client assets per global representative of $748,000 and $86 million, respectively.

In addition, included in the Company’s discontinued operations is a $168 million pre-tax gain on the sale of Quilter Holdings Ltd.

⁴ Source: Thomson Financial - for the period January 1, 2007 to February 28, 2007.

4

ASSET MANAGEMENT

Asset Management reported pre-tax income of $236 million, 37 percent higher than last year's $172 million.  The quarter’s pre-tax margin was 26 percent compared with 24 percent a year ago and the return on average common equity was 20 percent compared with 21 percent in last year’s first quarter.

· Net revenues increased 28 percent to $905 million primarily reflecting higher management and administration fees due to an increase in assets under management and higher performance fees from the alternatives business, including FrontPoint Partners. Higher investment revenues were driven by gains in private equity and alternative investments.

· Non-interest expenses increased 26 percent to $669 million driven by higher compensation costs resulting from increased revenues and business investment, particularly in the alternatives business, including operating expenses associated with FrontPoint Partners.

· Assets under management or supervision at February 28, 2007 were $500 billion, up $58 billion, or 13 percent, from a year ago. The increase resulted from market appreciation, acquisitions and minority interest investments, as inflows from the Americas Intermediary, Non-U.S. and Institutional Liquidity products were offset by Morgan Stanley Brand, U.S. Institutional, and Retail Money Market outflows.

· Asset Management recorded net customer inflows of $4.3 billion for the quarter compared with $6.9 billion of outflows a year ago.

· The percent of the Company’s long-term fund assets performing in the top half of the Lipper rankings was 48 percent over one year, 63 percent over three years, 73 percent over five years and 82 percent over 10 years.

DISCOVER

Discover’s first quarter pre-tax income was $372 million on a managed basis, a 22 percent decline compared with $479 million in last year’s first quarter. Net revenues of $1,025 million were 6 percent lower than a year ago, which included an increase in the valuation of the Company's residual interests in securitized receivables following changes in federal bankruptcy legislation in 2005. The quarter’s pre-tax margin was 36 percent compared with 44 percent a year ago. The quarter’s return on average common equity was 17 percent compared with 26 percent a year ago.

· Transaction volume increased 13 percent from a year ago to a record $30.3 billion, primarily driven by higher sales volume resulting from increased cardmember usage and the acquisition of the Goldfish credit card business.

· Managed credit card loans of $50.7 billion were up 6 percent from a year ago and up 1 percent from the end of last year.

5

· Managed merchant, cardmember and other fees were $552 million, up 6 percent from a year ago. The increase was primarily due to higher merchant discount revenues driven by higher sales activity and higher cardmember related fee revenue, partly offset by higher cardmember rewards.

· Other non-interest revenue was $5 million compared with $143 million in last year’s first quarter, which benefited from the increase in the valuation of the Company's residual interests in securitized receivables discussed above.

· The provision for consumer loan losses on a managed basis was $482 million, down 5 percent from last year, reflecting continued strong credit quality in the domestic portfolio, partially offset by increased credit losses in the U.K.

· Managed net interest income of $950 million increased $16 million, or 2 percent, reflecting an 8 percent increase in average credit card loans, partially offset by a narrowing of the interest rate spread as a higher yield was more than offset by a higher cost of funds.

· Non-interest expenses increased 7 percent to $653 million, primarily due to higher marketing and professional services and the inclusion of operating expenses associated with the Goldfish credit card business.

· The managed credit card net charge-off rate was 4.05 percent, 101 basis points lower than last year's first quarter. The managed credit card over-30-day delinquency rate was 3.45 percent, unchanged from the first quarter of 2006, and the over-90-day delinquency rate increased 8 basis points over the same period to 1.69 percent.

OTHER MATTERS

Effective December 1, 2006, the Company elected early adoption of SFAS No. 157, "Fair Value Measurements," and SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115." As a result of the adoption of SFAS No. 157 and SFAS No. 159, the Company recorded an after-tax cumulative effect adjustment of $186 million as an increase to the opening balance of retained earnings as of December 1, 2006. The adoption of these two standards had an immaterial impact in the first quarter.

As of February 28, 2007, the Company repurchased approximately 15 million shares of its common stock since the end of fiscal 2006.

The Company announced that its Board of Directors declared a $0.27 quarterly dividend per common share. The dividend is payable on April 30, 2007, to common shareholders of record on April 13, 2007. The Company also announced that its Board of Directors declared a quarterly dividend of $378.75 per share of Series A Floating Rate Non-Cumulative Preferred Stock (represented by depositary shares, each representing 1/1,000^th interest in a share of preferred stock and each having a dividend of $0.37875) to be paid on April 16, 2007 to preferred shareholders of record on April 1, 2007.

6

Total capital as of February 28, 2007 was $177.3 billion, including $42.8 billion of common shareholders' equity, preferred equity and junior subordinated debt issued to capital trusts. Book value per common share was $34.71, based on 1.1 billion shares outstanding.

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 Company’s employees serve clients worldwide including corporations, governments, institutions and individuals from more than 600 offices in 31 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, 2006.

7

MORGAN STANLEY
Quarterly Financial Summary
(unaudited, dollars in millions)
	Quarter Ended									Percentage Change From:
	Feb 28, 2007			Feb 28, 2006			Nov 30, 2006			Feb 28, 2006			Nov 30, 2006
Net revenues
Institutional Securities	$	7,631		$	5,551		$	5,702			37	%		34	%
Global Wealth Management Group		1,490			1,266			1,430			18	%		4	%
Asset Management		905			705			728			28	%		24	%
Discover		1,025			1,089			963			(6	%)		6	%
Intersegment Eliminations		(53	)		(59	)		(59	)		10	%		10	%
Consolidated net revenues	$	10,998		$	8,552		$	8,764			29	%		25	%
Income before taxes (1)
Institutional Securities	$	3,031		$	1,775		$	2,297			71	%		32	%
Global Wealth Management Group		220			15			165			*			33	%
Asset Management		236			172			190			37	%		24	%
Discover		372			479			199			(22	%)		87	%
Intersegment Eliminations		5			19			12			(74	%)		(58	%)
Consolidated income before taxes	$	3,864		$	2,460		$	2,863			57	%		35	%
Earnings per basic share:
Income from continuing operations	$	2.52		$	1.57		$	2.19			61	%		15	%
Discontinued operations	$	0.11		$	(0.03	)	$	-			*			*
Earnings per basic share	$	2.63		$	1.54		$	2.19			71	%		20	%
Earnings per diluted share:
Income from continuing operations	$	2.40		$	1.51		$	2.08			59	%		15	%
Discontinued operations	$	0.11		$	(0.03	)	$	-			*			*
Earnings per diluted share	$	2.51		$	1.48		$	2.08			70	%		21	%
Average common shares outstanding
Basic		1,009,186,993			1,020,041,181			997,892,310
Diluted		1,057,912,545			1,061,764,798			1,052,831,345
Period end common shares outstanding		1,061,644,077			1,070,407,513			1,048,877,006
Return on average common equity
from continuing operations		28.8	%		21.9	%		26.1	%
Return on average common equity		29.9	%		21.3	%		26.0	%

(1)	Represents consolidated income from continuing operations before losses from unconsolidated investees, taxes and gain/(loss) from discontinued operations.
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:
	Feb 28, 2007			Feb 28, 2006			Nov 30, 2006			Feb 28, 2006			Nov 30, 2006
Investment banking	$	1,227		$	982		$	1,503			25	%		(18	%)
Principal transactions:
Trading		4,158			3,086			2,317			35	%		79	%
Investments		920			349			567			164	%		62	%
Commissions		1,005			920			976			9	%		3	%
Fees:
Asset management, distribution and admin.		1,479			1,268			1,337			17	%		11	%
Merchant, cardmember and other		297			289			289			3	%		3	%
Servicing and securitizations income		556			596			526			(7	%)		6	%
Interest and dividends		14,814			10,544			11,880			40	%		25	%
Other		222			134			228			66	%		(3	%)
Total revenues		24,678			18,168			19,623			36	%		26	%
Interest expense		13,485			9,461			10,620			43	%		27	%
Provision for consumer loan losses		195			155			239			26	%		(18	%)
Net revenues		10,998			8,552			8,764			29	%		25	%
Compensation and benefits (1)		4,992			4,242			3,506			18	%		42	%
Occupancy and equipment		280			230			274			22	%		2	%
Brokerage, clearing and exchange fees		361			292			334			24	%		8	%
Information processing and communications		369			346			384			7	%		(4	%)
Marketing and business development		294			238			418			24	%		(30	%)
Professional services		499			433			724			15	%		(31	%)
Other		339			311			261			9	%		30	%
Total non-interest expenses		7,134			6,092			5,901			17	%		21	%
Income from continuing operations before losses
from unconsolidated investees and taxes		3,864			2,460			2,863			57	%		35	%
Losses from unconsolidated investees		44			69			54			(36	%)		(19	%)
Provision for income taxes		1,261			789			607			60	%		108	%
Income from continuing operations		2,559			1,602			2,202			60	%		16	%
Discontinued operations(2)
Gain/(loss) from discontinued operations		174			(48	)		6			*			*
Income tax benefit/(provision)		(61	)		20			(2	)		*			*
Gain/(loss) from discontinued operations		113			(28	)		4			*			*
Net income	$	2,672		$	1,574		$	2,206			70	%		21	%
Preferred stock dividend requirements	$	17		$	-		$	19			*			(11	%)
Earnings applicable to common shareholders	$	2,655		$	1,574		$	2,187			69	%		21	%
Return on average common equity
from continuing operations		28.8	%		21.9	%		26.1	%
Return on average common equity		29.9	%		21.3	%		26.0	%
Pre-tax profit margin (3)		35	%		29	%		33	%
Compensation and benefits as a % of net revenues		45	%		50	%		40	%

(1)	The Company maintains various deferred compensation plans for the benefit of certain employees. Beginning in the quarter ended Feb 28, 2007, increases or decreases in assets or earnings associated with such plans are reflected in net revenues, and increases or decreases in liabilities associated with such plans are reflected in compensation expense. For the quarter ended Feb 28, 2007, such net revenues and compensation expense totaled approximately $300 million and $280 million, respectively. Previously, the increases or decreases in assets and liabilities associated with these plans were both recorded in net revenues. Prior period activity has been reclassified to conform to the current presentation.
(2)	Gain/(loss) from discontinued operations for the quarter ended Feb 28, 2007 reflects the operating results for Quilter Holdings Limited and the gain related to the sale of this business.
(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.

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EX-99.2

MORGAN STANLEY
Financial Supplement - 1Q 2007
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	…………….	Quarterly Discover Reconciliation of Managed Income Statement Data
	22	…………….	Quarterly Reconciliation of Adjusted Assets
	23	…………….	Illustration of Standard Equity Award Amortization
	24	…………….	Legal Notice

MORGAN STANLEY
Quarterly Financial Summary
(unaudited, dollars in millions)
	Quarter Ended															Percentage Change From:
	Feb 28, 2006			May 31, 2006			Aug 31, 2006			Nov 30, 2006			Feb 28, 2007			1Q07 vs. 1Q06			1Q07 vs. 4Q06
Net revenues
Institutional Securities	$	5,551		$	5,637		$	5,153		$	5,702		$	7,631			37	%		34	%
Global Wealth Management Group		1,266			1,377			1,349			1,430			1,490			18	%		4	%
Asset Management		705			723			637			728			905			28	%		24	%
Discover		1,089			1,191			1,047			963			1,025			(6	%)		6	%
Intersegment Eliminations		(59	)		(98	)		(53	)		(59	)		(53	)		10	%		10	%
Consolidated net revenues	$	8,552		$	8,830		$	8,133		$	8,764		$	10,998			29	%		25	%
Income before taxes (1)
Institutional Securities	$	1,775		$	2,088		$	1,999		$	2,297		$	3,031			71	%		32	%
Global Wealth Management Group		15			149			154			165			220			*			33	%
Asset Management		172			224			125			190			236			37	%		24	%
Discover		479			541			368			199			372			(22	%)		87	%
Intersegment Eliminations		19			(13	)		15			12			5			(74	%)		(58	%)
Consolidated income before taxes	$	2,460		$	2,989		$	2,661		$	2,863		$	3,864			57	%		35	%
Earnings per basic share:
Income from continuing operations	$	1.57		$	1.81		$	1.83		$	2.19		$	2.52			61	%		15	%
Discontinued operations	$	(0.03	)	$	0.01		$	-		$	-		$	0.11			*			*
Earnings per basic share	$	1.54		$	1.82		$	1.83		$	2.19		$	2.63			71	%		20	%
Earnings per diluted share:
Income from continuing operations	$	1.51		$	1.74		$	1.75		$	2.08		$	2.40			59	%		15	%
Discontinued operations	$	(0.03	)	$	0.01		$	-		$	-		$	0.11			*			*
Earnings per diluted share	$	1.48		$	1.75		$	1.75		$	2.08		$	2.51			70	%		21	%
Average common shares outstanding
Basic		1,020,041,181			1,013,241,715			1,010,468,365			997,892,310			1,009,186,993
Diluted		1,061,764,798			1,054,733,745			1,055,664,392			1,052,831,345			1,057,912,545
Period end common shares outstanding		1,070,407,513			1,071,786,172			1,058,664,567			1,048,877,006			1,061,644,077
Return on average common equity
from continuing operations		21.9	%		23.7	%		22.8	%		26.1	%		28.8	%
Return on average common equity		21.3	%		23.7	%		22.7	%		26.0	%		29.9	%

(1)	Represents consolidated income from continuing operations before losses from unconsolidated investees, taxes and gain/(loss) from discontinued operations.
Note:	Certain reclassifications have been made to prior period amounts to conform to the current presentation.
	Refer to Legal Notice page 24.

1

MORGAN STANLEY
Quarterly Consolidated Income Statement Information
(unaudited, dollars in millions)
	Quarter Ended															Percentage Change From:
	Feb 28, 2006			May 31, 2006			Aug 31, 2006			Nov 30, 2006			Feb 28, 2007			1Q07 vs. 1Q06			1Q07 vs. 4Q06
Investment banking	$	982		$	1,132		$	1,138		$	1,503		$	1,227			25	%		(18	%)
Principal transactions:
Trading		3,086			3,559			2,843			2,317			4,158			35	%		79	%
Investments		349			755			322			567			920			164	%		62	%
Commissions		920			994			880			976			1,005			9	%		3	%
Fees:
Asset management, distribution and admin.		1,268			1,321			1,312			1,337			1,479			17	%		11	%
Merchant, cardmember and other		289			277			312			289			297			3	%		3	%
Servicing and securitization income		596			651			565			526			556			(7	%)		6	%
Interest and dividends		10,544			10,111			12,664			11,880			14,814			40	%		25	%
Other		134			125			132			228			222			66	%		(3	%)
Total revenues		18,168			18,925			20,168			19,623			24,678			36	%		26	%
Interest expense		9,461			9,965			11,803			10,620			13,485			43	%		27	%
Provision for consumer loan losses		155			130			232			239			195			26	%		(18	%)
Net revenues		8,552			8,830			8,133			8,764			10,998			29	%		25	%
Compensation and benefits (1)		4,242			3,802			3,305			3,506			4,992			18	%		42	%
Occupancy and equipment		230			236			253			274			280			22	%		2	%
Brokerage, clearing and exchange fees		292			340			339			334			361			24	%		8	%
Information processing and communications		346			364			369			384			369			7	%		(4	%)
Marketing and business development		238			297			291			418			294			24	%		(30	%)
Professional services		433			537			548			724			499			15	%		(31	%)
Other		311			265			367			261			339			9	%		30	%
Total non-interest expenses		6,092			5,841			5,472			5,901			7,134			17	%		21	%
Income from continuing operations before losses
from unconsolidated investees and taxes		2,460			2,989			2,661			2,863			3,864			57	%		35	%
Losses from unconsolidated investees		69			103			2			54			44			(36	%)		(19	%)
Provision for income taxes		789			1,058			811			607			1,261			60	%		108	%
Income from continuing operations		1,602			1,828			1,848			2,202			2,559			60	%		16	%
Discontinued operations(2)
Gain/(loss) from discontinued operations		(48	)		21			5			6			174			*			*
Income tax benefit/(provision)		20			(8	)		(2	)		(2	)		(61	)		*			*
Gain/(loss) from discontinued operations		(28	)		13			3			4			113			*			*
Net income	$	1,574		$	1,841		$	1,851		$	2,206		$	2,672			70	%		21	%
Preferred stock dividend requirements	$	-		$	-		$	-		$	19		$	17			*			(11	%)
Earnings applicable to common shareholders	$	1,574		$	1,841		$	1,851		$	2,187		$	2,655			69	%		21	%
Return on average common equity
from continuing operations		21.9	%		23.7	%		22.8	%		26.1	%		28.8	%
Return on average common equity		21.3	%		23.7	%		22.7	%		26.0	%		29.9	%
Pre-tax profit margin (3)		29	%		34	%		33	%		33	%		35	%
Compensation and benefits as a % of net revenues		50	%		43	%		41	%		40	%		45	%

(1)	The Company maintains various deferred compensation plans for the benefit of certain employees. Beginning in the quarter ended Feb 28, 2007, increases or decreases in assets or earnings associated with such plans are reflected in net revenues, and increases or decreases in liabilities associated with such plans are reflected in compensation expense. For the quarter ended Feb 28, 2007, such net revenues and compensation expense totaled approximately $300 million and $280 million, respectively. Previously, the increases or decreases in assets and liabilities associated with these plans were both recorded in net revenues. Prior period activity has been reclassified to conform to the current presentation.
(2)	Gain/(loss) from discontinued operations for the quarter ended Feb 28, 2007 reflects the operating results for Quilter Holdings Limited and the gain related to the sale of this business.
(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 24.

2

MORGAN STANLEY
Quarterly Consolidated Financial Information and Statistical Data
(unaudited)
	Quarter Ended										Percentage Change From:
	Feb 28, 2006		May 31, 2006		Aug 31, 2006		Nov 30, 2006		Feb 28, 2007 (1)		1Q07 vs. 1Q06			1Q07 vs. 4Q06
Morgan Stanley
Total assets (millions)	$	959,950	$	1,027,419	$	1,029,354	$	1,121,192	$	1,182,310		23	%		5	%
Adjusted assets (millions) (2)	$	528,473	$	548,961	$	557,236	$	651,862	$	669,723		27	%		3	%
Period end common shares outstanding (millions)		1,070.4		1,071.8		1,058.7		1,048.9		1,061.6		(1	%)		1	%
Book value per common share	$	28.12	$	29.97	$	31.24	$	32.67	$	34.71		23	%		6	%
Shareholders' equity (millions) (3)	$	33,886	$	35,902	$	37,956	$	40,248	$	42,839		26	%		6	%
Total capital (millions) (4)	$	134,366	$	145,849	$	149,956	$	162,134	$	177,270		32	%		9	%
Worldwide employees		53,870		53,163		54,349		56,310		57,845		7	%		3	%
Average Daily 95%/One-Day Value-at-Risk ("VaR") (5)
Primary Market Risk Category ($ millions, pre-tax)
Interest rate and credit spread	$	35	$	39	$	33	$	34	$	39
Equity price	$	25	$	29	$	26	$	32	$	45
Foreign exchange rate	$	9	$	9	$	7	$	12	$	15
Commodity price	$	31	$	28	$	33	$	30	$	40
Trading VaR	$	58	$	63	$	56	$	61	$	90
Non - trading VaR	$	20	$	26	$	24	$	18	$	14
Aggregate trading and non - trading VaR	$	65	$	70	$	66	$	67	$	92

(1)	Effective December 1, 2006, the Company elected early adoption of SFAS No. 157, "Fair Value Measurements", and SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115." As a result of the adoption of SFAS No. 157 and SFAS No. 159, the Company recorded an after-tax cumulative effect adjustment of $186 million as an increase to the opening balance of retained earnings as of December 1, 2006.
(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 22 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. 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 2006.
Note:	Certain reclassifications have been made to prior period amounts to conform to the current presentation.
	Refer to Legal Notice page 24.

3

MORGAN STANLEY
Quarterly Consolidated Financial Information and Statistical Data
(unaudited)
	Quarter Ended
	Feb 28, 2006					May 31, 2006					Aug 31, 2006					Nov 30, 2006					Feb 28, 2007 (1)
	Average common equity (billions)		Return on average common equity			Average common equity (billions)		Return on average common equity			Average common equity (billions)		Return on average common equity			Average common equity (billions)		Return on average common equity			Average tier 1 equity (billions) (2)		Average common equity (billions) (2)		Return on average common equity
Institutional Securities	$	16.2		29	%	$	18.1		28	%	$	18.8		30	%	$	19.6		36	%	$	21.3	$	20.3		40	%
Global Wealth Management Group		3.3		1	%		3.1		13	%		2.8		15	%		2.8		17	%		1.5		1.7		32	%
Asset Management		2.0		21	%		2.1		26	%		2.3		13	%		2.5		18	%		2.0		2.7		20	%
Securities Business		21.5		24	%		23.3		26	%		23.9		27	%		24.9		32	%		24.8		24.7		37	%
Discover		4.6		26	%		5.0		27	%		5.1		19	%		5.1		15	%		4.6		5.5		17	%
Capital surplus (unallocated)		3.2					2.6					3.4					3.5					5.1		5.1
Total - continuing operations		29.3		22	%		30.9		24	%		32.4		23	%		33.5		26	%		34.5		35.3		29	%
Discontinued operations		0.2					0.2					0.2					0.2					n/a		0.2
Firm	$	29.5		21	%	$	31.1		24	%	$	32.6		23	%	$	33.7		26	%	$	34.5	$	35.5		30	%

(1)	For the quarter ended Feb 28, 2007 the Company had reassessed the amount of capital required to support the market risks and credit risks in its Global Wealth Management business.
(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. Beginning in 1Q07, economic capital will be met by regulatory Tier 1 equity (including common shareholders' equity, certain preferred stock, eligible hybrid capital instruments and deductions of goodwill and certain intangibles and deferred tax assets), subject to regulatory limits. This enhancement to the Company's equity capital model and related disclosures will be made on a prospective basis.
Note:	Certain reclassifications have been made to prior period amounts to conform to the current presentation. The average common equity related to Quilter Holdings Limited has been reclassed to discontinued operations in all periods.
	Refer to Legal Notice page 24.

4

MORGAN STANLEY
Quarterly Institutional Securities Income Statement Information
(unaudited, dollars in millions)
	Quarter Ended															Percentage Change From:
	Feb 28, 2006			May 31, 2006			Aug 31, 2006			Nov 30, 2006			Feb 28, 2007			1Q07 vs. 1Q06			1Q07 vs. 4Q06
Investment banking	$	903		$	1,055		$	1,009		$	1,351		$	1,049			16	%		(22	%)
Principal transactions:
Trading		2,963			3,442			2,728			2,193			4,029			36	%		84	%
Investments		312			658			306			503			801			157	%		59	%
Commissions		610			693			630			673			691			13	%		3	%
Asset management, distribution and admin. fees		43			75			71			71			88			105	%		24	%
Servicing income		0			0			0			0			35			*			*
Interest and dividends		9,789			9,319			11,826			11,045			13,961			43	%		26	%
Other		96			85			89			176			145			51	%		(18	%)
Total revenues		14,716			15,327			16,659			16,012			20,799			41	%		30	%
Interest expense		9,165			9,690			11,506			10,310			13,168			44	%		28	%
Net revenues		5,551			5,637			5,153			5,702			7,631			37	%		34	%
Total non-interest expenses		3,776			3,549			3,154			3,405			4,600			22	%		35	%
Income from continuing operations before losses
from unconsolidated investees and taxes		1,775			2,088			1,999			2,297			3,031			71	%		32	%
Losses from unconsolidated investees		68			103			1			53			43			(37	%)		(19	%)
Income before taxes		1,707			1,985			1,998			2,244			2,988			75	%		33	%
Provision for income taxes		531			723			578			475			942			77	%		98	%
Income from continuing operations (1)	$	1,176		$	1,262		$	1,420		$	1,769		$	2,046			74	%		16	%
Return on average common equity (2)		29	%		28	%		30	%		36	%		40	%
Pre-tax profit margin (3)		32	%		37	%		39	%		40	%		40	%

(1)	Excludes (gain)/loss from discontinued operations.
(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 24.

5

 MORGAN STANLEY

 Quarterly Financial Information and Statistical Data

 Institutional Securities

 (unaudited, dollars in millions)

	Quarter Ended					Percentage Change From:
	Feb 28, 2006	May 31, 2006	Aug 31, 2006	Nov 30, 2006	Feb 28, 2007	1Q07 vs. 1Q06	1Q07 vs. 4Q06
Investment Banking
Advisory revenue	$ 355	$ 385	$ 461	$ 642	$ 390	10%	(39%)
Underwriting revenue
Equity	197	371	237	254	300	52%	18%
Fixed income	351	299	311	455	359	2%	(21%)
Total underwriting revenue	$ 548	$ 670	$ 548	$ 709	$ 659	20%	(7%)
Total investment banking revenue	$ 903	$ 1,055	$ 1,009	$ 1,351	$ 1,049	16%	(22%)
Sales & Trading(1)
Equity	1,654	1,724	1,509	1,433	2,243	36%	57%
Fixed income	2,724	2,366	2,221	2,266	3,566	31%	57%
Total sales & trading net revenue	$ 4,378	$ 4,090	$ 3,730	$ 3,699	$ 5,809	33%	57%

	Fiscal View															Calendar View
	Quarter Ended															Two Months Ended (2)
	Feb 28, 2006			May 31, 2006			Aug 31, 2006			Nov 30, 2006			Feb 28, 2007			Feb 28, 2006			Feb 28, 2007
Mergers and acquisitions announced transactions (2)
Morgan Stanley global market volume (billions)	$	304.7		$	178.9		$	170.4		$	363.3		$	259.6		$	139.2		$	147.0
Market share		38.2	%		20.5	%		24.1	%		36.4	%		26.8	%		29.4	%		25.9	%
Rank		4			3			4			1			2			9			6
Mergers and acquisitions completed transactions (2)
Morgan Stanley global market volume (billions)	$	176.5		$	182.3		$	172.6		$	226.5		$	175.0		$	107.8		$	141.5
Market share		27.6	%		29.6	%		25.9	%		32.3	%		23.1	%		26.1	%		33.7	%
Rank		3			2			5			1			3			3			2
Global equity and related issues (2)
Morgan Stanley global market volume (billions)	$	10.8		$	19.2		$	10.5		$	14.9		$	13.9		$	4.8		$	6.0
Market share		7.4	%		9.5	%		8.7	%		6.9	%		7.9	%		6.0	%		6.0	%
Rank		4			2			3			6			4			5			8
Global IPO's (2)
Morgan Stanley global market volume (billions)	$	2.7		$	7.6		$	5.2		$	6.1		$	4.0		$	1.5		$	1.7
Market Share		6.8	%		11.1	%		11.4	%		6.3	%		7.7	%		6.5	%		7.2	%
Rank		5			3			1			6			3			4			5
Global debt (2)
Morgan Stanley global market volume (billions)	$	96.1		$	102.2		$	89.2		$	112.6		$	96.1		$	76.1		$	66.4
Market share		5.9	%		5.9	%		5.6	%		5.3	%		5.7	%		6.7	%		5.6	%
Rank		5			5			7			7			6			3			6

(1)	Includes principal transactions trading, commissions and applicable net interest revenue.
(2)	Source: Thomson Financial, data as of March 7, 2007.
Note:	Certain reclassifications have been made to prior period amounts to conform to the current presentation. Refer to Legal Notice page 24.

6

MORGAN STANLEY
Quarterly Financial Information and Statistical Data
Institutional Securities
(unaudited, dollars in billions)
	Quarter Ended															Percentage Change From:
	Feb 28, 2006			May 31, 2006			Aug 31, 2006			Nov 30, 2006			Feb 28, 2007			1Q07 vs. 1Q06			1Q07 vs. 4Q06
Corporate funded loans
Investment grade	$	5.6		$	6.2		$	7.4		$	6.4		$	6.2			11	%		(3	%)
Non-investment grade		2.9			2.9			5.4			3.4			3.9			34	%		15	%
Total corporate funded loans	$	8.5		$	9.1		$	12.8		$	9.8		$	10.1			19	%		3	%
Corporate lending commitments
Investment grade	$	29.2		$	27.1		$	26.2		$	32.2		$	30.3			4	%		(6	%)
Non-investment grade		5.3			8.2			18.4			17.0			22.9			*			35	%
Total corporate lending commitments	$	34.5		$	35.3		$	44.6		$	49.2		$	53.2			54	%		8	%
Corporate funded loans plus lending commitments
Investment grade	$	34.8		$	33.3		$	33.6		$	38.6		$	36.5			5	%		(5	%)
Non-investment grade	$	8.2		$	11.1		$	23.8		$	20.4		$	26.8			*			31	%
% investment grade		81	%		75	%		59	%		65	%		58	%
% non-investment grade		19	%		25	%		42	%		35	%		42	%
Total corporate funded loans and lending commitments	$	43.0		$	44.4		$	57.4		$	59.0		$	63.3			47	%		7	%
Hedges (1)	$	17.7		$	23.8		$	24.3		$	26.5		$	29.9			69	%		13	%
Total corporate funded loans and lending commitments net of hedges	$	25.3		$	20.6		$	33.1		$	32.5		$	33.4			32	%		3	%

(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 24.

7

MORGAN STANLEY
Quarterly Global Wealth Management Group Income Statement Information
(unaudited, dollars in millions)
	Quarter Ended (1)															Percentage Change From:
	Feb 28, 2006			May 31, 2006			Aug 31, 2006			Nov 30, 2006			Feb 28, 2007			1Q07 vs. 1Q06			1Q07 vs. 4Q06
Investment banking	$	67		$	95		$	120		$	146		$	166			148	%		14	%
Principal transactions:
Trading		125			120			117			125			129			3	%		3	%
Investments		1			27			16			13			(2	)		*			(115	%)
Commissions		310			302			252			304			315			2	%		4	%
Asset management, distribution and admin fees		638			662			675			667			702			10	%		5	%
Interest and dividends		203			242			264			292			274			35	%		(6	%)
Other		37			43			34			44			44			19	%		--
Total revenues		1,381			1,491			1,478			1,591			1,628			18	%		2	%
Interest expense		115			114			129			161			138			20	%		(14	%)
Net revenues		1,266			1,377			1,349			1,430			1,490			18	%		4	%
Total non-interest expenses		1,251			1,228			1,195			1,265			1,270			2	%		--
Income before taxes		15			149			154			165			220			*			33	%
Provision for income taxes		6			48			52			49			83			*			69	%
Income from continuing operations	$	9		$	101		$	102		$	116		$	137			*			18	%
Return on average common equity (2)		1	%		13	%		15	%		17	%		32	%
Pre-tax profit margin (3)		1	%		11	%		11	%		12	%		15	%

(1)	All periods have been restated to exclude the operating results for Quilter Holdings Limited. The gain on the sale of this business is included in discontinued operations on the Company's consolidated income statement. Refer to page 2 of this supplement.
(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 24.

8

MORGAN STANLEY
Quarterly Financial Information and Statistical Data
Global Wealth Management Group
(unaudited)
	Quarter Ended (1)															Percentage Change From:
	Feb 28, 2006			May 31, 2006			Aug 31, 2006			Nov 30, 2006			Feb 28, 2007			1Q07 vs. 1Q06			1Q07 vs. 4Q06
Global representatives		8,913			8,091			7,982			7,944			7,993			(10	%)		1	%
Annualized revenue per global
representative (thousands) (2)	$	552		$	648		$	671		$	718		$	748			36	%		4	%
Assets by client segment (billions)
$10m or more		166			170			176			199			210			27	%		6	%
$1m - $10m		220			220			229			243			248			13	%		2	%
Subtotal - > $1m		386			390			405			442			458			19	%		4	%
$100k - $1m		177			180			180			177			174			(2	%)		(2	%)
< $100k		32			29			28			27			26			(19	%)		(4	%)
Client assets excluding corporate/other		595			599			613			646			658			11	%		2	%
Corporate / other		29			30			29			30			32			10	%		7	%
Total client assets (billions)	$	624		$	629		$	642		$	676		$	690			11	%		2	%
Fee-based client account assets (billions) (3)	$	173		$	180		$	183		$	195		$	202			17	%		4	%
Fee-based assets as a % of client assets		28	%		29	%		29	%		29	%		29	%
Bank deposit program (millions)	$	7,319		$	9,114		$	9,839		$	13,301		$	16,364			124	%		23	%
Client assets per global
representative (millions) (4)	$	70		$	78		$	80		$	85		$	86			23	%		1	%
Domestic retail net new assets (billions) (5)	$	-		$	2.4		$	5.4		$	0.7		$	6.7			*			*
Domestic retail locations		484			473			460			453			451			(7	%)		--

(1)	All periods have been restated to exclude Quilter Holdings Limited.
(2)	Annualized revenue divided by average global representative headcount.
(3)	Represents the amount of assets in client accounts where the basis of payment for services is a fee calculated on those assets.
(4)	Total client assets divided by period end global representative headcount.
(5)	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 24.

9

MORGAN STANLEY
Quarterly Asset Management Income Statement Information
(unaudited, dollars in millions)
	Quarter Ended															Percentage Change From:
	Feb 28, 2006			May 31, 2006			Aug 31, 2006			Nov 30, 2006			Feb 28, 2007			1Q07 vs. 1Q06			1Q07 vs. 4Q06
Investment banking	$	12		$	15		$	9		$	12		$	14			17	%		17	%
Principal transactions:
Investments		36			70			0			51			121			*			137	%
Commissions		7			7			5			6			6			(14	%)		--
Asset management, distribution and admin fees		640			619			606			639			732			14	%		15	%
Interest and dividends		5			10			19			11			13			160	%		18	%
Other		7			7			6			7			34			*			*
Total revenues		707			728			645			726			920			30	%		27	%
Interest expense		2			5			8			(2	)		15			*			*
Net revenues		705			723			637			728			905			28	%		24	%
Total non-interest expenses		533			499			512			538			669			26	%		24	%
Income before taxes		172			224			125			190			236			37	%		24	%
Provision for income taxes		67			89			50			79			96			43	%		22	%
Income from continuing operations	$	105		$	135		$	75		$	111		$	140			33	%		26	%
Return on average common equity (1)		21	%		26	%		13	%		18	%		20	%
Pre-tax profit margin (2)		24	%		31	%		20	%		26	%		26	%

(1)	Refer to page 4 for the allocation of average common equity.
(2)	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 24.

10

MORGAN STANLEY
Quarterly Financial Information and Statistical Data
Asset Management
(unaudited, dollars in billions)
	Quarter Ended															Percentage Change From:
	Feb 28, 2006			May 31, 2006			Aug 31, 2006			Nov 30, 2006			Feb 28, 2007			1Q07 vs. 1Q06			1Q07 vs. 4Q06
Assets under management or supervision
Net flows by distribution channel
Americas Retail Morgan Stanley Brand		(3.0	)		(2.2	)		(2.2	)		(2.1	)		(1.9	)		37	%		10	%
Americas Retail Van Kampen Brand		(0.7	)		(0.4	)		(0.8	)		(0.1	)		0.0			*			*
Americas Intermediary		1.7			4.0			1.5			1.0			1.0			(41	%)		--
U.S. Institutional		(4.3	)		(4.6	)		(2.3	)		(2.3	)		0.0			*			*
Non- U.S.		1.1			2.0			0.2			1.7			4.5			*			165	%
Net flows excluding money markets		(5.2	)		(1.2	)		(3.6	)		(1.8	)		3.6			169	%		*
Money Market Net Flows
Institutional		4.0			(1.4	)		2.8			7.7			2.5			(38	%)		(68	%)
Retail		(5.7	)		(3.0	)		(0.7	)		(3.3	)		(1.8	)		68	%		45	%
Total money market net flows		(1.7	)		(4.4	)		2.1			4.4			0.7			141	%		(84	%)
Assets under management or supervision by distribution channel
Americas Retail Morgan Stanley Brand	$	64		$	62		$	60		$	62		$	61			(5	%)		(2	%)
Americas Retail Van Kampen Brand		90			89			90			94			96			7	%		2	%
Americas Intermediary		47			51			55			58			61			30	%		5	%
U.S. Institutional		88			86			85			88			95			8	%		8	%
Non- U.S.		75			77			80			88			97			29	%		10	%
Total long term assets under management or supervision		364			365			370			390			410			13	%		5	%
Institutional money markets/liquidity		37			37			40			49			52			41	%		6	%
Retail money markets		41			38			38			35			33			(20	%)		(6	%)
Total Money Markets		78			75			78			84			85			9	%		1	%
Total assets under management or supervision	$	442		$	440		$	448		$	474		$	495			12	%		4	%
Share of minority interest assets (1)		0			0			0			4			5			*			25	%
Total	$	442		$	440		$	448		$	478		$	500			13	%		5	%
Assets under management or supervision by asset class
Equity	$	230		$	226		$	226		$	239		$	245			7	%		3	%
Fixed income		90			91			93			94			94			4	%		--
Money market		78			75			78			84			85			9	%		1	%
Alternatives		18			20			20			21			29			61	%		38	%
Real estate		14			15			18			22			27			93	%		23	%
Subtotal		430			427			435			460			480			12	%		4	%
Unit trusts		12			13			13			14			15			25	%		7	%
Total assets under management or supervision	$	442		$	440		$	448		$	474		$	495			12	%		4	%
Share of minority interest assets (1)		0			0			0			4			5			*			25	%
Total	$	442		$	440		$	448		$	478		$	500			13	%		5	%

(1)	Amount represents Asset Management's proportional share of assets managed by entities in which it owns a minority interest.
Note:	Certain reclassifications have been made to prior period amounts to conform to the current presentation.
	Refer to Legal Notice page 24.

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, 2006		May 31, 2006		Aug 31, 2006		Nov 30, 2006		Feb 28, 2007		1Q07 vs. 1Q06			1Q07 vs. 4Q06
Assets under management or supervision by distribution channel
Americas Retail Morgan Stanley Brand	$	64	$	62	$	60	$	62	$	61		(5	%)		(2	%)
Americas Retail Van Kampen Brand		90		89		90		94		96		7	%		2	%
Americas Intermediary		47		51		55		58		61		30	%		5	%
U.S. Institutional		88		86		85		88		95		8	%		8	%
Non - U.S.		75		77		80		88		97		29	%		10	%
Total long term assets under management or supervision		364		365		370		390		410		13	%		5	%
Institutional money markets/liquidity		37		37		40		49		52		41	%		6	%
Retail money markets		41		38		38		35		33		(20	%)		(6	%)
Total Money Markets		78		75		78		84		85		9	%		1	%
Sub-total assets under management or supervision		442		440		448		474		495		12	%		4	%
Global wealth management group (1)		129		127		142		153		153		19	%		8	%
Institutional securities		31		37		38		42		49		58	%		17	%
Total assets under management or supervision	$	602	$	604	$	628	$	669	$	697		16	%		4	%
Share of minority interest assets (2)		0		0		0		4		5		*			25	%
Total	$	602	$	604	$	628	$	673	$	702		17	%		4	%
Consolidated assets under management or supervision by asset class (1)
Equity	$	288	$	288	$	289	$	307	$	317		10	%		3	%
Fixed income		105		106		109		111		111		6	%		--
Money market		82		79		83		89		90		10	%		1	%
Alternatives		18		20		20		21		29		61	%		38	%
Real estate		45		52		56		64		76		69	%		19	%
Subtotal		538		545		557		592		623		16	%		5	%
Unit trusts		12		13		13		14		15		25	%		7	%
Other (3)		52		46		58		63		59		13	%		(6	%)
Total assets under management or supervision	$	602	$	604	$	628	$	669	$	697		16	%		4	%
Share of minority interest assets (2)		0		0		0		4		5		*			25	%
Total	$	602	$	604	$	628	$	673	$	702		17	%		4	%

(1)	All periods have been restated to exclude Quilter Holdings Limited.
(2)	Amount represents Asset Management's proportional share of assets managed by entities in which it owns a minority interest.
(3)	Includes assets under management or supervision associated with the Global Wealth Management Group. All periods have been restated to exclude Quilter Holdings Limited.
Note:	Certain reclassifications have been made to prior period amounts to conform to the current presentation.
	Refer to Legal Notice page 24.

12

MORGAN STANLEY

Quarterly Discover Income Statement Information

(unaudited, dollars in millions)

	Quarter Ended															Percentage Change From:
	Feb 28, 2006			May 31, 2006			Aug 31, 2006			Nov 30, 2006			Feb 28, 2007			1Q07 vs. 1Q06			1Q07 vs. 4Q06
Merchant, cardmember and other fees	$	289		$	277		$	312		$	289		$	297			3	%		3	%
Servicing and securitization income		596			651			565			526			521			(13	%)		(1	%)
Other		4			5			13			13			9			125	%		(31	%)
Total non-interest revenues		889			933			890			828			827			(7	%)		--
Interest revenue		586			608			642			622			680			16	%		9	%
Interest expense		231			220			253			248			287			24	%		16	%
Net interest income		355			388			389			374			393			11	%		5	%
Provision for consumer loan losses		155			130			232			239			195			26	%		(18	%)
Net credit income		200			258			157			135			198			(1	%)		47	%
Net revenues		1,089			1,191			1,047			963			1,025			(6	%)		6	%
Total non-interest expenses		610			650			679			764			653			7	%		(15	%)
Income before losses from
unconsolidated investees and taxes		479			541			368			199			372			(22	%)		87	%
Losses from unconsolidated investees		1			0			1			1			1			--			--
Income before taxes		478			541			367			198			371			(22	%)		87	%
Provision for income taxes		178			203			125			-			138			(22	%)		*
Income from continuing operations	$	300		$	338		$	242		$	198		$	233			(22	%)		18	%
Return on average common equity (1)		26	%		27	%		19	%		15	%		17	%
Pre-tax profit margin (2)		44	%		45	%		35	%		21	%		36	%

(1)	Refer to page 4 for the allocation of average common equity.
(2)	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 24.

13

MORGAN STANLEY

Quarterly Discover Income Statement Information

(Managed loan basis)

(unaudited, dollars in millions)

																Percentage Change From:
	Feb 28, 2006			May 31, 2006			Aug 31, 2006			Nov 30, 2006			Feb 28, 2007			1Q07 vs. 1Q06			1Q07 vs. 4Q06
Merchant, cardmember and other fees	$	519		$	541		$	579		$	542		$	552			6	%		2	%
Servicing and securitization income		0			0			0			0			0			--			--
Other		143			22			11			18			5			(97	%)		(72	%)
Total non-interest revenues		662			563			590			560			557			(16	%)		(1	%)
Interest revenue		1,475			1,576			1,572			1,544			1,599			8	%		4	%
Interest expense		541			576			619			614			649			20	%		6	%
Net interest income		934			1,000			953			930			950			2	%		2	%
Provision for consumer loan losses		507			372			496			527			482			(5	%)		(9	%)
Net credit income		427			628			457			403			468			10	%		16	%
Net revenues		1,089			1,191			1,047			963			1,025			(6	%)		6	%
Total non-interest expenses		610			650			679			764			653			7	%		(15	%)
Income before losses from
unconsolidated investees and taxes		479			541			368			199			372			(22	%)		87	%
Losses/(gains) from unconsolidated investees		1			0			1			1			1			--			--
Income before taxes		478			541			367			198			371			(22	%)		87	%
Provision for income taxes		178			203			125			-			138			(22	%)		*
Income from continuing operations	$	300		$	338		$	242		$	198		$	233			(22	%)		18	%
Return on average common equity (1)		26	%		27	%		19	%		15	%		17	%
Pre-tax profit margin (2)		44	%		45	%		35	%		21	%		36	%

(1)	Refer to page 4 for the allocation of average common equity.
(2)	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 24.

14

MORGAN STANLEY

Quarterly Financial Information and Statistical Data

Discover

(unaudited, dollars in millions)

	Quarter Ended															Percentage Change From:
	Feb 28, 2006			May 31, 2006			Aug 31, 2006			Nov 30, 2006			Feb 28, 2007			1Q07 vs. 1Q06			1Q07 vs. 4Q06
Total owned credit card loans (1)
Period end	$	19,924		$	21,764		$	22,922		$	23,588		$	22,410			12	%		(5	%)
Average	$	21,976		$	19,664		$	22,424		$	22,539		$	24,672			12	%		9	%
Total managed credit card loans (1)(2)
Period end	$	47,825		$	48,539		$	49,585		$	50,291		$	50,730			6	%		1	%
Average	$	47,575		$	47,307		$	48,763		$	49,181		$	51,390			8	%		4	%
Interest yield		12.13	%		12.69	%		12.38	%		12.23	%		12.27	%		14 bp			4 bp
Interest spread		7.44	%		7.78	%		7.07	%		6.86	%		6.85	%		(59 bp	)		(1 bp	)
Transaction volume (billions)	$	26.8		$	28.5		$	30.2		$	29.1		$	30.3			13	%		4	%
Net Sales		22.5			24.0			25.7			24.5			25.1			12	%		2	%
Other transaction volume		4.3			4.5			4.5			4.6			5.2			21	%		13	%
Accounts (millions)		46.1			45.9			45.6			45.3			44.9			(3	%)		(1	%)
Active accounts (millions)		19.6			19.6			19.7			19.8			19.7			1	%		(1	%)
Average receivables per avg. active account (actual $)	$	2,457		$	2,415		$	2,484		$	2,500		$	2,590			5	%		4	%
Trans volume per avg. active account (actual $)	$	1,385		$	1,457		$	1,538		$	1,481		$	1,528			10	%		3	%
Net gain on securitization	$	139		$	18		$	(2	)	$	5		$	(4	)		(103	%)		(180	%)
Return on managed receivables (3)		2.56	%		2.84	%		1.96	%		1.62	%		1.84	%		(72 bp	)		22 bp
Credit quality
Net charge-off rate		5.06	%		3.30	%		3.81	%		4.15	%		4.05	%		(101 bp	)		(10 bp	)
Delinquency rate (over 30 days)		3.45	%		3.29	%		3.41	%		3.51	%		3.45	%		0 bp			(6 bp	)
Delinquency rate (over 90 days)		1.61	%		1.53	%		1.59	%		1.65	%		1.69	%		8 bp			4 bp
Allowance for loan losses at period end	$	777		$	773		$	808		$	828		$	787			1	%		(5	%)
International managed credit card loans (2)
Period end	$	4,183		$	4,406		$	4,522		$	4,644		$	4,575			9	%		(1	%)
Average	$	2,911		$	4,049		$	4,361		$	4,419		$	4,608			58	%		4	%
Accounts (millions)		2.6			2.9			2.9			3.0			3.0			15	%		--
Payment services (millions of transactions)
Discover network transaction volume		339			340			362			358			361			6	%		1	%
PULSE network transaction volume		425			471			473			488			521			23	%		7	%
Total network transaction volume		764			811			835			846			882			15	%		4	%

(1)	Includes domestic and international consumer credit card businesses.
(2)	Includes owned and securitized credit card loans.
(3)	Annualized net income divided by average managed receivables.
Note:	Certain reclassifications have been made to prior period amounts to conform to the current presentation.
	Refer to Legal Notice page 24.

15

MORGAN STANLEY

Quarterly Intersegment Eliminations Income Statement Information

(unaudited, dollars in millions)

	Quarter Ended															Percentage Change From:
	Feb 28, 2006			May 31, 2006			Aug 31, 2006			Nov 30, 2006			Feb 28, 2007			1Q07 vs. 1Q06			1Q07 vs. 4Q06
Investment banking (1)	$	0		$	(33	)	$	0		$	(6	)	$	(2	)		*			67	%
Principal transactions:
Trading		(2	)		(3	)		(2	)		(1	)		0			*			*
Investments		0			0			0			0			0			--			--
Commissions		(7	)		(8	)		(7	)		(7	)		(7	)		--			--
Asset management, distribution and admin. fees		(53	)		(35	)		(40	)		(40	)		(43	)		19	%		(8	%)
Interest and dividends		(39	)		(68	)		(87	)		(90	)		(114	)		(192	%)		(27	%)
Other		(10	)		(15	)		(10	)		(12	)		(10	)		--			17	%
Total revenues		(111	)		(162	)		(146	)		(156	)		(176	)		(59	%)		(13	%)
Interest expense		(52	)		(64	)		(93	)		(97	)		(123	)		(137	%)		(27	%)
Net revenues		(59	)		(98	)		(53	)		(59	)		(53	)		10	%		10	%
Total non-interest expenses		(78	)		(85	)		(68	)		(71	)		(58	)		26	%		18	%
Income before taxes		19			(13	)		15			12			5			(74	%)		(58	%)
Provision for income taxes		7			(5	)		6			4			2			(71	%)		(50	%)
Income from continuing operations	$	12		$	(8	)	$	9		$	8		$	3			(75	%)		(63	%)

(1)	Included in the May 31, 2006 amount is $30m related to the sale of the Company's aircraft leasing business.
Note:	Certain reclassifications have been made to prior period amounts to conform to the current presentation.
	Refer to Legal Notice page 24.

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:
	Feb 28, 2006			May 31, 2006			Aug 31, 2006			Nov 30, 2006			Feb 28, 2007			1Q07 vs. 1Q06			1Q07 vs. 4Q06
Investment banking	$	982		$	1,165		$	1,138		$	1,503		$	1,227			25	%		(18	%)
Principal transactions:
Trading		3,088			3,562			2,845			2,318			4,158			35	%		79	%
Investments		349			755			322			567			920			164	%		62	%
Commissions		920			994			880			976			1,005			9	%		3	%
Asset management, distribution and administration fees		1,268			1,321			1,313			1,338			1,480			17	%		11	%
Servicing income		0			0			0			0			35			*			*
Interest and dividends		9,986			9,534			12,065			11,304			14,196			42	%		26	%
Other		130			120			119			215			213			64	%		(1	%)
Total revenues		16,723			17,451			18,681			18,221			23,234			39	%		28	%
Interest expense		9,258			9,776			11,593			10,419			13,261			43	%		27	%
Net revenues		7,465			7,675			7,088			7,802			9,973			34	%		28	%
Compensation and benefits (2)		3,998			3,578			3,070			3,287			4,762			19	%		45	%
Occupancy and equipment		207			215			230			250			258			25	%		3	%
Brokerage, clearing and exchange fees		292			340			339			334			361			24	%		8	%
Information processing and communications		258			271			273			282			276			7	%		(2	%)
Marketing and business development		119			155			146			220			152			28	%		(31	%)
Professional services		369			448			455			605			416			13	%		(31	%)
Other		241			190			282			160			254			5	%		59	%
Total non-interest expenses		5,484			5,197			4,795			5,138			6,478			18	%		26	%
Income from continuing operations before losses
from unconsolidated investees and taxes		1,981			2,478			2,293			2,664			3,495			76	%		31	%
Losses from unconsolidated investees		68			103			1			53			43			(37	%)		(19	%)
Income before taxes		1,913			2,375			2,292			2,611			3,452			80	%		32	%
Provision for income taxes		611			855			686			607			1,123			84	%		85	%
Income from continuing operations (3)	$	1,302		$	1,520		$	1,606		$	2,004		$	2,329			79	%		16	%
Return on average common equity (4)		24	%		26	%		27	%		32	%		37	%
Compensation and benefits as a % of net revenues		54	%		47	%		43	%		42	%		48	%
Non-compensation expenses as a % of net revenues		20	%		21	%		24	%		24	%		17	%
Pre-tax profit margin (5)		27	%		32	%		32	%		34	%		35	%
Number of employees (6)		40,188			40,088			41,416			43,124			44,797			11	%		4	%

(1)	Includes the elimination of intersegment activity between Institutional Securities, Global Wealth Management Group and Asset Management.
(2)	The Company maintains various deferred compensation plans for the benefit of certain employees. Beginning in the quarter ended Feb 28, 2007, increases or decreases in assets or earnings associated with such plans are reflected in net revenues, and increases or decreases in liabilities associated with such plans are reflected in compensation expense. For the quarter ended Feb 28, 2007, such net revenues and compensation expense totaled approximately $300 million and $280 million, respectively. Previously, the increases or decreases in assets and liabilities associated with these plans were both recorded in net revenues. Prior period activity has been reclassified to conform to the current presentation.
(3)	Excludes gain/(loss) from discontinued operations.
(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 24.

17

MORGAN STANLEY

Quarterly Discover Income Statement Information

(Managed loan basis)

(unaudited, dollars in millions)

	Quarter Ended															Percentage Change From:
	Feb 28, 2006			May 31, 2006			Aug 31, 2006			Nov 30, 2006			Feb 28, 2007			1Q07 vs. 1Q06			1Q07 vs. 4Q06
Merchant, cardmember and other fees	$	519		$	541		$	579		$	542		$	552			6	%		2	%
Servicing and securitization income		0			0			0			0			0			--			--
Other		143			22			11			18			5			(97	%)		(72	%)
Total non-interest revenues		662			563			590			560			557			(16	%)		(1	%)
Interest revenue		1,475			1,576			1,572			1,544			1,599			8	%		4	%
Interest expense		541			576			619			614			649			20	%		6	%
Net interest income		934			1,000			953			930			950			2	%		2	%
Provision for consumer loan losses		507			372			496			527			482			(5	%)		(9	%)
Net credit income		427			628			457			403			468			10	%		16	%
Net revenues		1,089			1,191			1,047			963			1,025			(6	%)		6	%
Compensation and benefits		244			224			235			219			230			(6	%)		5	%
Occupancy and equipment		23			21			23			24			22			(4	%)		(8	%)
Information processing and communications		90			96			98			103			94			4	%		(9	%)
Marketing and business development		119			142			145			198			142			19	%		(28	%)
Professional services		64			92			93			119			81			27	%		(32	%)
Other		70			75			85			101			84			20	%		(17	%)
Total non-interest expenses		610			650			679			764			653			7	%		(15	%)
Income before losses from
unconsolidated investees and taxes		479			541			368			199			372			(22	%)		87	%
Losses from unconsolidated investees		1			0			1			1			1			--			--
Income before taxes		478			541			367			198			371			(22	%)		87	%
Provision for income taxes		178			203			125			0			138			(22	%)		*
Income from continuing operations	$	300		$	338		$	242		$	198		$	233			(22	%)		18	%
Return on average common equity (1)		26	%		27	%		19	%		15	%		17	%
Compensation and benefits as a % of net revenues		22	%		19	%		22	%		23	%		22	%
Non-compensation expenses as a % of net revenues		34	%		36	%		42	%		57	%		41	%
Pre-tax profit margin (2)		44	%		45	%		35	%		21	%		36	%
Number of employees		13,683			13,075			12,933			13,186			13,048			(5	%)		(1	%)

(1)	Refer to page 4 for the allocation of average common equity.
(2)	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 24.

18

MORGAN STANLEY

The following (pages 19 - 21) 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 Feb 28, 2007
																	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	$	22,410	$	24,672		3.84	%		10.44	%		5.20	%		3.78	%		3.16	%		1.56	%
Securitized		28,320		26,718		3.55	%		13.96	%		8.39	%		4.30	%		3.67	%		1.79	%
Managed	$	50,730	$	51,390		1.84	%		12.27	%		6.85	%		4.05	%		3.45	%		1.69	%

(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 24.

19

MORGAN STANLEY

Quarterly Discover Reconciliation of General Purpose Credit Card Loan Data ⁽¹⁾

(unaudited, dollars in millions)

	Quarter Ended Nov 30, 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	$	23,588	$	22,539		3.53	%		10.28	%		5.18	%		3.95	%		3.22	%		1.53	%
Securitized		26,703		26,642		2.99	%		13.88	%		8.32	%		4.32	%		3.76	%		1.75	%
Managed	$	50,291	$	49,181		1.62	%		12.23	%		6.86	%		4.15	%		3.51	%		1.65	%

	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 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 24.

20

MORGAN STANLEY

Quarterly Discover Reconciliation of Managed Income Statement Data ⁽¹⁾

(unaudited, dollars in millions)

	Quarter Ended
	Feb 28, 2006			May 31, 2006			Aug 31, 2006			Nov 30, 2006			Feb 28, 2007
Merchant, cardmember and other fees:
Owned	$	289		$	277		$	312		$	289		$	297
Securitization adjustment		230			264			267			253			255
Managed	$	519		$	541		$	579		$	542		$	552
Servicing and securitizations income:
Owned	$	596		$	651		$	565		$	526		$	521
Securitization adjustment		(596	)		(651	)		(565	)		(526	)		(521	)
Managed	$	-		$	-		$	-		$	-		$	-
Other:
Owned	$	4		$	5		$	13		$	13		$	9
Securitization adjustment		139			17			(2	)		5			(4	)
Managed	$	143		$	22		$	11		$	18		$	5
Interest revenue:
Owned	$	586		$	608		$	642		$	622		$	680
Securitization adjustment		889			968			930			922			919
Managed	$	1,475		$	1,576		$	1,572		$	1,544		$	1,599
Interest expense:
Owned	$	231		$	220		$	253		$	248		$	287
Securitization adjustment		310			356			366			366			362
Managed	$	541		$	576		$	619		$	614		$	649
Provision for consumer loan losses:
Owned	$	155		$	130		$	232		$	239		$	195
Securitization adjustment		352			242			264			288			287
Managed	$	507		$	372		$	496		$	527		$	482

(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 24.

21

MORGAN STANLEY

The following (page 22) 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, 2006			May 31, 2006			Aug 31, 2006			Nov 30, 2006			Feb 28, 2007 (1)
Total assets		$	959,950		$	1,027,419		$	1,029,354		$	1,121,192		$	1,182,310
Less:	Securities purchased under agreements to resell		(176,260	)		(190,289	)		(171,547	)		(174,866	)		(192,038	)
	Securities borrowed		(252,896	)		(274,581	)		(283,024	)		(299,631	)		(277,093	)
Add:	Financial instruments sold, not yet purchased		149,561			159,822			152,979			183,119			157,807
Less:	Derivative contracts sold, not yet purchased		(42,928	)		(48,747	)		(47,017	)		(57,491	)		(51,574	)
	Subtotal		637,427			673,624			680,745			772,323			819,412
Less:	Segregated customer cash and securities balances		(27,156	)		(31,685	)		(30,917	)		(16,782	)		(21,264	)
	Assets recorded under certain provisions of SFAS No.140 and FIN 46		(78,925	)		(90,046	)		(89,649	)		(100,236	)		(124,163	)
	Goodwill and intangible assets		(2,873	)		(2,932	)		(2,943	)		(3,443	)		(4,262	)
Adjusted assets		$	528,473		$	548,961		$	557,236		$	651,862		$	669,723
Common equity		$	30,103		$	32,118		$	33,072		$	34,264		$	36,854
Preferred equity			0			0			1,100			1,100			1,100
Shareholders' equity			30,103			32,118			34,172			35,364			37,954
Junior subordinated debt issued to capital trusts (2)			3,783			3,784			3,784			4,884			4,885
	Subtotal		33,886			35,902			37,956			40,248			42,839
Less:	Goodwill and intangible assets		(2,873	)		(2,932	)		(2,943	)		(3,443	)		(4,262	)
Tangible shareholders' equity		$	31,013		$	32,970		$	35,013		$	36,805		$	38,577
Leverage ratio (3)			31.0x			31.2x			29.4x			30.5x			30.6x
Adjusted leverage ratio (4)			17.0x			16.7x			15.9x			17.7x			17.4x

(1)	Effective December 1, 2006, the Company elected early adoption of SFAS No. 157, "Fair Value Measurements", and SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115." As a result of the adoption of SFAS No. 157 and SFAS No. 159, the Company recorded an after-tax cumulative effect adjustment of $186 million as an increase to the opening balance of retained earnings as of December 1, 2006.
(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 sixty 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 24.

22

MORGAN STANLEY

This page represents an addendum to the 1Q 2007 Financial Supplement.

Fiscal 2007 compensation expense primarily includes the amortization related to fiscal 2004 awards, as well as fiscal 2005 awards and fiscal 2006 awards granted to non-retirement-eligible employees, and an accrual for the estimated full cost of fiscal 2007 year-end equity awards expected to be granted to retirement-eligible employees in December 2007. 

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, 2006.

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											40	%		40	%		18	%		2	%		100	%
2006														40	%		40	%		18	%		98	%
2007																	40	%		40	%		80	%
2008																				40	%		40	%

	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 24.

23

MORGAN STANLEY

Legal Notice

This Financial Supplement contains financial, statistical and business-related information, as well as business and segment trends.

The information should be read in conjunction with the Company's first quarter earnings press release issued March 21, 2007.

24