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Morgan Stanley Reports First Quarter Results
Net Revenues of $8.3 Billion
Quarterly EPS of $1.45 and Annualized ROE of 20%
Strong Trading Results with Record Revenues in Equities

NEW YORK, March 19, 2008 – Morgan Stanley (NYSE: MS) today reported income from continuing
operations for the first quarter ended February 29, 2008 of $1,551 million, or $1.45 per diluted share,compared with $2,314 million, or $2.17 per diluted share, in the first quarter of last year. Net
revenues were $8.3 billion, 17 percent below last year’s first quarter. Non-interest expenses of $6.1
billion, including severance expense of approximately $161 million related to staff reductions,decreased 7 percent from a year ago.1 The annualized return on average common equity fromcontinuing operations was 19.7 percent in the current quarter, compared with 30.9 percent in the prioryear.

Net income for the quarter was $1,551 million, or $1.45 per diluted share, compared with net incomeof $2,672 million, or $2.51 per diluted share, in the first quarter of 2007. Net income for the firstquarter of 2007 includes the results of Discover Financial Services and Quilter Holdings Ltd which arereported in discontinued operations. The annualized return on average common equity was 19.7
percent, compared with 29.9 percent a year ago.

Business Highlights•

Institutional Securities revenues were $6.2 billion, the third highest quarter ever.

•Equity sales and trading revenues were a record $3.3 billion, up 51 percent from last year’s firstquarter, reflecting record results in both derivatives and prime brokerage.

1

The severance expense was allocated to the business segments as follows: Institutional Securities, $130
million; Global Wealth Management, $19 million; and Asset Management, $12 million.

•

Fixed income sales and trading revenues were $2.9 billion, the second highest quarter ever.
These results reflect record revenues in interest rate, credit & currency products and the second
highest quarter ever for commodities, partly offset by mortgage proprietary trading net
writedowns of approximately $1.2 billion.

•

Other sales and trading included net losses of approximately $1.1 billion due primarily to themarking to market of loans as well as closed and pipeline commitments.

•

Investment banking delivered solid revenues of $980 million, including advisory revenues of$444 million, up 19 percent from last year’s first quarter.

•

Global Wealth Management achieved net revenues of $1.6 billion, up 6 percent from the firstquarter of last year and a pre-tax margin of 16 percent. This business generated net new assets
of $11 billion, the second highest on record and our eighth consecutive quarter of client inflows.

•

Asset Management faced challenging market conditions with losses in real estate and incurred
further losses related to securities issued by structured investment vehicles resulting in a pre-tax
loss of $161 million. The division continued to expand its product offerings with the launch of
15 new products in the first quarter including nine in alternatives, four in equities and two in
fixed income.

•

The Firm’s international businesses achieved record revenues of $4.5 billion, up 15 percent fromlast year, on strong results across Europe and the emerging markets.

The Firm also announced today that the Morgan Stanley Board of Directors had approved theappointment of Ken deRegt as the Firm's new Chief Risk Officer. In this role, he will continue as amember of the Firm’s Management Committee and report to Chief Executive Officer John Mack. Mr.
deRegt joined the Firm in February as a member of the Office of the Chairman to oversee the Firm’s
risk function.

John J. Mack, Chairman and CEO, said, “Despite turbulent markets, Morgan Stanley achieved strong
performance across many of our businesses this quarter – delivering a Firmwide ROE of 20 percent and continued taking important steps to position the Firm for growth as we move forward in 2008.
We achieved strong results across our equities and fixed income sales and trading businesses thisquarter, as we effectively capitalized on market opportunities and aggressively managed our positions.
We also delivered another solid quarter in investment banking and wealth management. While manyof our businesses are facing challenging market conditions that we expect to continue in the months
ahead, we are satisfied with how Morgan Stanley navigated the ongoing market turbulence. Our

2people remain intensely focused on continuing to serve our clients, building out our global franchiseand executing our growth plans in order to create long-term value for Morgan Stanley’s shareholders.”

INSTITUTIONAL SECURITIESInstitutional Securities posted pre-tax income2 of $2,117 million, compared with $2,845 million in thefirst quarter of 2007. Net revenues were $6.2 billion compared with net revenues of $7.2 billion a year
ago. The quarter’s pre-tax margin was 34 percent, compared with 40 percent in last year’s firstquarter. The quarter’s return on average common equity was 24 percent compared with 38 percent a
year ago.
•

Advisory revenues were $444 million, a 19 percent increase from last year’s first quarter,
compared with a decrease of 35 percent in industrywide completed M&A activity.3•

Underwriting revenues of $536 million decreased 19 percent from last year’s first quarter. Equity
underwriting revenues were $261 million, a 13 percent decrease from the prior year’s first quarter,
compared with a 23 percent decrease in industrywide activity. Fixed income underwriting
revenues decreased 23 percent to $275 million over the same period, compared with a 39 percent
decrease in industrywide activity.

•

3

Fixed income sales and trading net revenues were $2.9 billion, 15 percent below the record $3.4
billion in the first quarter of 2007 as record revenues in our Interest Rate, Credit & Currency(IRCC) business were partly offset by the mortgage proprietary trading net writedowns noted
above. Within IRCC, interest rate products and credit trading generated higher revenues fromstrong customer flow and higher levels of volatility, and emerging markets generated record
results. Credit trading also benefited from favorable positioning as credit spreads widened during
the quarter. Commodities results, benefiting from strong customer flow, were higher than a year
ago as higher trading revenues in agricultural products and oil liquids were partly offset by lower
revenues in electricity and natural gas. Fixed income sales and trading also benefited byapproximately $527 million from the widening of Morgan Stanley’s credit spreads on certain
long-term debt.

•

Record equity sales and trading net revenues were $3.3 billion, an increase of 51 percent from lastyear’s first quarter. Strong trading results in a volatile market coupled with increased customer

2

Represents income/(loss) from continuing operations before gains/(losses) from unconsolidated investees andtaxes.
3
Source: Thomson Financial – for the periods: December 1, 2006 to February 28, 2007 and December 1, 2007 to
February 29, 2008.

3

flow contributed to record results in derivatives and higher revenues in cash equities. Prime
brokerage also generated record net revenues for the quarter. Equity sales and trading benefitedby approximately $321 million from the widening of Morgan Stanley’s credit spreads on certain
long-term debt.

•

Other sales and trading losses of approximately $1.1 billion reflected writedowns on loans andcommitments largely related to acquisition financing to non-investment grade companies and thewritedown of securities in the Firm’s subsidiary banks.4•

Investment losses were $141 million compared to gains of $350 million in the first quarter of lastyear, reflecting losses on investments in real estate funds and our employee deferred compensationand co-investment plans.

•

The Company’s average trading VaR measured at the 95 percent confidence level was $97 million
compared with $90 million in the first quarter of 2007 and $89 million in the fourth quarter of
2007. Total aggregate average trading and non-trading VaR was $103 million compared with $92
million in the first quarter of 2007 and $98 million in the fourth quarter of 2007. At quarter-end,
the Company’s trading VaR was $100 million, and the aggregate trading and non-trading VaR was$107 million.

•

Non-interest expenses were $4.1 billion, a decrease of 5 percent from the first quarter of last year.
Compensation costs, including the severance costs noted above, decreased from last year’s firstquarter reflecting lower revenues. Non-compensation expenses increased from a year ago
primarily resulting from higher levels of business activity.

For the first two months of calendar 2008, the Company ranked second in global announced M&A
with a 23 percent market share, fourth in global completed M&A with a 28 percent market share,eighth in global IPOs with a 4 percent market share, tenth in global equity and equity-related issuanceswith a 4 percent market share and fifth in global debt issuance with a 5 percent market share.5

GLOBAL WEALTH MANAGEMENT GROUP
Global Wealth Management Group's pre-tax income for the first quarter was $254 million, a 12
percent increase from $226 million in the first quarter of last year. The quarter's pre-tax margin was
16 percent compared with 15 percent in last year's first quarter. The quarter's return on averagecommon equity was 42 percent compared with 32 percent a year ago.
4
5

Includes Morgan Stanley Bank (Utah) and Morgan Stanley Trust FSB.
Source: Thomson Financial – for the period January 1, 2008 to February 29, 2008.

4

•Net revenues of $1.6 billion were up 6 percent from a year ago reflecting higher net interest
revenue from growth in the bank deposit sweep program and stronger transactional revenues.
Lower asset management revenues reflect the discontinuance of certain fee-based brokerage
programs in the fourth quarter of 2007 and a change in the classification of sub-advisory fees
relating to certain customer agreements, partly offset by growth in other fee-based products.6•

Non-interest expenses were $1.4 billion, up 5 percent from a year ago. Compensation costs,
including the severance costs noted above, increased from a year ago, primarily reflecting higher
revenues. Non-compensation expenses declined from a year ago, as higher levels of businessactivity were more than offset by a change in the classification of certain sub-advisory fees noted
above.

•

Total client assets were $722 billion, a 5 percent increase from last year’s first quarter. Client
assets in fee-based accounts were $185 billion, an 8 percent decrease from a year ago andrepresent 26 percent of total assets.

•

The 8,456 global representatives at quarter-end achieved average annualized revenue per global
representative of $761,000 and total client assets per global representative of $85 million.

ASSET MANAGEMENT
Asset Management posted a pre-tax loss of $161 million compared with pre-tax income of $379
million in last year’s first quarter.
•

Net revenues decreased 60 percent to $543 million as our real estate business posted losses on
principal investments compared to strong gains posted in the first quarter of last year. Lower
trading results reflect losses of approximately $187 million related to securities issued bystructured investment vehicles. These decreases were partly offset by higher management andadministration fees primarily resulting from an increase in assets under management.

•

Non-interest expenses decreased 29 percent to $704 million from a year ago. Compensation costs,
including the severance costs noted above, declined on lower revenues including losses associatedwith the employee deferred compensation and co-investment plans. Non-compensation expenses
increased from a year ago reflecting higher levels of business activity.

•

Asset Management recorded net customer inflows of $6.6 billion for the quarter, primarily frominstitutional money markets, the sixth consecutive quarter of net customer inflows.

6

Beginning in 1Q08, certain sub-advisory fees are reported as a reduction to asset management, distribution andadmin fees, reflecting changes to certain customer agreements. In prior periods, these fees were reported as noncompensation expenses.

5•

Assets under management or supervision at February 29, 2008 were $577 billion, up $56 billion,or 11 percent, from a year ago, driven by increases in the alternative and institutional money
market asset classes. These increases primarily resulted from net customer inflows.

•

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, 54 percent over three years, 66 percent over five years and75 percent over 10 years.

OTHER MATTERS
The quarter’s effective tax rate from continuing operations was 30.0 percent, down from 32.5 percent
a year ago. The decrease in the rate primarily reflects a change in the geographic mix of earnings,
partly offset by an increase in the rate due to lower domestic tax credits.

On January 28, 2008, the Company announced that it had reached an agreement to sell Morgan
Stanley Wealth Management S.V., S.A.U. (“MSWM”), its Spanish onshore mass affluent wealthmanagement business. The transaction is expected to close during the second quarter of fiscal 2008
subject to customary closing conditions, including regulatory approvals. The results of MSWM are
included within the Global Wealth Management Group business segment.

As of February 29, 2008, the Company has not repurchased any shares of its common stock this fiscal
year.

The Company announced that its Board of Directors declared a $0.27 quarterly dividend per commonshare. The dividend is payable on April 30, 2008, to common shareholders of record on April 11,
2008. The Company also announced that its Board of Directors declared a quarterly dividend of$313.29 per share of Series A Floating Rate Non-Cumulative Preferred Stock (represented bydepositary shares, each representing 1/1,000th interest in a share of preferred stock and each having adividend of $0.31329) to be paid on April 15, 2008 to preferred shareholders of record on March 31,
2008.

Total capital as of February 29, 2008 was $198.2 billion, including $43.9 billion of commonshareholders' equity, preferred equity and junior subordinated debt issued to capital trusts. Book value
per common share was $29.11, based on 1.1 billion shares outstanding.

Morgan Stanley is a leading global financial services firm providing a wide range of investment

6

banking, securities, investment management and wealth management services. The Firm's employees
serve clients worldwide including corporations, governments, institutions and individuals from morethan 600 offices in 33 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 theearnings release and the Financial Supplement are available online in the Investor Relations section atwww.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 andwhich are subject to risks and uncertainties that may cause actual results to differ materially. Fora discussion of additional risks and uncertainties that may affect the future results of theCompany, 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, "Legal
Proceedings" in Part I, Item 3, "Management’s Discussion and Analysis of Financial Condition
and Results of Operations" in Part II, Item 7 and "Quantitative and Qualitative Disclosures about
Market Risk" in Part II, Item 7A of the Company's Annual Report on Form 10-K for the fiscal
year ended November 30, 2007 and other items throughout the Form 10-K and the Company's
2008 Current Reports on Form 8-K.

7

MORGAN STANLEY
Quarterly Financial Summary(unaudited, dollars in millions)

Quarter Ended
Feb 28, 2007

Feb 29, 2008
Net revenues
Institutional Securities
Global Wealth Management Group
Asset Management
Intersegment Eliminations
Consolidated net revenues

6,213
1,606
543
(40)
8,322

$

$

$
$

2,117
254
(161)
4
2,214
1,534

Earnings per basic share:
Income from continuing operations
Discontinued operations (2)Earnings per basic share$$$

Earnings per diluted share:
Income from continuing operations
Discontinued operations (2)Earnings per diluted share$$$

Income / (loss) before taxes (1)Institutional Securities
Global Wealth Management Group
Asset Management
Intersegment Eliminations
Consolidated income / (loss) before taxes
Earnings / (loss) applicable to common shareholders

Average common shares outstanding
Basic
Diluted
Period end common shares outstanding
Return on average common equityfrom continuing operations
Return on average common equity

(1)
(2)
Note:

$

$

$

7,162
1,511
1,368
(47)
9,994

$

$

$
$

2,845
226
379
6
3,456
2,655

1.50
1.50

$
$
$

1.45
1.45

$
$
$

$

Percentage Change From:Feb 28, 2007
Nov 30, 2007

Nov 30, 2007
(3,425)
1,789
1,252
(66)
(450)

(13%)
6%
(60%)
15%
(17%)

*
(10%)
(57%)
39%
*

$
$

(6,479)378
294
3(5,804)(3,605)(26%)
12%(142%)
(33%)
(36%)
(42%)

133%
(33%)
(155%)
33%
138%
143%

2.28
0.35
2.63

$
$
$

(3.61)(3.61)

(34%)
*
(43%)

142%
-142%

2.17
0.34
2.51

$
$
$

(3.61)(3.61)

(33%)
*
(42%)

140%
-140%

1,020,802,234
1,057,867,487
1,105,301,550

1,009,186,993
1,057,912,545
1,061,644,077

19.7%
19.7%

30.9%
29.9%

$

999,553,568
999,553,568
1,056,289,659**

Represents consolidated income / (loss) from continuing operations before gain / (loss) from unconsolidated investees, taxes and gain / (loss)
from discontinued operations.
All periods have been restated to include the results of Discover Financial Services in discontinued operations.
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)

Investment banking
Principal transactions:
Trading
Investments
Commissions
Asset management, distribution and admin. fees
Interest and dividends
Other
Total revenues
Interest expense
Net revenues

Feb 29, 2008

Quarter Ended
Feb 28, 2007

Nov 30, 2007

$

$

$

1,109

1,227

Percentage Change From:Feb 28, 2007
Nov 30, 2007

1,569

(10%)

(29%)

3,390
(346)
1,199
1,550
13,965317
21,184
12,862
8,322

4,158
880
1,005
1,479
14,171
272
23,192
13,198
9,994(7,171)
820
1,290
1,743
16,107353
14,711
15,161(450)(18%)(139%)
19%
5%
(1%)
17%
(9%)
(3%)
(17%)

147%
(142%)
(7%)
(11%)
(13%)
(10%)
44%
(15%)
*

Compensation and benefits

4,071

4,775

3,187

(15%)

28%

Occupancy and equipment
Brokerage, clearing and exchange fees
Information processing and communications
Marketing and business development
Professional services
Other
Total non-compensation expenses

286
444
305
183
379
440
2,037

260
361
277
153
419
293
1,763

312
470
328
271
676
110
2,167

10%
23%
10%
20%
(10%)
50%
16%

(8%)
(6%)
(7%)
(32%)
(44%)
*
(6%)

Total non-interest expenses

6,108

6,538

5,354

(7%)

14%

2,214
2
665
1,551

3,456
(26)
1,116
2,314

(5,804)18(2,198)(3,588)

(36%)
108%
(40%)
(33%)

138%
(89%)
130%
143%

0
0
0
1,551
17
1,534

564
206
358
2,672
17
2,655

0
0
0
(3,588)17(3,605)

*
*
*
(42%)
-(42%)---143%-143%

Income / (loss) from continuing operations before gain / (loss)
from unconsolidated investees and taxes
Gain / (loss) from unconsolidated investees
Provision / (benefit) for income taxes
Income / (loss) from continuing operations
Discontinued operations (1)Gain / (loss) from discontinued operations
Income tax provision / (benefit)
Gain / (loss) from discontinued operations
Net income / (loss)
Preferred stock dividend requirements
Earnings / (loss) applicable to common shareholders

$
$
$

$
$
$

$
$
$

Return on average common equityfrom continuing operations
Return on average common equity
Pre-tax profit margin (2)Compensation and benefits as a % of net revenues
Non-Compensation expenses as a % of net revenues

19.7%
19.7%
27%
49%
25%

30.9%
29.9%
35%
48%
18%

*
*
*
*
*

Effective Tax Rate

30.0%

32.5%

*

(1)
(2)
Note:

All periods have been restated to include the results of Discover Financial Services in discontinued operations.
Income / (loss) before taxes, excluding gain / (loss) from unconsolidated investees, as a % of net revenues.
Certain reclassifications have been made to prior period amounts to conform to the current presentation.
9