Contact:Media Relations
Mark Lake
212-761-0814

Investor Relations
William Pike
212-761-0008
For Immediate Release

Morgan Stanley Reports Second Quarter Results
Record Quarterly Earnings per Share from Continuing Operations of $1.85, Up 115%;
Record Net Revenues of $8.9 Billion, Up 48%;
Record Net Revenues in Institutional Securities and Discover
NEW YORK, June 21, 2006 -- Morgan Stanley (NYSE: MS) today reported net income for the secondquarter ended May 31, 2006 of $1,957 million, up 111 percent from the second quarter of 2005 and 25
percent above the first quarter of 2006. Net revenues (total revenues less interest expense and theprovision for loan losses) were a record $8.9 billion, 48 percent above last year’s second quarter.
Non-interest expenses of $5.8 billion increased 24 percent from last year, primarily resulting fromincreased compensation costs. Diluted earnings per share were $1.86 compared with $0.86 in thesecond quarter of 2005 and the annualized return on average common equity for the second quarterwas 25.1 percent compared with 13.1 percent a year ago.

For the first six months of 2006, net income was $3,518 million, a 51 percent increase from $2,330
million a year ago. Net revenues rose 35 percent to $17.4 billion and non-interest expenses increased
26 percent to $11.8 billion. Diluted earnings per share were $3.33 compared with $2.15 a year ago.
The annualized return on average common equity was 23.1 percent compared with 16.4 percent a yearago.

Business Highlights•

Institutional Securities achieved record net revenues of $5.7 billion, up 71 percent from thesame period last year, and record income before taxes of $2.3 billion, up 179 percent.

•Equity achieved the highest sales and trading revenues and equity underwriting revenues insix years. These strong sales and trading results included record results in Prime Brokerage.

•Fixed income delivered sales and trading revenues of $2.4 billion, up 95 percent from thesame period last year and the second highest ever. This increase reflected record results incredit products and the second best quarter ever in commodities.

•Global Wealth Management Group achieved its highest net revenues since the first quarter of2001.

•Asset Management launched nine new products this quarter, including international funds andinstitutional and alternative products. The division also appointed a new head of alternative
investments and acquired hedge fund Oxhead Capital Management.

•Discover achieved record net revenues of $1.2 billion and record income before taxes of$541 million as it continued to benefit from improvements in underlying credit quality and low
bankruptcies following last fall's spike in bankruptcy filings. Discover also announced thelaunch of the Discover Business Card, targeting small businesses and leveraging Discover's
core Cashback Bonus® rewards feature.

John J. Mack, Chairman and CEO, said, "I could not be more pleased with the outstanding results theemployees of Morgan Stanley delivered in the second quarter. Building on our strong momentum inrecent quarters, the Firm posted record revenues of $8.9 billion and ROE of 25 percent. We haveseen improvement in all of our businesses, with the Firm achieving four straight quarters of improving
PBT, and particularly robust results in the first six months of this year. We are continuing to
make significant progress in executing on our plan to drive improved growth, margins and ROE.
There is still a great deal of work to be done, but we are moving aggressively on many fronts and wesee significant opportunities to create shareholder value."

INSTITUTIONAL SECURITIESInstitutional Securities posted record income before taxes1 of $2,267 million, up 179 percent from$813 million in the second quarter of 2005. Record net revenues of $5.7 billion were 71 percent
higher, driven by strong results across all businesses. The quarter’s pre-tax margin was 40 percent,compared with 24 percent in last year’s second quarter.
•Advisory revenues were $385 million, an 8 percent increase from last year’s second quarter.

•Underwriting revenues were $670 million, a 77 percent increase from last year’s second quarter.
Equity underwriting revenues increased 156 percent to $371 million and fixed income
underwriting revenues rose 28 percent to $299 million.

•Fixed income sales and trading net revenues were $2.4 billion, a 95 percent increase over thesecond quarter of 2005 and the second best quarter. The increase was broad-based, driven byrecord revenues in credit products and strong performance in commodities. Credit products
benefited from significantly improved performance in corporate credit trading following a weaksecond quarter of 2005 and continuing strong results in residential and commercial securitized
products. The higher revenues in commodities were primarily attributable to results in electricity

1

Represents income from continuing operations before losses from unconsolidated investees, taxes andcumulative effect of an accounting change.
2and natural gas. Interest rate & currency products were up slightly, benefiting from strong
customer flows and higher foreign exchange trading revenue.
•Equity sales and trading net revenues were $1.7 billion, an increase of 54 percent from last year
and the second best quarter on record. Increased client flows across both the cash and derivatives
markets drove revenues higher, particularly in Europe and Asia. Trading revenues were alsosignificantly higher. Prime Brokerage financed higher client balances for the 13th consecutivequarter, which contributed to record revenues for the business.

•Investment revenues were $595 million compared with $226 million in the second quarter of lastyear and included significant gains from investments in the Company’s real estate funds, Grifols
S.A., Wacker Chemie AG and NYSE Group, Inc.

•The Company’s aggregate average trading VaR was $96 million compared with $87 million in thesecond quarter of 2005 and $84 million in the first quarter of 2006. Total aggregate average
trading and non-trading VaR was $106 million compared with $99 million in the second quarter of2005 and $94 million in the first quarter of 2006. At quarter end, the Company’s aggregate
trading VaR was $83 million, and the aggregate trading and non-trading VaR was $88 million.

•Non-interest expenses were $3.5 billion, a 37 percent increase from a year ago reflecting increased
compensation costs primarily resulting from higher net revenues. Non-compensation expenses
were relatively flat as higher expenses resulting from increased levels of business activity wereoffset by lower charges for legal and regulatory matters.

For the first five months of calendar 2006, the Company ranked second in global completed M&A
with a 30 percent market share, fifth in global announced M&A with a 24 percent market share,second in global IPOs with a 10 percent market share, third in global equity and equity-related
issuances with a 9 percent market share and fifth in global debt issuance with a 6 percent market
share.2

GLOBAL WEALTH MANAGEMENT GROUP
Global Wealth Management Group’s pre-tax income for the second quarter was $157 million, a 33
percent increase compared with $118 million in the second quarter of last year. The quarter's pre-tax
margin was 11 percent compared with 10 percent in last year’s second quarter.
•Net revenues of $1.4 billion were up 14 percent from a year ago, reflecting higher revenues fromtransactional and fee-based products, as well as higher net interest revenue primarily resulting
from the bank deposit sweep program.

2

Source: Thomson Financial -- for the period January 1, 2006 to May 31, 2006.
3•Investment revenues were $26 million in the quarter primarily reflecting gains from theinvestment in NYSE Group, Inc.

•Non-interest expenses were up 12 percent to $1.2 billion, reflecting increased compensation due inpart to higher revenues as well as severance-related costs.

•Total client assets were $639 billion, a 4 percent increase from last year’s second quarter. Client
assets in fee-based accounts rose 15 percent to $190 billion over the last 12 months and increased
as a percentage of total assets to a record 30 percent from 27 percent.

•The number of global representatives at quarter-end was 8,179. This reflects planned sales force
reductions of approximately 1,500 completed both during this quarter and in the third quarter of2005 and attrition.

•Average annualized revenue and total client assets per global representative increased to $653
thousand and $78 million, respectively, both records.

ASSET MANAGEMENT
Asset Management’s pre-tax income was $224 million, a 28 percent increase from $175 million in thesecond quarter of 2005. The quarter’s pre-tax margin was 31 percent compared with 27 percent a year
ago. Net revenues rose 13 percent compared with the second quarter of 2005, reflecting higher private
equity revenues. Non-interest expenses increased 7 percent to $499 million as higher compensationlevels were partly offset by lower non-compensation expenses. Excluding results from the private
equity business, pre-tax income decreased 12 percent driven by higher compensation levels, and thepre-tax margin was 25 percent compared with 29 percent last year.

Assets under management or supervision at May 31, 2006 were $440 billion, up $24 billion, or 6
percent, from a year ago. The increase resulted from market appreciation partly offset by customer
out-flows. Institutional assets rose $3 billion during the second quarter and $33 billion over the past
12 months to $250 billion. Retail assets decreased $5 billion during the quarter and $9 billion from ayear ago to $190 billion. 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, 76 percent over
five years and 81 percent over 10 years.

DISCOVER
Discover’s second quarter pre-tax income was a record $541 million on a managed basis, up 106
percent from $263 million in the second quarter of 2005. Record net revenues of $1,191 million were
34 percent higher than last year’s second quarter. The quarter’s pre-tax margin was 45 percent
compared with 30 percent a year ago. The current quarter includes the results of the Goldfish credit
card business, which was acquired in February 2006.
4•Net sales volume was a record $24.0 billion, a 14 percent increase from a year ago, reflecting
increased cardmember usage and the acquisition of the Goldfish credit card business.

•Managed credit card loans of $48.5 billion were up 4 percent from a year ago and up 1 percent
from the end of the first quarter.

•

Managed merchant, cardmember and other fees were $541 million, up 12 percent from a year ago.
The increase was primarily due to higher merchant discount and other revenues, partially offset byhigher cardmember rewards. The increase in merchant discount revenue was primarily driven byrecord sales activity.

•The provision for consumer loan losses on a managed basis was $372 million, down 35 percent
from last year, reflecting significantly lower bankruptcy charge offs and improved credit quality.

•Managed net interest income increased $7 million from a year ago, reflecting higher averageloans, partially offset by a narrowing of the interest rate spread as a higher yield was more thanoffset by a higher cost of funds.

•Non-interest expenses increased 4 percent to $650 million, primarily due to higher compensationand operating expenses associated with the Goldfish credit card business.

•The credit card net charge-off rate was 3.30 percent, 164 basis points lower than last year’s second
quarter and 176 basis points lower than this year’s first quarter. The managed credit card over-30day delinquency rate was 3.29 percent, a decrease of 61 basis points from the second quarter of2005. The managed credit card over-90-day delinquency rate was 1.53 percent, 30 basis points
lower than a year ago.

OTHER MATTERS
The quarter’s results reflect an increase in the Company’s annual effective tax rate from 33.0 percent
in the first quarter to 35.0 percent, primarily resulting from lower estimated tax credits.

On March 24, 2006, the Company completed the sale of its aircraft leasing business.

As of May 31, 2006, the Company repurchased approximately 22 million shares of its common stock
since the end of fiscal 2005. The Company also announced that its Board of Directors declared a$0.27 quarterly dividend per common share. The dividend is payable on July 31, 2006 to commonshareholders of record on July 14, 2006.

Total capital as of May 31, 2006 was $145.7 billion, including $35.7 billion of common shareholders’equity and junior subordinated debt issued to capital trusts. Book value per common share was$30.09, based on 1.1 billion shares outstanding.

5Morgan Stanley is a global financial services firm and a market leader in securities, investment
management and credit services. With more than 600 offices in 30 countries, Morgan Stanley
connects people, ideas and capital to help clients achieve their financial aspirations.

A financial summary follows. Additional 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 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 and “CertainFactors Affecting Results of Operations” in Part II, Item 7 of the Company’s Annual Report onForm 10-K for the fiscal year ended November 30, 2005, “Management’s Discussion andAnalysis of Financial Condition and Results of Operations” in the Company’s
Quarterly Report on Form 10-Q for the quarter ended February 28, 2006 and in other items
throughout the Form 10-K, Form 10-Q and the Company’s 2006 Current Reports on Form 8-K.

6

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

May 31, 2006
Net revenues
Institutional Securities
Global Wealth Management Group
Asset Management
DiscoverIntersegment Eliminations

Quarter Ended
May 31, 2005

Feb 28, 2006

Percentage Change From:
May 31, 2005
Feb 28, 2006

Six Months Ended
May 31, 2006
May 31, 2005

PercentageChange

$

5,726
1,402
723
1,191
(98)

$

3,340
1,228
642
888
(67)

$

5,474
1,284
695
1,089
(59)

71%
14%
13%
34%
(46%)

5%
9%
4%9%(66%)$

11,200
2,686
1,418
2,280
(157)

$

7,355
2,466
1,338
1,847
(137)

52%
9%
6%
23%(15%)

$

8,944

$

6,031

$

8,483

48%

5%

$

17,427$

12,869

35%

$

2,267
157
224
541
(13)

$

813
118
175
263
25

$

1,75423172
479
19179%
33%28%
106%(152%)

29%
*30%
13%
(168%)

$

4,021
180
396
1,020
6$

1,890
471
462
617
49113%
(62%)
(14%)
65%
(88%)

$

3,176

$

1,394

$

2,447

128%

30%

$

5,623

$

3,489

61%

Earnings per basic share: (2)Income from continuing operations
Discontinued operations
Cumulative effect of accounting change (3)Earnings per basic share

$
$
$
$

1.92
0.01
1.93$
$
$
$

0.88
0.88$
$
$
$

1.56(0.03)
1.53

118%
*-119%

23%
133%
-26%

$
$
$
$

3.48(0.02)
3.46$
$$$

2.150.05
2.2062%**57%

Earnings per diluted share: (2)Income from continuing operations
Discontinued operations
Cumulative effect of accounting change (3)Earnings per diluted share

$$$
$

1.85
0.01
1.86$
$
$
$

0.86
0.86$
$
$
$

1.50(0.03)
1.47

115%
*-116%

23%
133%
-27%

$
$
$
$

3.35(0.02)
3.33$
$
$
$

2.10
0.05
2.15

60%
*
*
55%

Consolidated net revenues
Income before taxes (1)Institutional Securities
Global Wealth Management Group
Asset Management
DiscoverIntersegment Eliminations
Consolidated income before taxes

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)
(3)
Note:

1,013,241,715
1,054,733,745
1,071,786,172

1,053,812,487
1,079,811,172
1,086,652,691

1,020,041,181
1,061,764,798
1,070,407,513

1,016,756,096
1,056,493,761
1,071,786,172

1,061,632,036
1,084,988,764
1,086,652,691

25.0%
25.1%

13.8%
13.1%

21.6%
21.1%

23.3%
23.1%

16.9%
16.4%

Represents consolidated income from continuing operations before losses from unconsolidated investees, taxes,
gain/(loss) from discontinued operations and cumulative effect of accounting change.
Summation of the quarters' earnings per common share may not equal the annual amounts due to the averaging effect of the number of shares and shareequivalents throughout the year.
Represents the effects of the adoption of SFAS 123R in the first quarter of fiscal 2005.
Certain reclassifications have been made to prior period amounts to conform to the current presentation.
7MORGAN STANLEY
Quarterly Consolidated Income Statement Information(unaudited, dollars in millions)

Investment banking
Principal transactions:
Trading
Investments
Commissions
Fees:
Asset management, distribution and admin.
Merchant, cardmember and otherServicing and securitizations income
Interest and dividends
Other
Total revenues
Interest expense
Provision for consumer loan losses
Net revenues

May 31, 2006

Quarter Ended
May 31, 2005

Feb 28, 2006$$$

Compensation and benefits
Occupancy and equipment
Brokerage, clearing and exchange fees
Information processing and communications
Marketing and business development
Professional services
Other
September 11th related insurance recoveries, net
Total non-interest expenses
Income from continuing operations before losses
from unconsolidated investees, taxes
and cumulative effect of accounting change
Losses from unconsolidated investees
Provision for income taxes
Income from continuing operations
Discontinued operations
Gain/(loss) from discontinued operations
Income tax benefit/(provision)
Gain/(loss) from discontinued operations
Cumulative effect of accounting change (1)Net income
Return on average common equityfrom continuing operations
Return on average common equity
Compensation and benefits as a % of net revenues(1)
Note:$1,132814

Percentage Change From:
May 31, 2005
Feb 28, 2006

982

39%

15%

Six Months Ended
May 31, 2006 May 31, 2005
$

2,114

$

Percentage
Change

1,635

29%

3,735
690
1,005

1,794
226
824

3,067
314
929

108%
*
22%

22%
120%
8%

6,802
1,004
1,934

3,640
379
1,648

87%
165%
17%

1,333
277
651
10,114125
19,062
9,988
130
8,944

1,246
318
423
6,035
121
11,801
5,561
209
6,031

1,279
289
596
10,549114
18,119
9,481
155
8,483

7%
(13%)
54%
68%
3%
62%
80%
(38%)
48%

4%
(4%)
9%(4%)
10%
5%5%(16%)
5%

2,612
566
1,247
20,663239
37,181
19,469285
17,427

2,450
626
917
11,878226
23,39910,186344
12,869

7%
(10%)
36%
74%
6%
59%
91%
(17%)
35%

3,723
237
340
365
298
538
267
0
5,768

2,622
232
276
349
298
438
422
0
4,637

4,183
232
292
347
238
434
310
0
6,036

42%
2%
23%
5%
-23%
(37%)
-24%(11%)
2%
16%
5%
25%
24%(14%)
-(4%)

7,906
469
632
712
536
972
577
0
11,804

5,476
564
536
691
555
817
992
(251)
9,380

44%(17%)
18%
3%
(3%)
19%
(42%)
*
26%

3,176
103
1,124
1,949

1,394
67
396
931

2,447
69784
1,594

128%
54%
184%
109%

30%
49%
43%
22%

5,623
172
1,908
3,543

3,489
140
1,069
2,280

61%
23%
78%
55%

14(6)
8
0
1,957(5)
2(3)
0928

(55)
22(33)
0
1,561

*
*
*
-111%

125%
(127%)
124%
-25%

(42)
17(25)
0
3,518

2(1)
149
2,330

*
*
*
*
51%

25.0%
25.1%
42%

$

$

13.8%
13.1%
44%

Represents the effects of the adoption of SFAS 123R in the first quarter of fiscal 2005.
Certain reclassifications have been made to prior period amounts to conform to the current presentation.
8

21.6%
21.1%
49%

$

23.3%
23.1%
45%

$

16.9%
16.4%
43%