Goldman Sachs & Co.Financial Services Conference

Philip J. Purcell Stephen S. Crawford

Chairman & CEO Chief Financial Officer

May 13, 2002

2

This slide is part of a presentation by Morgan Stanley and is intended to be viewed as part of that presentation. The presentation is based on information generally available to the public and does not contain any material, non-public information. The presentation has been prepared solely for informational purposes and is neither an offer to sell nor the solicitation of an offer to buy any security or instrument and has not been updated since it was originally presented on May 13, 2002.

Sales and Trading

3,956 4,403

6,622

8,8518,258

2,035

1997 1998 1999 2000 2001 1Q2002

Sales and Trading Net Revenues

($MM, % Total)

% of Firm Revenues 27% 27% 31% 34% 37% 39%

1997-2001 CAGR: 20%

3

This slide is part of a presentation by Morgan Stanley and is intended to be viewed as part of that presentation. The presentation is based on information generally available to the public and does not contain any material, non-public information. The presentation has been prepared solely for informational purposes and is neither an offer to sell nor the solicitation of an offer to buy any security or instrument and has not been updated since it was originally presented on May 13, 2002.

Diversification

47%

53%

63%

37%

57%

43%

68%

32%

56%

44%

46%

54%

1997 1998 1999 2000 2001 1Q02

Sales and Trading Net Revenues

($MM, % Total)

Equity Fixed Income

4

This slide is part of a presentation by Morgan Stanley and is intended to be viewed as part of that presentation. The presentation is based on information generally available to the public and does not contain any material, non-public information. The presentation has been prepared solely for informational purposes and is neither an offer to sell nor the solicitation of an offer to buy any security or instrument and has not been updated since it was originally presented on May 13, 2002.

Balance Sheet(1)

$MMs

Note: (1) As of February 28, 2002

Total Assets

Cash and cash equivalents

Financing transactions, including:Reverse repos and securities borrowed

Financial instruments, including:Cash products ($118,770)Derivative products ($31,814)

Receivables, net of allowances:

Other assets, primarily includes:Aircraft, cash collateral, goodwill, office facilities etc.

Asset Class

$491,651

74,298

194,222

158,846

47,885

16,400

Balance$MMs

15%

40%

32%

10%

3%

% ofTotal

5

This slide is part of a presentation by Morgan Stanley and is intended to be viewed as part of that presentation. The presentation is based on information generally available to the public and does not contain any material, non-public information. The presentation has been prepared solely for informational purposes and is neither an offer to sell nor the solicitation of an offer to buy any security or instrument and has not been updated since it was originally presented on May 13, 2002.

Financial Instruments – Cash(1)

Bank Loans: $4.9Bn

Private Equity: $900MM(2)

High Yield: $1.6Bn

Loans and Commitments

Investment Grade

Non-Investment Grade

75%

25%

Note: (1) As of February 28, 2002(2) Of which only $250 MM is in inventory

Selected Financial Instruments

Total: $10.2Bn

6

This slide is part of a presentation by Morgan Stanley and is intended to be viewed as part of that presentation. The presentation is based on information generally available to the public and does not contain any material, non-public information. The presentation has been prepared solely for informational purposes and is neither an offer to sell nor the solicitation of an offer to buy any security or instrument and has not been updated since it was originally presented on May 13, 2002.

Financial Instruments – Derivatives(1)

0

2,000

4,000

6,000

<1 Yrs 1-3 Yrs 3-5 Yrs 5+ Yrs0

2,000

4,000

6,000

8,000

Interest FX Equity Commodities

Maturity Profile by Counterparty Rating

($MMs)

Counterparty Rating by Product

($MMs)

AAA AA A BBB NIGNote: (1) As of February 28, 2002

7

This slide is part of a presentation by Morgan Stanley and is intended to be viewed as part of that presentation. The presentation is based on information generally available to the public and does not contain any material, non-public information. The presentation has been prepared solely for informational purposes and is neither an offer to sell nor the solicitation of an offer to buy any security or instrument and has not been updated since it was originally presented on May 13, 2002.

Revenue Drivers

Trading Volumes

Volatility

Primary Activity

Market Direction

8

This slide is part of a presentation by Morgan Stanley and is intended to be viewed as part of that presentation. The presentation is based on information generally available to the public and does not contain any material, non-public information. The presentation has been prepared solely for informational purposes and is neither an offer to sell nor the solicitation of an offer to buy any security or instrument and has not been updated since it was originally presented on May 13, 2002.

Business Model

Increase FlowLowers Risk Strengthens Client

Relationships

9

This slide is part of a presentation by Morgan Stanley and is intended to be viewed as part of that presentation. The presentation is based on information generally available to the public and does not contain any material, non-public information. The presentation has been prepared solely for informational purposes and is neither an offer to sell nor the solicitation of an offer to buy any security or instrument and has not been updated since it was originally presented on May 13, 2002.

6.5 11.1 14.9 18.3 21.7

78.3

34

5766 72 78

22

13 23 30 35 38 41 44 47 49 51 53 55 57 59 6040

Consolidation and Fragmentation

2001 Mutual Funds 2001 Passive Funds

Top 15 Complexes (Cumulative Share %) (%)

2001 Separately Managed Accounts

(Cumulative Share %)

Fidelity

Vangu

ard

Cap R

esea

rch

Putna

m F

unds

Frank

lin T

emple

ton

Mor

gan

Stanle

y

Janu

s

TIAA-C

REFM

FS

Oppen

heim

er

AIM

Amer

ican

Expre

ss

T. Row

e Pric

e

Amer

ican

Centu

ry

PIMCO

All Oth

ers

2001 Hedge Funds

(%)

3856

75

25

BHT SSGA Vanguard Deutsche Mellon Other

Brandes Rittenhouse Alliance 1838Advisors

Lazard OtherTop 20 Next 20 Next 60 Next 535Source for above charts: Morgan Stanley/Freeman Securities Research

10

This slide is part of a presentation by Morgan Stanley and is intended to be viewed as part of that presentation. The presentation is based on information generally available to the public and does not contain any material, non-public information. The presentation has been prepared solely for informational purposes and is neither an offer to sell nor the solicitation of an offer to buy any security or instrument and has not been updated since it was originally presented on May 13, 2002.

Client Service Model

Three customer segments Mutual funds Hedge funds Asset owners

Different value chains Best execution Enhanced services Advice Capital

One prerequisite: Scale operations

11

This slide is part of a presentation by Morgan Stanley and is intended to be viewed as part of that presentation. The presentation is based on information generally available to the public and does not contain any material, non-public information. The presentation has been prepared solely for informational purposes and is neither an offer to sell nor the solicitation of an offer to buy any security or instrument and has not been updated since it was originally presented on May 13, 2002.

Execution

Applied OTC market making technology and strategy to options business

Making markets in 40,000 instruments, representing 435 names – from standing start in August 1999

Largely automated operations – handful of traders

OTC Market Making Automated Options Market MakingTotal Number of Stocks

650

1,600

End-2000 1Q2002

12

This slide is part of a presentation by Morgan Stanley and is intended to be viewed as part of that presentation. The presentation is based on information generally available to the public and does not contain any material, non-public information. The presentation has been prepared solely for informational purposes and is neither an offer to sell nor the solicitation of an offer to buy any security or instrument and has not been updated since it was originally presented on May 13, 2002.

Services and Advice

Analytics

Financing

Settlement

Securities lending

Dedicated trading

Tax and regulatory advice

Technology

13

This slide is part of a presentation by Morgan Stanley and is intended to be viewed as part of that presentation. The presentation is based on information generally available to the public and does not contain any material, non-public information. The presentation has been prepared solely for informational purposes and is neither an offer to sell nor the solicitation of an offer to buy any security or instrument and has not been updated since it was originally presented on May 13, 2002.

Scale

Morgan Stanley Institutional Securities Trading Volume and Cost per Trade

(Indexed)

0

100

200

300

400

500

600

1997 1998 1999 2000 2001 2002YTD

GrossVolumes

OperationsExpenses

Cost per Trade

14

This slide is part of a presentation by Morgan Stanley and is intended to be viewed as part of that presentation. The presentation is based on information generally available to the public and does not contain any material, non-public information. The presentation has been prepared solely for informational purposes and is neither an offer to sell nor the solicitation of an offer to buy any security or instrument and has not been updated since it was originally presented on May 13, 2002.

Research

Japan II First Teams 2002

Chemicals Construction Metals Software/Business

Autos & Auto Parts Insurance Telecommunications Equipment Equity Strategy

Global II First Teams 2001

Top Ranked Analysts by Institutional Investor

Morgan Stanley Proprietary Research Ratings System

Ratings as of 3/18/2002:

O or Over = Overweight E or Equal = Equal-weight U or Under = Underweight

Pre- 3/18/2002 Ratings:

SB = Strong Buy O = Outperform N = Neutral U = Underperform

Currently 19% of stocks are ranked Underweight by MWD Analysts

North America II First Teams 2001

Medical Supplies & Devices Cable Publishing & Information

Services Radio & TV Broadcasting Enterprise Software Internet Infrastructure

Services

Specialty Chemicals Data Networking Autos & Auto Parts Brokers & Asset

Managers Insurance/Nonlife

Europe II First Teams 2002

Autos & Auto Parts Luxury Goods Telecommunications

Equipment Tobacco

Convertibles Economics/Developed

Markets Equity Strategy/Developed

Markets

15

This slide is part of a presentation by Morgan Stanley and is intended to be viewed as part of that presentation. The presentation is based on information generally available to the public and does not contain any material, non-public information. The presentation has been prepared solely for informational purposes and is neither an offer to sell nor the solicitation of an offer to buy any security or instrument and has not been updated since it was originally presented on May 13, 2002.

Relative Returns

Annual ROE Comparison

(Indexed to MWD)

20%

35%

50%

65%

80%

95%

110%

125%

140%

1996 1997 1998 1999 2000 2001 1Q2002

MWD

LEH

GS

MER

JPM

C

Source: Company filings and Morgan Stanley Research

16

This slide is part of a presentation by Morgan Stanley and is intended to be viewed as part of that presentation. The presentation is based on information generally available to the public and does not contain any material, non-public information. The presentation has been prepared solely for informational purposes and is neither an offer to sell nor the solicitation of an offer to buy any security or instrument and has not been updated since it was originally presented on May 13, 2002.

Provisions Address:

New NASD and NYSE Rules

Promises of Favorable Research Limitations on Relationships and Communications Analyst Compensation Firm Compensation Restrictions on Personal Trading by Analysts Disclosures of Financial Interests in Covered Companies Disclosures in Research Reports Regarding the Firm's

Ratings Disclosures During Public Appearances by Analysts

17

This slide is part of a presentation by Morgan Stanley and is intended to be viewed as part of that presentation. The presentation is based on information generally available to the public and does not contain any material, non-public information. The presentation has been prepared solely for informational purposes and is neither an offer to sell nor the solicitation of an offer to buy any security or instrument and has not been updated since it was originally presented on May 13, 2002.

Value Added By Morgan StanleyPercent of Analysts Beating Passive Portfolio

6965

42

54 53

1997 1998 1999 2000 2001Passive Portfolio

Note: Active: Portfolio weighted by Morgan Stanley research recommendations (prior to 3/18/02)Passive: Equal-weighted performance

(%)

18

This slide is part of a presentation by Morgan Stanley and is intended to be viewed as part of that presentation. The presentation is based on information generally available to the public and does not contain any material, non-public information. The presentation has been prepared solely for informational purposes and is neither an offer to sell nor the solicitation of an offer to buy any security or instrument and has not been updated since it was originally presented on May 13, 2002.

Average Return(1) For All IPOs

Source: Thomson FinancialNote: (1) Based on difference between offer price and price on 5/7/02

13.64

(3.18)

(18.55) (19.70) (21.98)(26.57)

MorganStanley

Citigroup JP Morgan CSFB Merrill GoldmanSachs

Jan 1, 1999 to May 7, 2002

(%)

19

This slide is part of a presentation by Morgan Stanley and is intended to be viewed as part of that presentation. The presentation is based on information generally available to the public and does not contain any material, non-public information. The presentation has been prepared solely for informational purposes and is neither an offer to sell nor the solicitation of an offer to buy any security or instrument and has not been updated since it was originally presented on May 13, 2002.

12.3 %

16.9 %

Disciplined UnderwritingMWD IPO Market Share ($ volume)(1):

1995-2001

InternetIndustry

Total IPO

Market Share

Source: Thomson FinancialNote: (1) Deals of $10MM or more

20

This slide is part of a presentation by Morgan Stanley and is intended to be viewed as part of that presentation. The presentation is based on information generally available to the public and does not contain any material, non-public information. The presentation has been prepared solely for informational purposes and is neither an offer to sell nor the solicitation of an offer to buy any security or instrument and has not been updated since it was originally presented on May 13, 2002.

Disciplined UnderwritingPassed On The IPO... 

1-800-Flowers

Buy.com

Earthlink

Excite

Exodus

GeoCites

Infospace

Internet Capital Group

IXL

Lycos

Network Solutions

NetZero

Pets.com

Startmedia

Theglobe.com

UUNet

USWeb

VerticalNet

Webvan

Yahoo!

21

This slide is part of a presentation by Morgan Stanley and is intended to be viewed as part of that presentation. The presentation is based on information generally available to the public and does not contain any material, non-public information. The presentation has been prepared solely for informational purposes and is neither an offer to sell nor the solicitation of an offer to buy any security or instrument and has not been updated since it was originally presented on May 13, 2002.

An Analyst Stands His Ground

Qwest Stock Price ($)

Qwest Communications

0

10

20

30

40

50

1/2/01 3/2/01 5/2/01 7/2/01 9/2/01 11/2/01 1/2/02 3/2/02 5/2/02

June 20, 2001Morgan Stanley Downgrade ReportQwest: Report is “Hogwash”

June 25, 2001Other Analysts Defend Qwest; Dismiss “Accounting Esoterics”

Aug. 14, 2001Qwest Reports 12%Increase in Revenues for Quarter Nov. 14, 2001

Qwest Reports Revenue Flat, But Key Areas Growing

Feb. 13, 2002Company Announces It will Draw Down $4Bn Bank Loan

Apr. 4, 2002SEC Announces It Has Begun Formal Investigation of Qwest

Jan. 25, 2001Morgan Stanley Downgrades

22

This slide is part of a presentation by Morgan Stanley and is intended to be viewed as part of that presentation. The presentation is based on information generally available to the public and does not contain any material, non-public information. The presentation has been prepared solely for informational purposes and is neither an offer to sell nor the solicitation of an offer to buy any security or instrument and has not been updated since it was originally presented on May 13, 2002.

Not Linked to Investment Banking Revenue

23

This slide is part of a presentation by Morgan Stanley and is intended to be viewed as part of that presentation. The presentation is based on information generally available to the public and does not contain any material, non-public information. The presentation has been prepared solely for informational purposes and is neither an offer to sell nor the solicitation of an offer to buy any security or instrument and has not been updated since it was originally presented on May 13, 2002.

Note: (1) Competitors include Bernstein, CSFB, Deutsche Banc, Goldman Sachs, Merrill Lynch, Prudential Securities, and UBS Warburg

A More Robust Ratings System

Revised stock rating system March 18th, 2002 based on intensive client survey

No other firm has made similar wholesale changes in their ratings

Number of stocks rated Underweight is more than 2x major competitors combined(1)

Overweight34%

Underweight19%

Equal-Weight47%