Salomon Smith Barney FinancialServices Conference

Philip Purcell

Chairman & CEO

January 31, 2002

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. 2

Agenda

Secular Trends and Company Strategy

Franchise Position and Momentum

Value Proposition for Shareholders

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. 3

Secular Trends and Firm StrategyInstitutional Investors

Low cost positions in commodity products Highest quality in complex products Innovation of new products/services Leading intermediary across geography and products (“Flow”)

Morgan Stanley Strategy

Secular Trends

Higher penetration of financial markets in commerce Continued growth in global trading in financial markets Pressure on margins

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. 4

Securities Trading Volume

83 218 326

813

3,0043,203

1980 1985 1990 1995 2000 2001

Average Combined Daily Volume for NYSE,NASDAQ and All Other U.S. Exchanges

(MM of Shares)

CAGR

‘95 - ‘01 25.7%‘90 - ‘01 23.1%‘85 - ‘01 18.3%‘80 - ‘01 19.0%

(1)

Note: (1) Total for 2001 does not include regional stock exchanges.Source: Securities Industry Association.

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. 5

Efficiency in Securities ProcessingMorgan Stanley Institutional Securities

Trading Volume and Cost per Trade

(Indexed)

0

100

200

300

400

500

600

1997 1998 1999 2000 2001

GrossVolumes

OperationsExpenses

Cost per Trade

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. 6

Flow

Morgan Stanley OTC Market Making

Total Number of Stocks

650

1,500

4Q2000 4Q2001

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. 7

Innovation: Prime Brokerage Business

Morgan Stanley Prime Brokerage Net Revenues

(Indexed)

0

100

200

300

400

500

1995 1996 1997 1998 1999 2000 2001

Net Revenues

1995-2001 CAGR: 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. 8

Innovation: Credit Derivatives Business

Morgan Stanley Credit Derivatives Revenues

100%

254%

2000 2001

(Indexed)

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. 9

Secular Trends and Firm StrategyCorporate Clients

Unique global network of information/contacts for our clients Most experienced professionals to help solve complex problems

and create opportunities for clients Culture and incentive system which dedicates the entire firm to

client objectives

Morgan Stanley Strategy

Secular Trends

Globalization of industry sectors Restructuring of selected economic areas Disintermediation of banks

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. 10

Disintermediation

Percent of Private Nonfinancial Debt Outstanding

(%)

25

30

35

40

45

50

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Intermediated Through Depository InstitutionsIntermediated Through Securities Markets

Source: Federal Reserve Board

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. 11

Growth in Global Mergers & Acquisitions

235 382

837

3,263

1,598

1985 1990 1995 2000 2001

Total Global Announced Deals

($ Billions)

Source: Thomson Financial Services.

‘95 - ‘01‘90 - ‘01‘85 - ‘01

11.4%13.9%12.7%

CAGR

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. 12

Global Consolidation and Restructuring

M&A as a Percentage of GDP – 2001E

(%)

Note: (1) EU15 comprises the 15 current members of the European Union. (2) Asia Pacific includes Japan, China, Hong Kong SAR, Taiwan, Indonesia, Singapore, South Korea, Australia and New Zealand.

Sources: Thomson Financial Securities Data, EIU/Datastream, OECD/Factset. GDP data are nominal estimates.

U.S. EU15 Asia Pacific(2)(1)

12.6%

9.0%

4.7%

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. 13

Delivering the Firm for Corporate Clients

Comcast/AT&T Broadband Merger

France Telecom-Orange IPO

Chalco IPO

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. 14

Secular Trends and Firm StrategyAsset Management Services

Develop best advice channel for clients Further align advisor interests with client/firm interests Provide best in class product across asset classes Strengthen bonds between distribution and manufacturing

Morgan Stanley Strategy

Secular Trends

Increasing importance of distribution Proliferation of professional management of assets Ongoing volatility in asset allocation by investors

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. 15

1980 1985 1990 1995 2000 2001

Growth in U.S. Asset Management

Industrywide Mutual Fund Assets

($ Billions)

‘95 - ‘01‘90 - ‘01‘85 - ‘01‘80 - ‘01

CAGR

17.9%27.1%23.3%22.9%

Equity Total

16.2%18.6%17.9%20.6%

135495

1,065

2,812

6,965 6,927

(1)

Note: (1) As of November 2001.Source: Investment Company Institute.

Equity

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. 16

70 7493

113

149

191

249

298275

1993 1994 1995 1996 1997 1998 1999 2000 3Q 01

Growth in Separately Managed Accounts

Total Separately Managed Account Assets

Source: Cerulli Associates.

($ Billions)

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. 17

Professional Management of Assets

1992 2000

Share of U.S. Household Securities Assets Held in Mutual Funds

(%)

Source: Federal Reserve Board, Morgan Stanley Research. Securities assets includes: corporate equities, fixed income, mutual funds, money market funds, and free credit balances. Mutual funds total includes money market funds.

18.7%

29.1%

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. 18

Note: (1) As of November.Source: Strategic Insight, Simfund2.

A Crowded Marketplace

344

646

1992 2001

Number of Mutual Fund Firms

2,846

7,083

1992 2001

Number of Mutual Funds

Long-Term Funds Money Market Funds

(1) (1)

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. 19

Performance

35

58

1996* 2001

Morgan Stanley Morningstar 4 & 5 Star Rated Funds

Calendar Year-End

*1996 total is pro forma.

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. 20

Product Breadth

Large

Mid

Small

Value Blend Growth

3 10 1

3 0 8

3 0 2

ConvertiblesDomestic HybridSpecialty – FinancialSpecialty – HealthSpecialty – Natural ResourcesSpecialty – Real EstateSpecialty – TechnologySpecialty – Utilities

27111123

Specialty

Large

Mid

Small

Value Blend Growth

6 15 9

3 2 9

3 1 4

ConvertiblesDomestic HybridSpecialty – FinancialSpecialty – HealthSpecialty – Natural ResourcesSpecialty – Real EstateSpecialty – TechnologySpecialty – Utilities

27111443

Specialty

1997 Morningstar Style Boxes –Morgan Stanley Domestic Equity Funds

2001 Morningstar Style Boxes –Morgan Stanley Domestic Equity Funds

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. 21

Secular Trends and Firm StrategyConsumer Credit

Parity on merchant acceptance Leading customer service platform: emphasis on the Internet Competitive product offering for mass market customers (CashBack Bonus) Customer rewards strategy vs. price strategy

Morgan Stanley Strategy

Secular Trends

Continued shift in consumer payments from cash/check to credit cards Pricing pressure remains intense; utility increasingly important Consolidation of consumer relationships with fewer financial service firms

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. 22

Growth in U.S. Credit Cards

70

173

359

579 565

1985 1990 1995 2000 2001*

Total Receivables

($ Billions)

‘95 - ’00‘90 - ’00‘85 - ’00

10.0%12.8%15.1%

CAGR

Source: Faulkner & Gray, Nilson, SEC Filings. *Data for 2001 is as of end of June.

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. 23

Growth in U.S. Credit Cards

167337

701

1,249

1985 1990 1995 2000

Total Charge Volume

($ Billions)

‘95 - ’00‘90 - ’00‘85 - ’00

12.2%14.0%14.4%

CAGR

Source: Faulkner & Gray, Nilson, SEC Filings.

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. 24

Merchant Acceptance

Merchant Acceptance

1.0

2.0

3.0

4.0

5.0

1995 1996 1997 1998 1999 2000

Visa MasterCard American Express Discover

Source: Nilson

(Millions of merchant outlets)

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. 25

0

1

2

3

4

5

6

7

8

Q100 Q200 Q300 Q400 Q101 Q201 Q301 Q4010%

100%

200%

300%

400%

500%

600%

Internet Penetration

Discover Online Card Usage

Millions ofAccounts %

Discover Card Online Registered AccountsDiscover Card Online Payments (Indexed)

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. 26

Morgan Stanley

A Value proposition for shareholders built on 3 goals1) Higher market share2) Disciplined risk management3) Differentiated financial returns

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. 27

Market Conditions - 2001 vs. 2000

Volume:

NYSE

NASDAQ

Volatility:

VIX

QQV

Crude Oil (WTI)

Total Underwriting Activity

InstitutionalInvestors

19%

8%

27%

32%

12%

M&A Announced

Equity Underwriting

IPO's

Fixed Income Issuance

CorporateMarket

50%

20%

60%

20%

Margin Debits

Fund Flows:

Total Long-Term Fund Flows

Equity Fund Flows

Market Performance:

S&P

Nasdaq

Retail Investors

32%

90%

43%

Unemployment rate

Bankruptcy filings

Interest Rates:

2-Year Treasury

Retail Sales

Credit Cards

40%

3.3%

Sources: NYSE, NASDAQ, SIA, Thomson Financial Securities Data, Investment Company Institute, Bloomberg

13%

21%

45%

20%

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. 28

Morgan Stanley Market Share

Corporate Clients(2)

Equity IssuanceIPOsFixed Income IssuanceHigh YieldM&A Announced

19.015.9

6.69.2

34.5

17.314.4

6.810.134.1

18.514.5

5.67.7

28.7

Institutional Clients(1)

Research (# of positions)Listed EquitiesOTCEurope EquitiesFixed Income TradingHigh Yield Trading

1 (22)4.88%3.14%4.03%

5NA

1 (20)5.41%3.88%5.76%

57

3 (18)6.26%5.25%6.50%

58

Notes: (1) Sources: Research Ranking: Institutional Investor; Listed and OTC: Autex; Europe Equities: Local Exchanges; Fiscal year basis.(2) Source: Thomson Financial Securities, Calendar year basis.

1999 2000 2001Up/Flat

Off

Down

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. 29

Morgan Stanley Market Share

Retail Clients(1)

FA Market ShareMutual Fund FlowsEquity Fund Flows

21.2%3.2%3.1%

21.6%3.8%6.0%

21.4%0.8%0.7%

Credit Cards(2)

Receivables ShareNetwork Volume Share

7.7 6.4

8.37.2

8.66.9

Notes: (1) Sources: FA Market Share: Company Reports and SIA Yearbook (2001 share data is as of 3Q); Long-term and Equity Fund Flows: Strategic Insight (2001 data is year-to-date through November).(2) Sources: Nilson, Faulkner and Gray. 2001 data is as of end of June.

Up/Flat

Off

Down

1999 2000 2001

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. 30

Flexible Expense Structure

Net Revenue/Expense Growth

(Indexed)

90%

110%

130%

150%

170%

190%

210%

230%

1996* 1997 1998 1999 2000 2001

Net Revenue Compensation & Benefits Non-Comp*1996 data is pro forma.

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. 31

Selected Assets

($ in Millions)

$4,300$3,000

Risk Management

Year-Over-YearChange (36)% (33)% (46)%

Portfolio/Inventory 4Q00 Portfolio/Inventory 4Q014Q00 - Loans 4Q01 - Loans

High Yield Private Equity Commercial Loansand Commitments

$2,200$1,400 $1,200 $800

$18,800

$10,100$14,500

$7,100

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. 32

13.0%

17.0%

21.0%

25.0%

29.0%

33.0%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Above Average Historic Returns

Morgan Stanley Historic ROE* vs. Cyclical Goal

Cyclical Goal18-20%

Morgan StanleyDean Witter merger

Average ‘90-’01: 21%Average ex-’99-’00: 19%

ROE

*ROE prior to 1997 merger is pro forma and calculated using annual reports.

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. 33

Growth in Morgan Stanley Book Value

$9.22$11.06 $11.94

$14.85$16.91

$18.64

1996* 1997 1998 1999 2000 2001

Book Value per Share

CAGR: 15%

*Book value for 1996 is pro forma

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. 34

Relative Returns

Annual ROE Comparison

(Indexed to MWD)

30%

45%

60%

75%

90%

105%

120%

135%

1996 1997 1998 1999 2000 2001

MWD

LEH

GSMER

JPM

C

Source: Company filings and Morgan Stanley Research

Salomon Smith Barney FinancialServices Conference

Philip Purcell

Chairman & CEO

January 31, 2002