FWP 1 dp08067_fwp-ps463.htm
 
January 2008
Preliminary Terms No. 463
Registration Statement No. 333-131266
Dated December 26, 2007
Filed pursuant to Rule 433
STRUCTURED INVESTMENTS
Opportunities in Equities
Four PLUS Each Based on the Value of a Different Underlying Index
Performance Leveraged Upside SecuritiesSM
PLUS offer leveraged exposure to a wide variety of assets and asset classes, including equities, commodities and currencies. These investments allow investors to capture enhanced returns relative to the asset’s actual positive performance. The leverage typically applies only for a certain range of price performance. In exchange for enhanced performance in that range, investors generally forgo performance above a specified maximum return. At maturity, an investor will receive an amount in cash that may be more or less than the principal amount based upon the closing value of the asset at maturity.
 
These preliminary terms offer four separate PLUS, each relating to a different underlying index.  Each offering provides exposure to a single underlying index.  The performance of each offering will depend only on the performance of the single underlying index to which it relates and not on the performance of any other index or offering.
 
BASIC TERMS FOR EACH PLUS
Issuer:
Morgan Stanley
Agent:
Morgan Stanley & Co. Incorporated
Maturity date:
February 20, 2009
Payment at maturity:
§  If final index value is greater than initial index value,
 
$10 + leveraged upside payment
 
§  In no event will the payment at maturity exceed the maximum payment at maturity.
 
§  If final index value is less than or equal to initial index value,
 
$10 x (final index value / initial index value)
 
§  This amount will be less than or equal to the stated principal amount of $10.
Leveraged upside payment:
$10  x  leverage factor  x  index percentage increase
Index percentage increase:
(final index value – initial index value) / initial index value
Initial index value:
The index closing value of the underlying index on the pricing date
Final index value:
The index closing value of the underlying index on the valuation date, subject to adjustment for certain market disruption events.
Stated principal amount:
$10
Issue price:
$10 (see “Syndicate Information” on page 6)
Pricing date:
January      , 2008
Original issue date:
January      , 2008  (5 business days after the pricing date)
Listing:
Application may be made to list each PLUS on the American Stock Exchange LLC (“AMEX”) or The Nasdaq Global MarketSM (“NASDAQ”).  If application is made, please see the related ticker symbols listed below.  We do not expect to announce whether any PLUS will meet such requirements prior to the pricing date.  If accepted for listing, each PLUS will begin trading on the day after the pricing date.

SPECIFIC TERMS FOR EACH PLUS

Underlying index:
  
Dow Jones Industrial
AverageSM (“DJIA”)
NASDAQ-100 Index®
(“NDX”)
S&P 500® Index
(“SPX”)
Russell 2000® Index
(“RTY”)
Initial index value:
          
Valuation date:
  
February 18, 2009
February 18, 2009
February 18, 2009
February 18, 2009
Leverage factor:
  
300%
300%
300%
300%
Maximum payment at maturity:
  
$11.50 to $11.70
(115% - 117%)
$11.70 to $12.10
(117% - 121%)
$11.60 to $11.80
(116% - 118%)
$12.00 to $12.40
(120% - 124%)
CUSIP:
  
61747W844
61747W851
61747W869
61747W877
Listing ticker symbol:
  
DNZ
MBPL
RLL
RZM
Securities exchange for listing:
  
AMEX
NASDAQ
AMEX
AMEX


   
Per DJIA PLUS
Total
Per NDX PLUS
Total
Per SPX PLUS
Total
Per RTY PLUS
Total
Price to public:(1)
  
$10
  
$10
  
$10
  
$10
  
Agent’s commissions:(1)(2)
  
$0.15
  
$0.15
  
$0.15
  
$0.15
  
Proceeds to company:
  
$9.85
  
$9.85
  
$9.85
  
$9.85
  
 
(1)  
The actual price to public and agent’s commissions for a particular investor may be reduced for volume purchase discounts depending on the aggregate amount of PLUS purchased by that investor.  The lowest price payable by an investor is $9.95 per PLUS.  Please see “Syndicate Information” on page 6 for further details.
(2)  
For additional information, see “Plan of Distribution” in the prospectus supplement for PLUS.
 
YOU SHOULD READ THIS DOCUMENT TOGETHER WITH THE RELATED PROSPECTUS SUPPLEMENT AND PROSPECTUS, EACH OF WHICH CAN BE ACCESSED VIA THE HYPERLINKS BELOW, BEFORE YOU DECIDE TO INVEST.
 
The issuer has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents the issuer has filed with the SEC for more complete information about the issuer and this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, the issuer, any underwriter or any dealer participating in this offering will arrange to send you the prospectus if you request it by calling toll-free 1-800-584-6837.
 
 
 
 
Four PLUS Each Based on the Value of a Different Underlying Index
Performance Leveraged Upside SecuritiesSM
 
 
Investment Overview
 
Performance Leveraged Upside Securities
 
The PLUS can be used:
 
§  
As an alternative to direct exposure to the underlying index that enhances returns for a certain range of price performance of the underlying index.
 
§  
To enhance returns and potentially outperform the underlying index in a moderately bullish scenario.
 
§  
To achieve similar levels of exposure to the underlying index as a direct investment while using fewer dollars by taking advantage of the leverage factor
 
The PLUS are exposed on a 1:1 basis to the negative performance of the underlying index.
 
 
DJIA
NDX
SPX
RTY
Maturity:
13 Months
13 Months
13 Months
13 Months
Leverage factor:
300%
300%
300%
300%
Maximum payment at maturity:
$11.50 to $11.70
(115% - 117%)
$11.70 to $12.10
(117% - 121%)
$11.60 to $11.80
(116% - 118%)
$12.00 to $12.40
(120% - 124%)
Principal protection:
None
None
None
None
 
Key Investment Rationale
 
Investors can use the PLUS to enhance returns up to the maximum payment at maturity, while maintaining similar risk as a direct investment in the underlying index.
 
Leverage Performance
The PLUS offer investors an opportunity to capture enhanced returns relative to a direct investment in the underlying index within a certain range of price performance.
   
Best Case Scenario
The underlying index increases in value and, at maturity, the PLUS redeem for the maximum payment at maturity.
   
Worst Case Scenario
The underlying index declines in value and, at maturity, the PLUS redeem for less than the stated principal amount by an amount proportional to the decline.
 
Summary of Selected Key Risks (see page 9)
 
§  
No guaranteed return of principal.
 
§  
No interest payments.
 
§  
Appreciation potential is limited by the maximum payment at maturity.
 
§  
Secondary trading may be limited, and the inclusion of commissions and projected profit from hedging in the original issue price is likely to adversely affect secondary market prices and you could receive less, and possibly significantly less, than the stated principal amount per PLUS if you try to sell your PLUS prior to maturity.
 
§  
The market price of the PLUS will be influenced by many unpredictable factors, including the value, volatility and dividend yield of the underlying index.
 
§  
The U.S. federal income tax consequences of an investment in the PLUS are uncertain.
 
§  
Credit risk to Morgan Stanley.
 
 
 
January 2008
Page 2
 
 
Four PLUS Each Based on the Value of a Different Underlying Index
Performance Leveraged Upside SecuritiesSM
 
 
Underlying Index Overview
 
Dow Jones Industrial Average
The Dow Jones Industrial Average is a price-weighted average comprised of 30 common stocks selected at the discretion of the editors of The Wall Street Journal, which is published by Dow Jones & Company, Inc., as representative of the broad market of U.S. industry.

Information as of market close on December 19, 2007

Bloomberg Ticker Symbol:
INDU
Current Index Level:
13,207.27
52 Weeks Ago:
12,471.30
52 Week High (on 10/9/2007):
14,164.53
52 Week Low (on 3/5/2007):
12,050.41

NASDAQ-100 Index
The NASDAQ-100 Index is a modified capitalization-weighted index of 100 of the largest non-financial companies listed on The NASDAQ Stock Market LLC.  The NASDAQ-100 Index constitutes a broadly diversified segment of the largest securities listed on The NASDAQ Stock Market LLC and includes companies across a variety of major industry groups.

Information as of market close on December 19, 2007

Bloomberg Ticker Symbol:
NDX
Current Index Level:
2,031.00
52 Weeks Ago:
1,785.12
52 Week High (on 10/31/2007):
2,238.98
52 Week Low (on 3/5/2007):
1,712.94

S&P 500 Index
The S&P 500® Index, which is calculated, maintained and published by Standard & Poor's Corporation, consists of 500 component stocks selected to provide a performance benchmark for the U.S. equity markets.  The calculation of the S&P 500® Index is based on the relative value of the float adjusted aggregate market capitalization of the 500 component companies as of a particular time as compared to the aggregate average market capitalization of the 500 similar companies during the base period of the years 1941 through 1943.

Information as of market close on December 19, 2007

Bloomberg Ticker Symbol:
SPX
Current Index Level:
1,453.00
52 Weeks Ago:
1,425.55
52 Week High (on 10/9/2007):
1,565.15
52 Week Low (on 3/5/2007):
1,374.12

Russell 2000 Index
The Russell 2000 Index, which is calculated, maintained and published by the Frank Russell Company, is a capitalization weighted index designed to track the performance of the small capitalization segment of the U.S. equity market.  The Russell 2000 Index measures the composite price performance of the smallest 2,000 companies (incorporated in the U.S. and its territories) included in the Russell 3000 Index and represents a small portion of the total market capitalization of the Russell 3000 Index.  The Russell 3000 Index is composed of the 3,000 largest U.S. companies as determined by market capitalization and represents approximately 98% of the U.S. equity market.

Information as of market close on December 19, 2007

Bloomberg Ticker Symbol:
RTY
Current Index Level:
756.13
52 Weeks Ago:
782.10
52 Week High (on 7/13/2007):
855.77
52 Week Low (on 11/26/2007):
735.07
 
 
 
January 2008
Page 3
 
 
Four PLUS Each Based on the Value of a Different Underlying Index
Performance Leveraged Upside SecuritiesSM
 
 
Historical Performance of Each Underlying Index
 
The following graphs show the weekly closing values of each underlying index during the period from January 4, 2002 to December 14, 2007.
 
 
 
 
January 2008
Page 4
 
 
Four PLUS Each Based on the Value of a Different Underlying Index
Performance Leveraged Upside SecuritiesSM
 
 
Fact Sheet
 
These preliminary terms offer four separate PLUS, each relating to a different underlying index.  Each PLUS provides exposure to a single underlying index.  You may choose to invest in one or more of the PLUS described below.  The performance of each PLUS will not depend on the performance of any other PLUS or index.
 
The PLUS offered are senior unsecured obligations of Morgan Stanley, will pay no interest, do not guarantee any return of principal at maturity and have the terms described in the prospectus supplement for PLUS and the prospectus, as supplemented or modified by these preliminary terms.  At maturity, an investor will receive for each stated principal amount of PLUS that the investor holds, an amount in cash that may be more or less than the stated principal amount based upon the closing value of the underlying index at maturity.  The PLUS are senior notes issued as part of Morgan Stanley’s Series F Global Medium-Term Notes program.
 
Expected Key Dates
      
Pricing Date:
Original Issue Date (Settlement Date):
  
Maturity Date:
January    , 2008
January    , 2008
(5 business days after the pricing date)
  
February 20, 2009, subject to postponement due to a market disruption event

Key Terms Applicable to Each PLUS
Issuer:
Morgan Stanley
$10 per PLUS  (See “Syndicate Information” on page 6)
Stated principal amount:
$10 per PLUS
Denominations:
$10 per PLUS and integral multiples thereof
Interest:
None
Bull market or bear market PLUS:
Bull market PLUS
Payment at maturity:
§  If final index value is greater than initial index value,
 
$10 + leveraged upside payment
 
§  In no event will the payment at maturity exceed the maximum payment at maturity.
 
§  If final index value is less than or equal to initial index value,
 
$10 x index performance factor
 
§  This amount will be less than or equal to the stated principal amount of $10.
Leveraged upside payment:
$10 x leverage factor x index percent increase
Index percent increase:
(final index value – initial index value) / initial index value
Initial index value:
The index closing value of the underlying index on the pricing date.
Final index value:
The index closing value of the underlying index on the valuation date, as reported under the Bloomberg ticker symbol or, in each case, any successor symbol, set forth in the table below.
Index performance factor:
(final index value / initial index value)
Postponement of maturity date:
For each PLUS, if the scheduled valuation date is not an index business day or if a market disruption event occurs on that day so that the valuation date as postponed falls less than two scheduled index business days prior to the scheduled maturity date, the maturity date of that PLUS will be postponed until the second scheduled index business day following that valuation date as postponed.
Risk factors:
Please see “Risk Factors” on page 9.

Specific Terms for Each PLUS
 
Underlying index:
  
Dow Jones Industrial
Average (“DJIA”)
NASDAQ-100 Index (“NDX”)
S&P 500 Index
(“SPX”)
Russell 2000 Index (“RTY”)
Bloomberg ticker symbol:
  
“INDU”
“NDX”
“SPX”
“RTY”
Initial index value:
          
Valuation date:
  
February 18, 2009
February 18, 2009
February 18, 2009
February 18, 2009
Leverage factor:
  
300%
300%
300%
300%
Maximum payment at maturity:
  
$11.50 to $11.70
(115% - 117%)
$11.70 to $12.10
(117% - 121%)
$11.60 to $11.80
(116% - 118%)
$12.00 to $12.40
(120% - 124%)
CUSIP:
  
61747W844
61747W851
61747W869
61747W877
Listing ticker symbol:
  
DNZ
MBPL
RLL
RZM
Securities exchange for listing:
  
AMEX
NASDAQ
AMEX
AMEX
Underlying index publisher:
  
Dow Jones & Company, Inc.
The NASDAQ Stock Market, Inc.
Standard & Poor’s Corporation
The Frank Russell Company
 
 
January 2008
Page 5
 
 
Four PLUS Each Based on the Value of a Different Underlying Index
Performance Leveraged Upside SecuritiesSM
 
 

 
General Information
  
Listing:
Application may be made to list each PLUS on the American Stock Exchange LLC (“AMEX”) or The Nasdaq Global MarketSM (“NASDAQ”).  If application is made, please see the related ticker symbols listed above.  We do not expect to announce whether any PLUS will meet such requirements prior to the pricing date.  If accepted for listing, each PLUS will begin trading on the day after the pricing date.
Minimum ticketing size:
100 PLUS
Tax considerations:
Although the issuer believes that, under current law, each PLUS should be treated as a single financial contract that is an “open transaction” for U.S. federal income tax purposes, there is uncertainty regarding the U.S. federal income tax consequences of an investment in the  PLUS.
 
 
Assuming this characterization of the PLUS is respected and subject to the discussion under “United States Federal Taxation” in the accompanying prospectus supplement for PLUS, the following U.S. federal income tax consequences should result based on current law:
 
 
·  A U.S. Holder should not be required to recognize taxable income over the term of the PLUS prior to maturity, other than pursuant to a sale or exchange.
 
 
·  Upon sale, exchange or settlement of the PLUS at maturity, a U.S. Holder should generally recognize capital gain or loss equal to the difference between the amount realized and the U.S. Holder’s tax basis in the PLUS.  Such gain or loss should generally be long-term capital gain or loss if the investor has held the  PLUS for more than one year.
 
 
On December 7, 2007, the Treasury Department and IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments (such as the PLUS).  The notice focuses in particular on whether to require holders of such instruments to accrue income over the term of their investment.  It also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments; the relevance of factors such as exchange-traded status of the instruments and the nature of the underlying property to which they are linked; the degree, if any, to which any income (including any mandated accruals) realized by non-U.S. holders should be subject to withholding tax; and whether these investments are or should be subject to the “constructive ownership” regime, which very generally can operate to recharacterize certain long-term capital gain as ordinary income that is subject to an interest charge.  While the notice requests comments on appropriate transition rules and effective dates, Treasury regulations or other guidance, if any, issued after consideration of these issues could materially and adversely affect the tax consequences of an investment in the PLUS, possibly on a retroactive basis.  Both U.S. and non-U.S. investors considering an investment in the PLUS should read the discussion under “Risk Factors ― Structure Specific Risk Factors” in these preliminary terms and the discussion under “United States Federal Taxation” in the accompanying prospectus supplement for PLUS and consult their tax advisers regarding the U.S. federal income tax consequences of investing in the PLUS as well as the notice described above and its potential implications for an investment in the PLUS.
Trustee:
The Bank of New York (as successor trustee to JPMorgan Chase Bank, N.A.)
Calculation agent:
Morgan Stanley & Co. Incorporated (“MS & Co.”)
Use of proceeds and hedging:
The net proceeds we receive from the sale of the PLUS will be used for general corporate purposes and, in part, in connection with hedging our obligations under the PLUS through one or more of our subsidiaries.
 
On or prior to the pricing date, we, through our subsidiaries or others, will hedge our anticipated exposure in connection with each PLUS by taking positions in futures and options contracts on the respective underlying index or the shares comprising an underlying index.  Such purchase activity could increase the value of such underlying index and therefore the value at which that underlying index must close on the valuation date before investors would receive at maturity a payment that exceeds the principal amount of the PLUS.  For further information on our use of proceeds and hedging, see “Use of Proceeds and Hedging” in the prospectus supplement for PLUS.
ERISA:
See “ERISA” in the prospectus supplement for PLUS.
Contact:
Morgan Stanley clients may contact their local Morgan Stanley branch office or our principal executive offices at 1585 Broadway, New York, New York 10036 (telephone number (866) 477-4776).  All other clients may contact their local brokerage representative.  Third-party distributors may contact Morgan Stanley Structured Investment Sales at (800) 233-1087.

 
Syndicate Information
    
Issue price of the PLUS
Selling concession
Principal amount
of the PLUS for any single investor
$10.00
$0.15
<$999K
$9.975
$0.125
$1MM-$2.99MM
$9.9625
$0.1125
$3MM-$4.99MM
$9.95
$0.10
>$5MM
 
Selling concessions allowed to dealers in connection with the offering may be reclaimed by the agent, if, within 30 days of the offering, the agent repurchases the PLUS distributed by such dealers.
 
This offering summary represents a summary of the terms and conditions of four separate PLUS.  We encourage you to read the accompanying prospectus supplement for PLUS and prospectus related to this offering, which can be accessed via the hyperlinks on the front page of this document.
 
 
January 2008
Page 6
 
 
Four PLUS Each Based on the Value of a Different Underlying Index
Performance Leveraged Upside SecuritiesSM
 
How PLUS Work
 
Payoff Diagram
 
The hypothetical payoff diagram below illustrates the payment at maturity on a PLUS.
The diagram below is based on the following terms:
 
Stated principal amount:
$10
   
Leverage factor:
300%
   
Hypothetical maximum payment at maturity:
$11.60 (116% of the stated principal amount)
 
The following payoff diagram is provided for illustrative purposes only and does not reflect the actual terms of any PLUS.  Actual terms will vary for each PLUS.
 
 
How it works
 
§  
If the final index value is greater than the initial index value, then investors receive the $10 stated principal amount plus 300% of the appreciation of the underlying index over the term of the PLUS, subject to the maximum payment at maturity.  In the payoff diagram, an investor will realize the maximum payment at maturity at a final index value of 105.333% of the initial index value.
 
§  
If the underlying index appreciates 5%, the investor would receive a 15% return, or $11.50.
 
§  
If the underlying index appreciates 25%, the investor would receive the hypothetical maximum payment at maturity of 116% of the stated principal amount, or $11.60.
 
§  
If the final index value is less than or equal to the initial index value, the investor would receive an amount less than or equal to the $10 stated principal amount, based on a 1% loss of principal for each 1% decline in the underlying index.
 
§  
If the underlying index depreciates 10%, the investor would lose 10% of their principal and receive only $9 at maturity, or 90% of the stated principal amount.
 
 
January 2008
Page 7
 
 
Four PLUS Each Based on the Value of a Different Underlying Index
Performance Leveraged Upside SecuritiesSM
 
 
Payment at Maturity
 
At maturity, investors will receive for each $10 stated principal amount of PLUS that they hold an amount in cash based upon the value of the underlying index, determined as follows:
 
If the final index value of the underlying index is greater than the initial index value of the underlying index, investors will receive for each $10 stated principal amount of PLUS that they hold a payment at maturity equal to:
 
$10    +    Leveraged Upside Payment:
subject to the maximum payment at maturity for each PLUS,
 
 
If the final index value of the underlying index is less than or equal to the initial index value of the underlying index, investors will receive for each $10 stated principal amount of PLUS that they hold a payment at maturity equal to:
 
$10    r    Index Performance Factor
 
 
 
 
 
 
January 2008
Page 8
 
 
Four PLUS Each Based on the Value of a Different Underlying Index
Performance Leveraged Upside SecuritiesSM
 
 
Risk Factors
 
The following is a non-exhaustive list of certain key risk factors for investors in each PLUS.  For further discussion of these and other risks, you should read the section entitled “Risk Factors” beginning on page S-18 of the prospectus supplement for PLUS.  We also urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the PLUS.
 
Structure Specific Risk Factors
 
§  
PLUS do not pay interest nor guarantee return of principal. The terms of the PLUS differ from those of ordinary debt securities in that the PLUS do not pay interest nor guarantee payment of the principal amount at maturity.  If the final index value is less than the initial index value the payout at maturity for that PLUS will be an amount in cash that is less than the $10 stated principal amount of that PLUS by an amount proportionate to the decrease in the value of the underlying index.
 
§  
Appreciation potential is limited.  The appreciation potential of a PLUS is limited by the maximum payment at maturity as specified on the cover of these preliminary terms.  Although the leverage factor provides enhanced exposure to any increase in the value of the underlying index at maturity, because the payment at maturity will be limited, the percentage exposure provided by the leverage factor is progressively reduced as the final index value, as a percentage of the initial index level, surpasses approximately (i) 105% to 105.6667%, in the case of the DJIA PLUS, (ii) 105.6667% to 107% in the case of the NDX PLUS, (iii) 105.3333% to 106%, in the case of the SPX PLUS or (iv) 106.6667% to 108% in the case of the RTY PLUS.
 
§  
Market price influenced by many unpredictable factors.  Several factors will influence the value of the PLUS in the secondary market and the price at which MS & Co. may be willing to purchase or sell the PLUS in the secondary market, including: the value, volatility and dividend yield of the underlying index, interest and yield rates, time remaining to maturity, geopolitical conditions and economic, financial, political and regulatory or judicial events and creditworthiness of the issuer.
 
§  
Not equivalent to investing in the underlying index.  Investing in any PLUS is not equivalent to investing in the respective underlying index or its component stocks.  Investors in any of these PLUS will not have voting rights or rights to receive dividends or other distributions or any other rights with respect to stocks that constitute the respective underlying index.
 
§  
Adjustments to an underlying index could adversely affect the value of the PLUS on that index.  An underlying index publisher may discontinue or suspend calculation or publication of an underlying index at any time.  In these circumstances, the calculation agent will have the sole discretion to substitute a successor index for that PLUS that is comparable to the discontinued underlying index and is not precluded from considering indices that are calculated and published by the calculation agent or any of its affiliates.
 
§  
The inclusion of commissions and projected profit from hedging in the original issue price is likely to adversely affect secondary market prices.  Assuming no change in market conditions or any other relevant factors, the price, if any, at which MS & Co. is willing to purchase PLUS in secondary market transactions will likely be lower than the original issue price, since the original issue price included, and secondary market prices are likely to exclude, commissions paid with respect to the PLUS, as well as the projected profit included in the cost of hedging the issuer’s obligations under the PLUS.  In addition, any such prices may differ from values determined by pricing models used by MS & Co., as a result of dealer discounts, mark-ups or other transaction costs.
 
§  
The U.S. federal income tax consequences of an investment in the PLUS are uncertain.  Please read the discussion under “Fact Sheet ― General Information ― Tax Considerations” in these preliminary terms and the discussion under “United States Federal Taxation” in the accompanying prospectus supplement for PLUS (together the “Tax Disclosure Sections”) concerning the U.S. federal income tax consequences of investing in the PLUS.  If the Internal Revenue Service (the “IRS”) were successful in asserting an alternative characterization or treatment for the PLUS, the timing and character of income on the PLUS might differ significantly from the tax treatment described in the Tax Disclosure Sections.  For example, under one characterization, U.S. Holders could be required to accrue original issue discount on the PLUS every year at a “comparable yield” determined at the time of issuance and recognize all income and gain in respect of the PLUS as ordinary income.  The issuer does not plan to request a ruling from the IRS regarding the tax treatment of the PLUS, and the IRS or a court may not agree with the tax
 
 
 
January 2008
Page 9
 
 
Four PLUS Each Based on the Value of a Different Underlying Index
Performance Leveraged Upside SecuritiesSM
 
 
 
treatment described in these preliminary terms and the accompanying prospectus supplement for PLUS.  On December 7, 2007, the Treasury Department and IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments (such as the PLUS).  The notice focuses in particular on whether to require holders of such instruments to accrue income over the term of their investment.  It also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments; the relevance of factors such as exchange-traded status of the instruments and the nature of the underlying property to which they are linked; the degree, if any, to which any income (including any mandated accruals) realized by non-U.S. holders should be subject to withholding tax; and whether these investments are or should be subject to the “constructive ownership” regime, which very generally can operate to recharacterize certain long-term capital gain as ordinary income that is subject to an interest charge.  While the notice requests comments on appropriate transition rules and effective dates, Treasury regulations or other guidance, if any, issued after consideration of these issues could materially and adversely affect the tax consequences of an investment in the PLUS, possibly on a retroactive basis.  Both U.S. and non-U.S. investors considering an investment in the PLUS should consult their tax advisers regarding the U.S. federal income tax consequences of investing in the PLUS as well as the notice and its potential implications for an investment in the PLUS.
 
Other Risk Factors
 
§  
Secondary trading may be limited. Secondary trading may be limited, and the inclusion of commissions and projected profit from hedging in the original issue price is likely to adversely affect secondary market prices and you could receive less, and possibly significantly less, than the stated principal amount per PLUS if you try to sell your PLUS prior to maturity.
 
§  
Potential adverse economic interest of the calculation agent. The hedging or trading activities of the issuer’s affiliates on or prior to the pricing date and prior to maturity could adversely affect the value of the underlying index for each PLUS and, as a result, could decrease the amount an investor may receive on a PLUS at maturity.  Any of these hedging or trading activities on or prior to the pricing date could potentially affect the initial index value and, therefore could increase the value at which that underlying index must close before an investor receives a payment at maturity that exceeds the issue price of the PLUS.  Additionally, such hedging or trading activities during the term of the PLUS, including on the valuation date, could potentially affect the value of the underlying index on the valuation date and, accordingly, the amount of cash an investor will receive at maturity.
 
 
 
 
January 2008
Page 10
 
 
Four PLUS Each Based on the Value of a Different Underlying Index
Performance Leveraged Upside SecuritiesSM
 
Information about the Underlying Indices
 
The Dow Jones Industrial Average.  The Dow Jones Industrial Average is a price-weighted average comprised of 30 common stocks selected at the discretion of the editors of The Wall Street Journal, which is published by Dow Jones & Company, Inc., as representative of the broad market of U.S. industry. The Dow Jones Industrial Average is described under the heading “Underlying Indices and Underlying Index Publishers Information—Dow Jones Industrial Average” in Annex A of the prospectus supplement for PLUS.
 
License Agreement between Dow Jones & Company, Inc. and Morgan Stanley & Co. Incorporated.  “Dow Jones Industrial Average,” “Dow JonesSM,” and “DJIASM” are service marks of Dow Jones & Company, Inc. and have been licensed for use by Morgan Stanley. The PLUS are not sponsored, endorsed, sold or promoted by Dow Jones & Company, Inc., and Dow Jones & Company, Inc. makes no representation regarding the advisability of investing in the PLUS. See “Underlying Indices and Underlying Index Publishers Information—Dow Jones Industrial Average—License Agreement between Dow Jones and Morgan Stanley” in the prospectus supplement for PLUS.
 
The NASDAQ-100 Index.  The NASDAQ-100 Index is a modified capitalization-weighted index of 100 of the largest non-financial companies listed on The NASDAQ Stock Market LLC.  The NASDAQ-100 Index constitutes a broadly diversified segment of the largest securities listed on The NASDAQ Stock Market LLC and includes companies across a variety of major industry groups. The NASDAQ-100 Index is described under the heading “Underlying Indices and Underlying Index Publishers Information—NASDAQ-100 Index” in Annex A of the prospectus supplement for PLUS.
 
License Agreement between The NASDAQ Stock Market, Inc. and Morgan Stanley & Co. Incorporated.  The “NASDAQ®,” “NASDAQ-100®”, “NASDAQ Global MarketSM” and “NASDAQ-100 Index” are trade or service marks of The NASDAQ Stock Market, Inc., which with its affiliates we refer to as NASDAQ, and have been licensed for use by Morgan Stanley.  The PLUS have not been passed on by NASDAQ as to their legality or suitability.  The PLUS are not issued, endorsed, sold or promoted by NASDAQ.  NASDAQ makes no warranties and bears no liability with respect to the PLUS.  See “Underlying Indices and Underlying Index Publishers Information—NASDAQ-100 Index—License Agreement between The NASDAQ Stock Market, Inc. and Morgan Stanley” in the prospectus supplement for PLUS.
 
The S&P 500® Index.  The S&P 500® Index, which is calculated, maintained and published by Standard & Poor's® Corporation, consists of 500 component stocks selected to provide a performance benchmark for the U.S. equity markets.  The S&P 500® Index is described under the heading “Underlying Indices and Underlying Index Publishers Information—S&P 500® Index” in Annex A of the prospectus supplement for PLUS.
 
License Agreement between Standard & Poor’s® Corporation and Morgan Stanley.  “Standard & Poor’s®,” “S&P®,” “S&P 500®,” “Standard & Poor’s 500” and “500” are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by Morgan Stanley. See “Underlying Indices and Underlying Index Publishers Information— S&P 500® Index — License Agreement between S&P and Morgan Stanley” in the prospectus supplement for PLUS.
 
The Russell 2000 Index.  The Russell 2000 Index, which is calculated, maintained and published by the Frank Russell Company, is a capitalization weighted index designed to track the performance of the small capitalization segment of the U.S. equity market.  The Russell 2000 Index measures the composite price performance of the smallest 2,000 companies (incorporated in the U.S. and its territories) included in the Russell 3000 Index and represents a small portion of the total market capitalization of the Russell 3000 Index.  The Russell 3000 Index is composed of the 3,000 largest U.S. companies as determined by market capitalization and represents approximately 98% of the U.S. equity market.  For additional information about the Russell 2000 Index, see the information set forth under “Underlying Indices and Underlying Index Publishers Information—Russell 2000 Index” in Annex A of the prospectus supplement for PLUS.
 
License Agreement between The Frank Russell Company and Morgan Stanley.  The “Russell 2000® Index” is a trademark of Frank Russell Company and has been licensed for use by Morgan Stanley.  The Securities are not sponsored, endorsed, sold or promoted by Frank Russell Company and Frank Russell Company makes no representation regarding the advisability of investing in the Securities.  See “Underlying Indices and Underlying Index Publishers Information—Russell 2000 Index” in Annex A of the prospectus supplement for PLUS.
 
 
January 2008
Page 11
 
 
Four PLUS Each Based on the Value of a Different Underlying Index
Performance Leveraged Upside SecuritiesSM
 
 
Historical Information
 
The following table sets forth the published high and low closing values, as well as end-of-quarter closing values, of each underlying index for each quarter in the period from January 1, 2002 through December 19, 2007.  The closing values on December 19, 2007 were, in the case of the Dow Jones Industrial Average, 13,207.27, in the case of the NASDAQ-100 Index, 2,031.00, in the case of the S&P 500 Index, 1,453.00, and in the case of the Russell 2000 Index, 756.13.  We obtained the information in the table below from Bloomberg Financial Markets, without independent verification.  The historical values of the underlying indices should not be taken as an indication of future performance, and no assurance can be given as to the level of the each underlying index on the valuation date.  The payment of dividends on the stocks that constitute each underlying index are not reflected in its level and, therefore, have no effect on the calculation of the payment at maturity for any PLUS.

Dow Jones Industrial Average
High
Low
Period End
2002
      
First Quarter
10,635.25
  9,618.24
10,403.94
Second Quarter
10,381.73
  9,120.11
  9,243.26
Third Quarter
  9,379.50
  7,591.93
  7,591.93
Fourth Quarter
  8,931.68
  7,286.27
  8,341.63
2003
 
 
 
First Quarter
  8,842.62
  7,524.06
  7,992.13
Second Quarter
  9,323.02
  8,069.86
  8,985.44
Third Quarter
  9,659.13
  9,036.04
  9,275.06
Fourth Quarter
10,453.92
  9,469.20
10,453.92
2004
 
 
 
First Quarter
10,737.70
10,048.23
10,357.70
Second Quarter
10,570.81
  9,906.91
10,435.48
Third Quarter
10,342.79
  9,814.59
10,080.27
Fourth Quarter
10,854.54
  9,749.99
10,783.01
2005
 
 
 
First Quarter
10,940.55
10,368.61
10,503.76
Second Quarter
10,623.07
10,012.36
10,274.97
Third Quarter
10,705.55
10,270.68
10,568.70
Fourth Quarter
10,931.62
10,215.22
10,717.50
2006
 
 
 
First Quarter
11,317.43
10,667.39
11,109.32
Second Quarter
11,642.65
10,706.14
11,150.22
Third Quarter
11,718.45
10,739.35
11,679.07
Fourth Quarter
12,510.57
11,670.35
12,463.15
2007
 
 
 
First Quarter
12,786.64
12,050.41
12,354.35
Second Quarter
13,676.32
12,382.30
13,408.62
Third Quarter
14,000.41
12,845.78
13,895.63
Fourth Quarter (through December 19, 2007)
14,164.53
12,743.44
13,207.27

 
 
January 2008
Page 12
 
 
Four PLUS Each Based on the Value of a Different Underlying Index
Performance Leveraged Upside SecuritiesSM

 

NASDAQ-100 Index
High
Low
Period End
2002
      
First Quarter
1,675.03
1,348.25
1,452.81
Second Quarter
1,478.52
1,022.74
1,051.41
Third Quarter
1,060.89
   832.52
   832.52
Fourth Quarter
1,127.06
   804.64
   984.36
2003
 
 
 
First Quarter
1,094.87
   951.90
1,018.66
Second Quarter
1,247.90
1,022.63
1,201.69
Third Quarter
1,400.13
1,207.28
1,303.70
Fourth Quarter
1,470.37
1,335.34
1,467.92
2004
 
 
 
First Quarter
1,553.66
1,370.04
1,438.41
Second Quarter
1,516.64
1,379.90
1,516.64
Third Quarter
1,489.57
1,304.43
1,412.74
Fourth Quarter
1,627.46
1,425.21
1,621.12
2005
 
 
 
First Quarter
1,603.51
1,464.34
1,482.53
Second Quarter
1,568.96
1,406.85
1,493.52
Third Quarter
1,627.19
1,490.53
1,601.66
Fourth Quarter
1,709.10
1,521.19
1,645.20
2006
 
 
 
First Quarter
1,758.24
1,645.09
1,703.66
Second Quarter
1,739.20
1,516.85
1,575.23
Third Quarter
1,661.59
1,451.88
1,654.13
Fourth Quarter
1,819.76
1,632.81
1,756.90
2007
 
 
 
First Quarter
1,846.34
1,712.94
1,772.36
Second Quarter
1,944.37
1,773.33
1,934.10
Third Quarter
2,096.39
1,846.09
2,091.11
Fourth Quarter (through December 19, 2007)
2,238.98
1,982.16
2,031.00


 
January 2008
Page 13
 
 
Four PLUS Each Based on the Value of a Different Underlying Index
Performance Leveraged Upside SecuritiesSM
 


S&P 500 Index
High
Low
Period End
2002
      
First Quarter
1,172.51
1,080.17
1,147.39
Second Quarter
1,146.54
   973.53
   989.82
Third Quarter
   989.03
   797.70
   815.28
Fourth Quarter
   938.87
   776.76
   879.82
2003
 
 
 
First Quarter
   931.66
   800.73
   848.18
Second Quarter
1,011.66
   858.48
   974.50
Third Quarter
1,039.58
   965.46
   995.97
Fourth Quarter
1,111.92
1,018.22
1,111.92
2004
 
 
 
First Quarter
1,157.76
1,091.33
1,126.21
Second Quarter
1,150.57
1,084.10
1,140.84
Third Quarter
1,129.30
1,063.23
1,114.58
Fourth Quarter
1,213.55
1,094.81
1,211.92
2005
 
 
 
First Quarter
1,225.31
1,163.75
1,180.59
Second Quarter
1,216.96
1,137.50
1,191.33
Third Quarter
1,245.04
1,194.44
1,228.81
Fourth Quarter
1,272.74
1,176.84
1,248.29
2006
 
 
 
First Quarter
1,307.25
1,254.78
1,294.83
Second Quarter
1,325.76
1,223.69
1,270.20
Third Quarter
1,339.15
1,234.49
1,335.85
Fourth Quarter
1,427.09
1,331.32
1,418.30
2007
 
 
 
First Quarter
1,459.68
1,374.12
1,420.86
Second Quarter
1,539.18
1,424.55
1,503.35
Third Quarter
1,553.08
1,406.70
1,526.75
Fourth Quarter (through December 19, 2007)
1,565.15
1,407.22
1,453.00

 
 
January 2008
Page 14
 
 
Four PLUS Each Based on the Value of a Different Underlying Index
Performance Leveraged Upside SecuritiesSM
 

 

Russell 2000 Index
High
Low
Period End
2002
      
First Quarter
506.46
458.40
506.46
Second Quarter
522.95
452.45
462.65
Third Quarter
447.73
356.58
362.27
Fourth Quarter
410.24
327.04
383.09
2003
 
 
 
First Quarter
398.45
345.94
364.54
Second Quarter
458.01
368.69
448.30
Third Quarter
520.20
449.17
487.68
Fourth Quarter
565.47
500.32
556.91
2004
 
 
 
First Quarter
601.50
557.63
590.31
Second Quarter
606.39
535.34
591.52
Third Quarter
582.72
517.10
572.94
Fourth Quarter
654.57
564.88
651.57
2005
 
 
 
First Quarter
644.95
604.53
615.07
Second Quarter
644.19
575.02
639.66
Third Quarter
688.51
643.04
667.80
Fourth Quarter
690.57
621.57
673.22
2006
 
 
 
First Quarter
765.14
684.05
765.14
Second Quarter
781.83
672.72
724.67
Third Quarter
734.48
671.94
725.59
Fourth Quarter
797.73
718.35
787.66
2007
 
 
 
First Quarter
829.44
760.06
800.71
Second Quarter
855.09
803.22
833.70
Third Quarter
855.77
751.54
805.45
Fourth Quarter (through December 19, 2007)
845.72
735.07
756.13

 
 
January 2008
Page 15