FWP 1 dp08063_fwp-ps462.htm
 
Filed pursuant to Rule 433 dated December 26, 2007 relating to
Preliminary Pricing Supplement No. 462 dated December 18, 2007 to
Registration Statement No. 333-131266
   
Structured Investments
Opportunities in Commodities
 
PLUS based on the Dow Jones–AIG Commodity IndexSM due January   , 2011
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.  At maturity, investors 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.
 
SUMMARY TERMS
Issuer:
Morgan Stanley
Aggregate principal amount:
$
Stated principal amount:
$1,000 per PLUS
Issue price:
$1,000 per PLUS
Pricing date:
  
Original issue date:
  
Maturity date:
January    , 2011
Underlying index:
Dow Jones–AIG Commodity IndexSM
Payment at maturity:
If final index value is greater than initial index value,
$1,000 + leveraged upside payment
If final index value is less than or equal to initial index value,
$1,000 x index performance factor
This amount will be less than or equal to the stated principal amount of $1,000.
Maximum payment at maturity:
There will be no maximum payment at maturity.
Leveraged upside payment:
$1,000 x upside leverage factor x index percent increase
Upside leverage factor:
140% to 160%.  The actual upside leverage factor will be determined on the pricing date.
Index percent increase:
(final index value – initial index value) / initial index value
Index performance factor:
final index value / initial index value
Initial index value:
The official settlement price of the underlying index on the pricing date
Final index value:
The official settlement price of the underlying index on the index valuation date
Index valuation date:
January    , 2011, subject to adjustment for certain market disruption events
CUSIP:
6174462J7
Listing:
The PLUS will not be listed on any exchange.
Agent:
Morgan Stanley & Co. Incorporated (“MS & Co.”)
         
Commissions and issue price:
  
Price to Public
Agent’s Commissions(1)
Proceeds to Company
 
Per PLUS
$1,000
$
$
 
Total
$
$
$
 (1)
For additional information, see “Plan of Distribution” in the prospectus supplement for PLUS.
 
YOU SHOULD READ THIS DOCUMENT TOGETHER WITH THE PRELIMINARY PRICING SUPPLEMENT DESCRIBING THIS OFFERING, AND 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 the offering will arrange to send you the prospectus if you request it by calling toll-free 1-800-584-6837.
 
 
 
 
PLUS based on the Dow Jones-AIG Commodity Index due January    , 2011
Performance Leveraged Upside SecuritiesSM
 
 
Investment Overview
 
Performance Leveraged Upside Securities
 
Exposure to commodities is a component of portfolio diversification.  Investors who believe they have underweight exposure to commodities can use the PLUS based on the value of the Dow Jones—AIG Commodity IndexSM
 
§  
To gain access to commodities and provide portfolio diversification from traditional fixed income/equity investments
 
§  
As an alternative to direct exposure to the underlying index that enhances returns of the positive performance of the underlying index
 
§  
To enhance returns and outperform the underlying index in a 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 upside leverage factor
 
The PLUS are exposed on a 1:1 basis to the negative performance of the Dow Jones—AIG Commodity IndexSM.
 
 
Maturity:
3 years
     
 
Upside leverage factor:
140% to 160%.  The actual upside leverage factor will be determined on the pricing date
     
 
Maximum payment at maturity:
None
     
 
Principal protection:
None
 
Dow Jones–AIG Commodity IndexSM Overview
 
The Dow Jones–AIG Commodity IndexSM provides a unique, diversified and liquid benchmark for commodities as an asset class and is currently composed of the prices of nineteen exchange-traded futures contracts on physical commodities. The Dow Jones–AIG Commodity IndexSM was developed, and is calculated, maintained and published daily by Dow Jones & Company, Inc. and AIG Financial Products Corp.
 
Information as of market close on December 17, 2007
 
 
Bloomberg Ticker:
DJAIG
     
 
Current Share Price:
180.104
     
 
52 Weeks Ago:
166.574
     
 
52 Week High (on November 6, 2007):
184.918
     
 
52 Week Low (on January 9, 2007):
155.800
 
 
 
January 2008
Page 2
 
 
PLUS based on the Dow Jones-AIG Commodity Index due January    , 2011
Performance Leveraged Upside SecuritiesSM
 
 
 
 
 
 
January 2008
Page 3
 
 
PLUS based on the Dow Jones-AIG Commodity Index due January    , 2011
Performance Leveraged Upside SecuritiesSM
 
 
Key Investment Rationale
 
This 3 year investment offers 140% to 160% leveraged upside.  The actual upside leverage factor will be determined on the pricing date.
 
Investors can use the PLUS to capture enhanced returns relative to the underlying index’s actual positive performance, 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.
 
Best Case Scenario
The underlying index increases in value and, at maturity, the PLUS redeem for the stated principal amount plus 140% to 160% of the actual increase in the underlying index.
 
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.
 
§  
The PLUS will not be listed on any exchange, 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 and volatility of the underlying index and the commodities futures contracts comprising the underlying index.
 
§  
Higher future prices of the index commodities relative to their current prices may adversely affect the value of the underlying index and the value of the PLUS.
 
§  
Suspensions or disruptions of market trading in commodity and related futures markets could adversely affect the price of the PLUS.
 
§  
Adjustments to the underlying index by the underlying index publisher could adversely affect the value of the PLUS.
 
§  
The U.S. federal income tax consequences of an investment in the PLUS are uncertain.
 
§  
Economic interests of the calculation agent may be potentially adverse to investors
 
§  
Credit risk to Morgan Stanley.
 
 
 
January 2008
Page 4
 
 
PLUS based on the Dow Jones-AIG Commodity Index due January    , 2011
Performance Leveraged Upside SecuritiesSM
 
Fact Sheet
 
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 preliminary pricing supplement, the prospectus supplement and the prospectus.  At maturity, investors will receive for each $1,000 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   , 2011
Key Terms
  
Issuer:
Morgan Stanley
Underlying index:
Dow Jones–AIG Commodity IndexSM
Underlying index publisher:
Dow Jones & Company, Inc. in conjunction with AIG Financial Products Corp.
Issue price:
$1,000 per PLUS
Aggregate principal amount:
$
Stated principal amount:
$1,000 per PLUS
Denominations:
$1,000 per PLUS and integral multiples thereof
Interest:
None
Payment at maturity:
If final index value is greater than initial index value,
$1,000 + leveraged upside payment
 
If final index value is less than or equal to initial index value,
$1,000 x index performance factor
This amount will be less than or equal to the stated principal amount of $1,000.
Maximum payment at maturity:
There will be no maximum payment at maturity
Leveraged upside payment:
$1,000 x index performance factor
Upside leverage factor:
140% to 160%. The actual upside leverage factor will be determined on the pricing date.
Index percent increase:
(final index value – initial index value) / initial index value
Index performance factor:
final index value / initial index value
Initial index value:
The official settlement price of the underlying index on the pricing date.
Final index value:
The official settlement price of the underlying index on the index valuation date as published by the underlying index publisher.
Index valuation date:
January   , 2011, subject to adjustment for certain market disruption events.
Postponement of
maturity date:
If the scheduled valuation date is not a trading day or if a market disruption event occurs on that day so that the valuation date as postponed falls less than two scheduled trading days prior to the scheduled maturity date, the maturity date of the PLUS will be postponed until the second scheduled trading day following that valuation date as postponed.
Risk factors:
Please see “Risk Factors” on page 9.
 
 
 
January 2008
Page 5
 
 
PLUS based on the Dow Jones-AIG Commodity Index due January    , 2011
Performance Leveraged Upside SecuritiesSM

 
General Information
Listing:
The PLUS will not be listed on any exchange. Therefore, there may be little or no secondary market for the PLUS and you should be willing to hold the PLUS to maturity.
CUSIP:
6174462J7
Tax considerations:
You should note that the discussion under “United States Federal Taxation” in the accompanying prospectus supplement does not apply to the PLUS offered under these preliminary terms and is superseded by the following discussion.
 
Although the issuer believes that, under current law, the 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, 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 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 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 pricing supplement and 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.
Trustee:
The Bank of New York (as successor trustee to JPMorgan Chase Bank, N.A.)
Calculation agent:
Morgan Stanley Capital Services Inc. (“MSCS”)
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 the PLUS by taking positions in swaps or futures contracts on the underlying index or on the commodity contracts underlying the underlying index. Such purchase activity could increase the value of the underlying index, and therefore the value at which the underlying index must close on the index 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.
 
This offering summary represents a summary of the terms and conditions of the PLUS.  We encourage you to read the preliminary pricing supplement, the prospectus supplement and the prospectus for this offering.
 
 
 
January 2008
Page 6
 
 
PLUS based on the Dow Jones-AIG Commodity Index due January    , 2011
Performance Leveraged Upside SecuritiesSM
 
 
How PLUS Work
 
Payoff Diagram
 
The payoff diagram below illustrates the payment at maturity on the PLUS based on the following terms:
 
 
Stated principal amount:
$1,000
 
 
Hypothetical upside leverage factor:
150%

 
¡  
If the final index value is greater than the initial index value, investors will receive the $1,000 stated principal amount plus the appreciation of the underlying index over the term of the PLUS multiplied by the hypothetical upside leverage factor of 150%.  Based on the actual and hypothetical terms above:
 
–  
If the underlying index appreciates 5%, investors would receive a 7.5% return, or $1,075.
 
¡  
If the final index value is less than or equal to the initial index value, investors will receive an amount that is less than or equal to the $1,000 stated principal amount, based on a 1% loss of principal for each 1% decline in the underlying index.
 
–  
If the underlying index depreciates 10%, investors would lose 10% of their principal and receive only $900 at maturity, or 90% of the stated principal amount.
 
–  
if the underlying index depreciates 50%, investors would lose 50% of their principal and receive only $500 at maturity, or 50% of the stated principal amount.
 
 
 
January 2008
Page 7
 
 
PLUS based on the Dow Jones-AIG Commodity Index due January    , 2011
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 is greater than the initial index value:
 
$10    +    Leveraged Upside Payment:
 
 
The actual upside leverage factor will be 140% to 160% and will be determined on the pricing date.
 
If the final index value is less than or equal to the initial index value:
 
$10    r    Index Performance Factor
 
 
Because the index performance factor will be less than or equal to 1.0, this payment will be less than or equal to $10.
 
 
January 2008
Page 8
 
 
PLUS based on the Dow Jones-AIG Commodity Index due January    , 2011
Performance Leveraged Upside SecuritiesSM
 

Risk Factors
 
The following is a non-exhaustive list of certain key risk factors for investors in the securities. For further discussion of these and other risks, you should read the section entitled “Risk Factors” in the accompanying preliminary pricing supplement, prospectus supplement and prospectus.  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 stated principal amount at maturity.  If the final index value is less than the initial index value, the payout at maturity will be an amount in cash that is less than the $1,000 stated principal amount of each PLUS by an amount proportionate to the decrease in the value of the underlying index.
 
§  
Not equivalent to investing in the underlying index.  Investing in the PLUS is not equivalent to investing in the underlying index or the futures contracts that comprise the underlying index.
 
§  
Market price of the PLUS may be influenced by many unpredictable factors.  Numerous 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 and volatility of the underlying index, the price and volatility of the commodity underlying the underlying index, trends of supply and demand for the commodities underlying the underlying index, geopolitical conditions and economic, financial, political and regulatory or judicial events, interest and yield rates in the market, time remaining to maturity and the creditworthiness of the issuer.  In addition, the commodities markets are subject to temporary distortions or other disruptions due to various factors, including lack of liquidity, participation of speculators and government intervention.  As a result, the market value of the PLUS will vary and may be less than the original issue price at any time prior to maturity and sale of the PLUS prior to maturity may result in a loss.
 
§  
Several factors have had and may in the future have an effect on the value of the underlying index.  Investments, such as the PLUS, linked to the prices of commodities, are considered speculative, and prices of commodities and related contracts may fluctuate significantly over short periods for a variety of factors, including: changes in supply and demand relationships; weather; climatic events; the occurrence of natural disasters; wars; political and civil upheavals; acts of terrorism; trade, fiscal, monetary, and exchange control programs; domestic and foreign political and economic events and policies; disease; pestilence; technological developments; changes in interest rates; and trading activities in commodities and related contracts.  These factors may affect the settlement price and of your PLUS in varying and potentially inconsistent ways.
 
§  
Higher future prices of the index commodities relative to their current prices may adversely affect the value of the underlying index and the value of the PLUS.  The underlying index is composed of futures contracts on physical commodities.  Unlike equities, which typically entitle the holder to a continuing stake in a corporation, commodity futures contracts normally specify a certain date for delivery of the underlying physical commodity.  As the futures contracts that compose the underlying index approach expiration, they are replaced by contracts that have a later expiration.  Thus, for example, a contract purchased and held in September may specify an October expiration.  As time passes, the contract expiring in October is replaced by a contract for delivery in November.  This process is referred to as “rolling.”  If the market for these contracts is (putting aside other considerations) in “backwardation,” where the prices are lower in the distant delivery months than in the nearer delivery months, the sale of the October contract would take place at a price that is higher than the price of the November contract, thereby creating a “roll yield.”  While many of the contracts included in the underlying index have historically exhibited consistent periods of backwardation, backwardation will most likely not exist at all times.  Moreover, certain of the commodities included in the underlying index have historically traded in “contango” markets.  Contango markets are those in which the prices of contracts are higher in the distant delivery months than in the nearer delivery months.  The absence of backwardation in the commodity markets could result in negative “roll yields,” which could adversely affect the value of the underlying index and, accordingly, the value of the PLUS.
 
§  
Suspensions or disruptions of market trading in commodity and related futures markets could adversely affect the price of the PLUS.  The commodity markets are subject to temporary distortions or other disruptions due to various factors, including the lack of liquidity in the markets, the participation of speculators and government regulation and intervention.  In addition, U.S. futures exchanges and some foreign exchanges have regulations that limit the amount of fluctuation in futures
 
 
January 2008
Page 9
 
 
PLUS based on the Dow Jones-AIG Commodity Index due January    , 2011
Performance Leveraged Upside SecuritiesSM
 
 
 
   
contract prices which may occur during a single business day.  These limits are generally referred to as “daily price fluctuation limits” and the maximum or minimum price of a contract on any given day as a result of these limits is referred to as a “limit price.”  Once the limit price has been reached in a particular contract, no trades may be made at a different price.  Limit prices have the effect of precluding trading in a particular contract or forcing the liquidation of contracts at disadvantageous times or prices.  These circumstances could adversely affect the value of the underlying index and, therefore, the value of the PLUS.
 
§  
Adjustments to the underlying index could adversely affect the value of the PLUS.  Dow Jones & Company, Inc., in conjunction with AIG Financial Products Corp., as the underlying index publisher, may add, delete or substitute the commodity constituting the underlying index or make other methodological changes that could change the value of the underlying index.  The underlying index publisher may discontinue or suspend calculation or publication of the underlying index at any time.  Any of these actions could adversely affect the value of the PLUS.  Where the underlying index is discontinued, the calculation agent will have the sole discretion to substitute a successor index that is comparable to the 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 pricing supplement (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 possible 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 treatment described in these preliminary terms and the accompanying pricing supplement.  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
 
§  
The PLUS will not be listed.  The PLUS will not be listed on any exchange. Therefore, there may be little or no secondary market for the PLUS. MS & Co. currently intends to act as a market maker for the PLUS but is not required to do so. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the PLUS easily. Because we do not expect that other market makers will participate significantly in the secondary market for the PLUS, the price at which you may be able to trade your PLUS is likely to depend on the price, if any, at which MS & Co.
 
 
January 2008
Page 10
 
 
PLUS based on the Dow Jones-AIG Commodity Index due January    , 2011
Performance Leveraged Upside SecuritiesSM
 
 
 
  
is willing to transact.  If at any time MS & Co. were to cease acting as a market maker, it is likely that there would be no secondary market for the PLUS.
 
§  
Potential adverse economic interest of the calculation agent and other of our affiliates.  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 and, as a result, could decrease the amount investors may receive on the 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 the underlying index must close before investors receive 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 index valuation date, could potentially affect the value of the underlying index on the index valuation date and, accordingly, the amount of cash investors will receive at maturity.
 
§  
Issuer’s credit ratings may affect the market value.  Investors are subject to the credit risk of the issuer.  Any decline in the issuer’s credit ratings may affect the market value of the PLUS.
 
 
 
 
January 2008
Page 11
 
 
PLUS based on the Dow Jones-AIG Commodity Index due January    , 2011
Performance Leveraged Upside SecuritiesSM
 
 
Information about the Underlying Index
 
The Dow Jones–AIG Commodity IndexSM. The Dow Jones–AIG Commodity IndexSM provides a unique, diversified and liquid benchmark for commodities as an asset class and is currently composed of the prices of nineteen exchange-traded futures contracts on physical commodities. The Dow Jones–AIG Commodity IndexSM was developed, and is calculated, maintained and published daily by Dow Jones & Company, Inc. and AIG Financial Products Corp.
 
License Agreement between Dow Jones & Company, Inc., American International Group and Morgan Stanley.  “Dow Jones,” “AIG®” “Dow Jones–AIG Commodity IndexSM” and “DJ-AIGCISM” are service marks of Dow Jones & Company, Inc. and American International Group, as the case may be, and have been licensed for use for certain purposes by Morgan Stanley.  See “Description of PLUS— License Agreement among Dow Jones, AIG-FP and Morgan Stanley” in the accompanying preliminary pricing supplement.
 
Historical Information
 
The following table sets forth the published high and low daily official settlement prices, as well as end-of-quarter daily official settlement prices of the underlying index for each quarter in the period from January 1, 2002 through December 17, 2007.  The closing value of the underlying index on December 17, 2007 was 180.104.  We obtained the information in the table below from Bloomberg Financial Markets, without independent verification.  The historical values of the underlying index should not be taken as an indication of future performance, and no assurance can be given as to the level of the underlying index on the index valuation date.
 
Dow Jones—AIG Commodity Index
High
Low
Period End
2002
      
First Quarter
  99.588
  87.366
  99.588
Second Quarter
102.617
  94.108
  99.518
Third Quarter
106.985
  96.860
106.294
Fourth Quarter
112.933
101.140
110.276
2003
      
First Quarter
125.049
110.276
113.171
Second Quarter
120.826
110.966
115.788
Third Quarter
121.322
114.021
120.898
Fourth Quarter
137.320
121.139
135.269
2004
      
First Quarter
151.691
136.818
150.837
Second Quarter
154.994
143.289
144.034
Third Quarter
153.175
140.991
153.175
Fourth Quarter
159.294
141.271
145.600
2005
      
First Quarter
165.246
142.180
162.094
Second Quarter
162.389
146.078
152.885
Third Quarter
179.069
154.107
178.249
Fourth Quarter
180.240
163.358
171.149
2006
      
First Quarter
174.224
158.780
165.194
Second Quarter
187.628
164.723
173.235
Third Quarter
179.962
156.587
159.957
Fourth Quarter
175.214
156.075
166.509
2007
      
First Quarter
173.503
155.880
171.963
Second Quarter
176.484
168.522
169.671
Third Quarter
179.715
161.062
178.250
Fourth Quarter (through December 17, 2007)
184.918
172.123
180.104
 
 
January 2008
Page 12
 
 
PLUS based on the Dow Jones-AIG Commodity Index due January    , 2011
Performance Leveraged Upside SecuritiesSM
 

 
Index Components
 
The following table sets out the component commodities of the Dow Jones-AIG Commodity Excess Return Index for 2008, along with the designated contract, exchange and target weighting for each commodity.

Commodity
Designated Contract
Exchange
Target Weighting**
Aluminum
High Grade Primary Aluminum
LME
7.107971%
Coffee
Coffee “C”
CSCE
3.001585%
Copper*
High Grade Cooper
COMEX
7.040516%
Corn
Corn
CBOT
5.663457%
Cotton
Cotton
NYCE
2.479588%
Crude Oil
Light, Sweet Crude Oil
NYMEX
13.156592%
Gold
Gold
COMEX
7.396190%
Heating Oil
Heating Oil
NYMEX
3.822525%
Live Cattle
Live Cattle
CME
4.887400%
Lean Hogs
Lean Hogs
CME
2.548123%
Natural Gas
Henry Hub Natural Gas
NYMEX
12.237084%
Nickel
Primary Nickel
LME
2.791708%
Silver
Silver
COMEX
2.721423%
Soybeans
Soybeans
CBOT
2.811933%
Soybean Oil
Soybean Oil
CBOT
7.628541%
Sugar
World Sugar No. 11
CSCE
3.185145%
Unleaded Gasoline
Reformulated Gasoline Blendstock for Oxygen Blending
NYMEX
3.783798%
Wheat
Wheat
CBOT
4.703406%
Zinc
Special High Grade Zinc
LME
3.033016%
 
* The Dow Jones–AIG Commodity Index uses the High Grade Copper contract traded on the COMEX division of the New York Mercantile Exchange for copper contract prices and LME volume data in determining the weighting for the Dow Jones–AIG Commodity Index.
 
** The column in the above table titled “Target Weighting”  reflects the target weightings as of January 2008 of the 19 commodities currently included in the Dow Jones–AIG Commodity Index.
 
 
 
January 2008
Page 13