Morgan Stanley Presented by Abe Khorshid Ronnie Ng

Morgan Stanley Presented by: Abe Khorshid Ronnie Ng (Presented 4 -10 -2001) Recommendation: BUY

The Morgan Stanley Vision To be the world’s first choice in achieving financial aspirations.

Overview Morgan Stanley is a preeminent global financial services firm that maintains market positions in each of its businesses — Securities, Asset Management, and Credit Services. The company combines leadership in investment banking (including underwriting public offerings of securities and mergers and acquisitions advice) and institutional sales and trading, with strengths in providing investment and global asset management services as well as quality consumer credit products.

Profile n n n n n NYSE symbol: MWD Recent Price: $54. 77 52 week low/high: $44. 10 - $110. 00 P/E: 11. 63 Shares Outstanding: 1. 11 billion Market Cap. : $60. 9 billion 2000 Div. Per Share: $. 80 2000 ROE: 31% Historical 5 Year Net Revenue CAGR: 21. 8% Historical 5 Year Net Income CAGR: 28. 8%

1 Q 2001 Earnings n n Reported EPS of $. 94, which is down 30% from 1 Q 2000 Securities business net income dropped 37% n n Reflects the impact of difficult markets for equity underwriting, and principal investment activity — partially offset by strong performances in fixed income and equity sales and trading. 1 st in announced global M&A deals (39% market share) Achieved ROE of 23% for the quarter Declared quarterly dividend of $. 23 per share The Company has repurchased approximately 9 million shares of its common stock since the end of fiscal 2000 Non-staff costs fell 7. 5% between 4 Q 2000 and 1 Q 2001

Securities Includes Investment Banking, Institutional Sales & Trading, Full-Service Brokerage, and Principal Investing Activities n Comprises 81% of total sales and 74% of total profit n Net revenue and net income grew at 22% and 10%, respectively, in 2000 n #1 in Institutional Investor’s Yr 2000 Global Research Poll for 4 th straight year n

Securities - Investment Banking n n n n 2000 Total Fees: $4. 88 billion - Comprises 18. 5% of total net revenues M&A fees account for 43. 8% of total fees Equity Underwriting fees account for 35. 7% Debt Underwriting fees account for 20. 5% #1 in U. S. announced M&A deals for 2000 #1 in global M&A deals for Q 1 of 2001 #1 in European M&A deals for Q 1 of 2001

Securities - Principal Transaction Includes Equity, Fixed Income, Foreign Exchange, and Commodities trading n Total revenues for 2000: $7. 4 billion - Comprises 28. 7% of total net revenues n Revenues increased 27% in 2000 - fueled by 54% increase in equity trading revenues n Includes private equity arm n

Asset Management Provide wide range of investment products for institutions and individual investors - Van Kampen Mutual Funds - Unit Trusts - Insurances and Annuities n Net Revenues of $2. 5 billion in 2000 - Comprises 9. 6% of total net revenues - Grew at 20% from 1999 n Ranks among the top eight global active asset managers with over $500 billion of assets under management n

Credit Services n n Operated by Discover Financial Services Includes Discover Card, MS Card, and other proprietary general purpose credit cards Net Revenues of $3. 9 billion in 2000 - Comprises 14. 8% of total net revenues - Grew at 11. 3% from 1999 Only top-tier investment bank with credit card business

Current Economic Environment n n n Unemployment rose to 4. 3%, higher than projections Consumer confidence was up for the first time in the past five months Deteriorating economic environment - Fear of recession in US and Japan - Falling corporate earnings - Corporate layoffs across the board Interest rate friendly environment Equity bubble has popped in the US - Hard to raise capital through equity markets - M&A slowdown

Employment Data

Industry Environment n n n Firms are focusing on controlling costs - Recent layoffs in many brokerages M&A deal flows are slowing down Deteriorating equity backlog of underwriting Consumer credit is an increasing concern Increased fixed income liquidity in wake of fed easing

Position In Industry IB League Tables 2000 U. S. Announced M&A Advisor Rankings Rank 1 2 3 4 5 Advisor Morgan Stanley Dean Witter Credit Suisse First Boston Goldman Sachs Salomon Smith Barney Merrill Lynch Amt. ($bln) # of Deals 542. 56 517. 51 513. 27 408. 47 264. 54 197 398 255 209 165 Source: Comm. Scan M&ADesk Period: January 1, 2000 - November 30, 2000 Criteria: Excludes withdrawn deals, Includes all M&A deals involving either a US target, divestor or acquiror, spin-offs and split-offs Credit: Full credit to both acquiror and target advisor

Position In Industry IB League Tables 2000 Global Equity and Equity-linked Underwriter Rankings Rank 1 2 3 4 5 6 Underwriter Goldman Sachs Morgan Stanley Dean Witter Merrill Lynch Credit Suisse First Boston Citigroup Deutsche Bank Source: Comm. Scan Equi. Desk/Capital. Data Period: January 1, 2000 - September 30, 2000 Credit: Total deal size is apportioned to bookrunner (minimum of 3 deals) Total Amt. ($mm) # of Deals 80, 776. 85 58, 715. 64 56, 257. 99 35, 376. 05 34, 153. 65 27, 403. 54 184 166 154 171 161 101

Historic Performance

1 Year Stock Performance

Excel Spreadsheet n Financials n Revenue Composition n Ratios and Comparisons n Valuation Model

Relative Price-to-Book

Relative Price-to-Earnings

What Analysts Say… n n n “MWD should be trading at a premium, given its leadership in M&A and equity underwriting. ” -- Goldman Sachs Smith Barney rates MWD as a BUY with a target price of $90 “The top franchises in global finance, with a breadth of competencies and product offerings to which every bank aspires to have. ” – CSFB First Union reiterates STRONG BUY rating and target price of $90, 20 x 2001 EPS estimate “MWD remains the most attractively valued traditional broker dealer. Rated BUY rating with a $75 target. ” --Merrill Lynch

Why Morgan Stanley? Leading share in M&A and equity underwriting n Ahead of competition in cost reduction n Diversification of revenue sources n Unbeatable capability/financial strength - Larger asset base than other top tier IBs n Solid track record - Consistent growth in EPS and ROE n Trading at a very attractive value n Adds diversification to our client’s portfolio n

Recommendation n BUY 400 shares at the market! n Total projected market value: $22, 000