February 27, 2008

Fellow shareholder:

I cordially invite you to attend Morgan Stanley’s 2008 annual meeting of shareholders to:

Our Board of Directors recommends that you vote “FOR” the election of directors, the ratification of the appointment of the auditor and the amendment and restatement of Morgan Stanley’s Certificate of Incorporation and “AGAINST” the shareholder proposals.

We enclose our proxy statement, our 10-K annual report and a proxy card. Please submit your proxy. Thank you for your support of Morgan Stanley.

Very truly yours,

John J. Mack

Chairman and Chief Executive Officer

Table of Contents

Morgan Stanley

1585 Broadway

New York, New York 10036

February 27, 2008

Proxy Statement

We are sending you this proxy statement in connection with the solicitation of proxies by our Board of Directors for the 2008 annual meeting of shareholders. We are mailing this proxy statement and the accompanying form of proxy to shareholders on or about February 28, 2008. In this proxy statement, we refer to Morgan Stanley as the “Company,” “we,” “our” or “us” and the Board of Directors as the “Board.” When we refer to Morgan Stanley’s fiscal year, we mean the twelve-month period ending November 30 of the stated year (for example, fiscal 2007 is December 1, 2006 through November 30, 2007).

Annual Meeting Information

Date and Location.    We will hold the annual meeting on Tuesday, April 8, 2008 at 9:00 a.m., local time, at our offices at 2000 Westchester Avenue, Purchase, New York.

Admission.    Only record or beneficial owners of Morgan Stanley’s common stock or their proxies may attend the annual meeting in person. When you arrive at the annual meeting, you must present photo identification, such as a driver’s license. Beneficial owners must also provide evidence of stock holdings, such as a recent brokerage account or bank statement.

Electronic Access.    You may listen to the meeting at www.morganstanley.com. Please go to our website prior to the annual meeting to register.

Voting Information

Record Date.    The record date for the annual meeting is February 8, 2008. You may vote all shares of Morgan Stanley’s common stock that you owned as of the close of business on that date. Each share of common stock entitles you to one vote on each matter voted on at the annual meeting. On the record date, 1,104,641,594 shares of common stock were outstanding. We need a majority of the shares of common stock outstanding on the record date present, in person or by proxy, to hold the annual meeting.

Confidential Voting.    Our Amended and Restated Bylaws (Bylaws) provide that your vote is confidential and will not be disclosed to any officer, director or employee, except in certain limited circumstances such as when you request or consent to disclosure. Voting of the shares held in the Morgan Stanley 401(k) Plan (401(k) Plan) and the Employee Stock Ownership Plan (ESOP) also is confidential.

Submitting Voting Instructions for Shares Held Through a Broker.    If you hold shares through a broker, follow the voting instructions you receive from your broker. If you want to vote in person at the annual meeting, you must obtain a legal proxy from your broker and present it at the annual meeting. If you do not submit voting instructions to your broker, your broker may still be permitted to vote your shares. New York Stock Exchange (NYSE) member brokers may vote your shares as described below.

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If you do not submit voting instructions and your broker does not have discretion to vote your shares on a matter, your shares will not be counted in determining the outcome of the vote on that matter.

Submitting Voting Instructions for Shares Held in Your Name.    If you hold shares as a record holder, you may vote by submitting a proxy for your shares by mail, telephone or internet as described on the proxy card. If you submit your proxy via the internet, you may incur costs such as cable, telephone and internet access charges. Submitting your proxy will not limit your right to vote in person at the annual meeting. A properly completed and submitted proxy will be voted in accordance with your instructions, unless you subsequently revoke your instructions. If you submit a signed proxy card without indicating your vote, the person voting the proxy will vote your shares according to the Board’s recommendations.

Submitting Voting Instructions for Shares Held in Employee Plans.    If you hold shares in, or have been awarded stock units under, certain employee plans, you will receive directions on how to submit your voting instructions. Shares held in the following employee plans also are subject to the following rules.

Revoking Your Proxy.    You can revoke your proxy at any time before your shares are voted by (1) delivering a written revocation notice prior to the annual meeting to Thomas R. Nides, Secretary, Morgan Stanley, 1585 Broadway, New York, New York 10036; (2) submitting a later proxy that we receive no later than the conclusion of voting at the annual meeting; or (3) voting in person at the annual meeting. Attending the annual meeting does not revoke your proxy unless you vote in person at the meeting.

Votes Required to Elect Directors.    Each director will be elected by a majority of the votes cast with respect to such director. A “majority of the votes cast” means that the number of votes cast “for” a director exceeds the number of votes cast “against” that director. Under Delaware law, if the director is not elected at the annual meeting, the director will continue to serve on the Board as a “holdover director.” As required by the Company’s Bylaws, each director has submitted an irrevocable letter of resignation as director that becomes effective if he or she is not elected by shareholders and the Board accepts the resignation. If a director is not elected, the Nominating and Governance Committee will consider the director’s resignation and recommend to the Board

whether to accept or reject the resignation. The Board will decide whether to accept or reject the resignation and publicly disclose its decision, including the rationale behind the decision if it rejects the resignation, within 90 days after the election results are certified.

Votes Required to Adopt Other Proposals.    The ratification of Deloitte & Touche LLP’s appointment and the approval of the shareholder proposals each require the affirmative vote of a majority of the shares of common stock represented at the annual meeting and entitled to vote thereon. The approval of the Company’s proposal to amend and restate the Company’s Certificate of Incorporation, including eliminating the supermajority voting requirements necessary for shareholders to amend the Company’s Bylaws, requires the affirmative vote of at least eighty percent (80%) of the Company’s outstanding capital stock entitled to vote generally in the election of directors, voting together in a single class.

“Abstaining.” You may vote “abstain” for any nominee in the election of directors and on the other proposals. Shares voting “abstain” on any nominee for director will be excluded entirely from the vote and will have no effect on the election of directors. Shares voting “abstain” on the other proposals will be counted as present at the annual meeting for purposes of that proposal and your abstention will have the effect of a vote against the proposal.

Item 1—Election of Directors

Our Board currently has twelve (12) directors. The Board stands for election at each annual meeting of shareholders. Each director holds office until his or her successor has been duly elected and qualified or the director’s earlier resignation, death or removal. Dr. Klaus Zumwinkel will not stand for re-election at the annual meeting of shareholders. The eleven (11) nominees are all current directors of Morgan Stanley, and each nominee has indicated that he or she will serve if elected. We do not anticipate that any nominee will be unable or unwilling to stand for election, but if that happens, your proxy will be voted for another person nominated by the Board.

		Roy J. Bostock (67).    Chairman of The Partnership for a Drug-Free America (since 2002). Chairman of the Committee for Economic Development (2002 to 2005). Chairman of B|Com3 Group, Inc., an advertising and marketing services firm that is now part of the Publicis Groupe S.A. (2000 to 2001). Chairman and Chief Executive Officer, D’Arcy, Masius Benton & Bowles (1990 to 2000).   Director since:    2005   Other directorships:    Northwest Airlines Corporation and Yahoo! Inc.
		Erskine B. Bowles (62).    President of the University of North Carolina (since January 2006). Senior advisor (since 2001) and Managing Director (1999 to 2001) of Carousel Capital LLC, a private investment firm. General Partner at the private investment firm of Forstmann Little & Company (1999 to 2001).   Director since:    2005   Other directorships:    General Motors Corporation and Cousins Properties Incorporated

		Howard J. Davies (57).    The Director, London School of Economics and Political Science (since September 2003). Chairman of the U.K. Financial Services Authority (August 1997 to September 2003). Deputy Governor, the Bank of England (September 1995 to August 1997).   Director since:    2004
		C. Robert Kidder (63).    Chairman & Chief Executive Officer, 3Stone Advisors LLC, a private investment firm (since August 2006). Principal, Stonehenge Partners, Inc., a private investment firm (April 2004 to January 2006). President of Borden Capital, Inc., a company that provided financial and strategic advice to the Borden family of companies (November 2001 to March 2003). Chairman of the Board (January 1995 to August 2004) and Chief Executive Officer (January 1995 to March 2002) of Borden Chemical, Inc. (formerly Borden, Inc.), a forest products and industrial chemicals company.   Director since:    1993   Other directorships:    Schering-Plough Corporation
		John J. Mack (63).    Chairman of the Board and Chief Executive Officer (since June 2005). Chairman of Pequot Capital Management (June 2005). Co-Chief Executive Officer of Credit Suisse Group (January 2003 to June 2004). President, Chief Executive Officer and Director of Credit Suisse First Boston (July 2001 to June 2004). President, Chief Operating Officer and Director of Morgan Stanley (May 1997 to March 2001).   Director since:    2005
		Donald T. Nicolaisen (63).    Chief Accountant, Securities and Exchange Commission (September 2003 to November 2005). Partner of PricewaterhouseCoopers, an accounting firm (1978 to September 2003).   Director since:    2006   Other directorships:    MGIC Investment Corporation, Verizon Communications Inc. and Zurich Financial Services
		Charles H. Noski (55).    Corporate Vice President and Chief Financial Officer (December 2003 to March 2005) and Director (November 2002 to May 2005) of Northrop Grumman Corporation. Senior advisor to The Blackstone Group (March 2003 to November 2003). Vice Chairman of the Board (July 2002 to November 2002), Vice Chairman of the Board and Chief Financial Officer (February 2002 to July 2002) and Senior Executive Vice President and Chief Financial Officer (December 1999 to February 2002) of AT&T Corp. President, Chief Operating Officer and Director, Hughes Electronics Corporation (October 1997 to December 1999).   Director since:    2005   Other directorships:    Microsoft Corporation and Air Products and Chemicals, Inc.

		Hutham S. Olayan (54).    President, Chief Executive Officer and Director of Olayan America Corporation, the Americas-based arm of The Olayan Group (since 1985). Director of The Olayan Group, a private, multinational enterprise with diversified businesses and investments in the Middle East and globally (since 1981).   Director since:    2006
		Charles E. Phillips, Jr. (48).    President and Director (since January 2004) and Executive Vice President, Strategy, Partnerships, and Business Development (May 2003 to January 2004) of Oracle Corporation, a software company. Managing Director, Morgan Stanley (December 1996 to May 2003).   Director since:    2006   Other directorships:    Oracle Corporation and Viacom, Inc.
		O. Griffith Sexton (64).    Advisory director of Morgan Stanley (since 1995). Adjunct professor of finance at Columbia Business School (since 1995) and visiting lecturer at Princeton University (since 2000).   Director since:    2005   Other directorships:    Investor AB
		Laura D. Tyson (60).    Professor, Walter A. Haas School of Business, University of California at Berkeley (since January 2007). Dean of the London Business School (January 2002 to December 2006). Dean (July 1998 to December 2001) and Class of 1939 Professor in Economics and Business Administration (January 1997 to July 1998) at the Walter A. Haas School of Business, University of California, Berkeley. National Economic Advisor to the President and Chair, President’s National Economic Council (February 1995 to December 1996).   Director since:    1997   Other directorships:    Eastman Kodak Company and AT&T Inc.

Our Board unanimously recommends a vote “FOR” the election of all eleven (11) nominees. Proxies solicited by our Board will be voted “FOR” these nominees unless otherwise instructed.

Corporate Governance

Corporate Governance Documents.    Morgan Stanley has a corporate governance webpage at the “Company Information” link under the “About Morgan Stanley” link at www.morganstanley.com (www.morganstanley.com/about/company/governance/index.html).

Our Corporate Governance Policies (including our Director Independence Standards), Code of Ethics and Business Conduct, Board Committee charters, Policy Regarding Communication by Shareholders and Other Interested Parties with the Board of Directors, Policy Regarding Director Candidates Recommended by Shareholders, Policy Regarding Corporate Political Contributions, Policy Regarding Shareholder Rights Plan, information regarding the Integrity Hotline and the Equity Ownership Commitment are available at our corporate governance webpage at www.morganstanley.com/about/company/governance/index.html and are available to any shareholder who requests them by writing to Morgan Stanley, Suite D, 1585 Broadway, New York, New York 10036. Our Director Independence Standards are also attached as Annex A. The Board has established a process whereby shareholders can communicate with directors. This process is described in “Communications with Directors” herein.

Director Independence.    The Board has determined that Messrs. Bostock, Bowles, Davies, Kidder, Nicolaisen, Noski, Ms. Olayan, Mr. Phillips and Drs. Tyson and Zumwinkel are independent in accordance with the Director Independence Standards (attached as Annex A) established under our Corporate Governance Policies. To assist the Board with its determination, the standards follow NYSE rules and establish guidelines as to employment and commercial relationships that affect independence and categories of relationships that are not deemed material for purposes of director independence. Ten (10) of twelve (12) of our current directors are independent. All members of the Audit Committee, the Compensation, Management Development and Succession Committee and the Nominating and Governance Committee satisfy the standards of independence applicable to members of such committees. In addition, the Board has determined that Messrs. Nicolaisen, Noski and Phillips are “audit committee financial experts” within the meaning of current Securities and Exchange Commission (SEC) rules.

In making its determination as to the independent directors, the Board reviewed relationships between Morgan Stanley and the directors, including commercial relationships in the last three years between Morgan Stanley and entities where the directors are employees or executive officers, or their immediate family members are executive officers, that did not exceed a certain amount of such other entity’s gross revenues in any year (Messrs. Bowles and Davies, Ms. Olayan, Mr. Phillips and Drs. Tyson and Zumwinkel); ordinary course relationships arising from transactions on terms and conditions substantially similar to those with unaffiliated third parties between Morgan Stanley and entities where the directors or their immediate family members are executive officers or employees or own equity of 5% or more of that entity (Messrs. Bowles and Davies, Ms. Olayan, Mr. Phillips and Drs. Tyson and Zumwinkel); Morgan Stanley’s contributions to charitable organizations where the directors or their immediate family members serve as officers, directors or trustees that did not exceed a certain amount of the organization’s annual charitable receipts in the preceding year (Messrs. Bostock, Bowles, Davies, Kidder and Noski and Dr. Tyson); and the directors’ utilization of Morgan Stanley products and services in the ordinary course of business on terms and conditions substantially similar to those provided to unaffiliated third parties (Messrs. Bostock, Kidder and Phillips and Dr. Tyson).

In determining Mr. Bostock’s independence, the Board considered, in addition to relationships deemed immaterial under the Company’s Director Independence Standards, an employment relationship of the Company with a family member of Mr. Bostock. In connection with the Company’s acquisition of FrontPoint Partners LLC (FrontPoint) in December 2006, a son-in-law of Mr. Bostock who was employed at FrontPoint and held less than 5% of the equity interests in FrontPoint became a managing director of the Company in the Company’s asset management business. The Board considered that the managing director: received his pro rata share of the merger consideration (including contingent consideration that will become payable in 2008 if certain conditions are satisfied); will receive a retention payment to induce him to become and remain a Morgan Stanley employee; is not an executive officer of the Company within the meaning of relevant SEC rules; and is awarded compensation in line with his position at Morgan Stanley and in comparison to market standards. The Board also considered that Mr. Bostock has no influence over the asset management business other than that possessed by any other Morgan Stanley non-employee director. The Board determined, consistent with NYSE rules and based upon the facts and circumstances, that the relationship is immaterial to Mr. Bostock’s independence.

Lead Director.    Mr. Kidder is currently the Lead Director appointed by the independent directors of the Board. The Lead Director’s duties and authority, set forth in our Corporate Governance Policies, include the authority to call meetings of non-employee directors and independent directors, to facilitate communication between the Chairman of the Board (Chairman) and the independent directors, and to be available, if requested by major shareholders, for consultation and direct communication.

Board Meetings and Committees.    Our Board met 15 times during fiscal 2007. Each director attended at least 75% of the total number of meetings of the Board and committees on which the director served that were held while the director was a member. The Board’s standing committees include the following:

⁽¹⁾ Dr. Zumwinkel will not stand for re-election at the annual meeting of shareholders.

Our Board has adopted a written charter for each of the Audit Committee, CMDS Committee and Nominating and Governance Committee setting forth the roles and responsibilities of each committee. The charters are available at our corporate governance website at www.morganstanley.com/about/company/governance/index.html.

The reports of the Audit Committee and the CMDS Committee appear herein.

Non-Employee Director Meetings.    The Company’s Corporate Governance Policies provide that non-employee directors meet in executive sessions and that the Lead Director will preside over these executive sessions. If any non-employee directors are not independent, then the independent directors will meet in executive session at least once annually and the Lead Director will preside over these executive sessions.

Director Attendance at Annual Meetings.    The Company’s Corporate Governance Policies state that directors are expected to attend annual meetings of shareholders. All twelve (12) current directors attended the 2007 annual meeting of shareholders.

Shareholder Nominations for Director Candidates.    The Nominating and Governance Committee will consider director candidates recommended by shareholders. Any shareholder wishing to nominate a candidate for our Board should consult our Policy Regarding Director Candidates Recommended by Shareholders, available at www.morganstanley.com/about/company/governance/index.html. The discussion of the applicable procedures for such nominations is described in “Shareholder Recommendations for Director Candidates” herein, which also describes the Nominating and Governance Committee’s process for identifying and evaluating director candidates.

Compensation Governance.    The CMDS Committee is composed solely of independent members of the Board with no conflicts of interest and operates under a written charter adopted by the Board. As noted above, the CMDS Committee is responsible for reviewing and approving annually all compensation awarded to the Company’s executive officers, including the CEO and other executive officers named in the “Summary Compensation Table” herein (named executive officers or NEOs). In addition, the CMDS Committee administers the Company’s equity incentive plans, including reviewing and approving equity grants to executive officers. Information on the CMDS Committee’s processes, procedures and analysis of NEO compensation for fiscal 2007 is addressed in the “Compensation Discussion and Analysis” herein.

The CMDS Committee actively engages in its duties and follows procedures intended to ensure excellence in compensation governance, including those described below:

The principal compensation plans and arrangements applicable to our NEOs are described in the “Compensation Discussion and Analysis” and the executive compensation tables herein. The CMDS Committee may delegate the administration of these plans as appropriate, including to executive officers of the Company and members of the Company’s Human Resources department. The CMDS Committee may also create subcommittees with authority to act on its behalf.

Hay Group is the CMDS Committee’s consultant. Hay Group has also been retained by the Nominating and Governance Committee to provide consulting services on Board compensation. Other than the consulting services that it provides to these two committees of the Board, Hay Group provides no consulting services to the Company or its executive officers. Hay Group assists the CMDS Committee in collecting and evaluating market data regarding executive compensation and advises the Committee on developing trends and best practices in executive compensation and equity and incentive plan design. Hay Group generally attends all CMDS Committee meetings, reports directly to the Committee Chair and meets with the Committee without management present.

Human Resources acts as a liaison between the CMDS Committee and its consultant and prepares materials for the Committee’s use in compensation decisions. Separately, Human Resources may engage third-party compensation consultants to assist in the development of compensation data to inform and facilitate the CMDS Committee’s deliberations.

Our executive officers are not engaged directly with the CMDS Committee in setting the amount or form of executive officer compensation. However, as part of the annual performance review for our executive officers other than the CEO, the CMDS Committee considers our CEO’s assessment of each executive officer’s individual performance, as well as the performance of the Company and his compensation recommendations for each executive officer.

The CMDS Committee has delegated to the Equity Awards Committee (which consists of the Chairman) the CMDS Committee’s authority to make special retention equity awards; however, this delegation of authority does not extend to awards to our executive officers. Awards granted by the Equity Awards Committee are subject to a share limit imposed by the CMDS Committee and individual awards are reviewed by the CMDS Committee on a regular basis. All equity awards to our executive officers must be granted by the CMDS Committee. Annual year-end equity awards are typically granted by the CMDS Committee in December of each year. This schedule coincides with the time when year-end financial results are available and the CMDS Committee can evaluate individual and Company performance with respect to the Company’s performance priorities and strategic goals and apply the Section 162(m) formula described in the “Compensation Discussion and Analysis” herein. Special equity awards are generally approved on a monthly basis; however, they may be granted at any time, as deemed necessary for new hires, promotions, and recognition or retention purposes. We do not coordinate or time the release of material information around our grant dates in order to affect the value of compensation.

Executive Equity Ownership Commitment.    Members of senior management are subject to an Equity Ownership Commitment that requires them to retain 75% of common stock and equity awards (net of tax and exercise price) held at the time they become subject to the Equity Ownership Commitment and subsequently made to them. This commitment ties a portion of their net worth to the Company’s stock price and provides a continuing incentive for them to work towards superior long-term stock price performance. None of our executive officers have prearranged trading plans under SEC Rule 10b5-1.

Beneficial Ownership of Company Common Stock

Stock Ownership of Directors and Executive Officers.    We encourage our directors, officers and employees to own our common stock; owning our common stock aligns their interests with your interests as shareholders. All executive officers, including the NEOs, are subject to the Equity Ownership Commitment described above. Executive officers also may not engage in hedging strategies or sell short or trade derivatives involving Morgan Stanley securities.

The following table sets forth the beneficial ownership of common stock as of November 30, 2007 by each of our directors and NEOs, and by all our directors and executive officers as of November 30, 2007, as a group. As of November 30, 2007, none of the common stock beneficially owned by our directors and NEOs was pledged.

⁽¹⁾ Each director, NEO and executive officer as of November 30, 2007 has sole voting and investment power with respect to his or her shares, except Mr. Bostock’s beneficial ownership includes 1,775 shares held by his spouse.

⁽²⁾ Shares of common stock held in the Trust corresponding to stock units. Directors and executive officers may direct the voting of the shares corresponding to their stock units. Voting by executive officers is subject to the provisions of the Trust described in “Voting Information – Submitting Voting Instructions for Shares Held in Your Name” herein.

⁽³⁾ Excludes 87,098, 185,281, 103,533 and 38,112 stock units granted on December 20, 2007 to Messrs. Kelleher, Scully, Lynch and Nides, respectively, for services in fiscal 2007.

⁽⁴⁾ See the “Outstanding Equity Awards at Fiscal Year End Table” herein for additional information regarding stock options held by the NEOs as of November 30, 2007.

⁽⁵⁾ Each NEO and director beneficially owned less than 1% of the shares of common stock outstanding. All executive officers and directors as a group as of November 30, 2007 beneficially owned less than 1% of the common stock outstanding.

⁽⁶⁾ Mr. Sidwell retired from employment with the Company effective October 31, 2007.

In addition to his beneficial ownership of Morgan Stanley securities as of November 30, 2007 set forth in the table above, Mr. Sidwell held 5,277 shares of common stock of MSCI Inc., a subsidiary of the Company, and

2,777 stock units corresponding to an equal number of shares of MSCI Inc. common stock. The shares were delivered by MSCI Inc. in lieu of cash retainers for Mr. Sidwell’s services as a non-employee director of MSCI Inc. The stock units were also granted by MSCI Inc. as compensation for Mr. Sidwell’s services on its board. The shares and stock units represent Mr. Sidwell’s total beneficial ownership of MSCI Inc. securities as of November 30, 2007, which constitutes less than 1% of MSCI Inc. shares of common stock outstanding as of November 30, 2007.

Principal Shareholders.    The following table contains information regarding the only persons we know of that beneficially own more than 5% of our common stock.

⁽¹⁾ Based on a Schedule 13G Information Statement filed February 12, 2008 by State Street, acting in various fiduciary capacities. The Schedule 13G discloses that State Street had sole voting power as to 35,227,145 shares, shared voting power as to 107,235,330 shares and shared dispositive power as to 142,462,475 shares; that shares held by State Street on behalf of the Trust and a Company-sponsored equity-based compensation program amounted to 9.76% of our common stock as of December 31, 2007; and that State Street disclaimed beneficial ownership of all shares reported therein.

Executive Compensation

Compensation Discussion and Analysis.

This Compensation Discussion and Analysis describes and analyzes the objectives, practices, policies and decisions relating to compensation awarded to the NEOs. The CMDS Committee is responsible for approving all compensation awarded to our NEOs, as discussed in more detail under “Compensation Governance.”

The Company’s executive compensation program is designed to balance the following key objectives:

The principal tool to accomplish these objectives is at-risk incentive compensation (annual bonus). NEO incentive compensation is determined by the CMDS Committee annually and varies from year to year based on the Committee’s assessment of Company and individual performance. The overriding objective of incentive compensation is to drive individual and Company performance that will increase shareholder value over the long term. Therefore, a significant portion of incentive compensation is delivered in the form of equity and other long-term incentive awards that are subject to market and cancellation risk over the long term. As described under “Executive Stock Ownership Commitment” herein, our NEOs are required to retain at least 75% of the equity awards (net of tax and exercise cost) awarded to them. The CMDS Committee believes that a competitive and long-term oriented compensation program such as ours, strongly linked to performance and coupled with shareholder alignment and retention features, is critical to the continued success of the Company.

In 2007, we made significant progress in executing a number of aspects of the Company’s long-term strategic plan, as well as in achieving numerous financial and other performance priorities. Our fixed income business,

however, was severely impacted by significant writedowns of mortgage-related instruments resulting from an unfavorable subprime mortgage-related trading strategy and the continued deterioration and lack of market liquidity for subprime and other mortgage-related instruments. In light of the Company’s overall financial performance, Mr. Mack requested that he not receive a bonus for fiscal 2007 and the CMDS Committee did not award a bonus to Mr. Mack. The CMDS Committee determined that the compensation of other members of senior management, particularly those with the broadest ability to affect Company performance, should also reflect the Company’s unsatisfactory fiscal 2007 financial performance. Certain senior officers, including executive officers, were replaced, some did not receive an annual bonus and many received severely reduced bonuses compared to the previous year.

We believe that by closely linking pay to Company and individual performance, our compensation program motivates executives to achieve the Company’s short-term and long-term financial and strategic goals. The CMDS Committee determines annual total compensation levels after a thorough review of Company, business unit and individual performance both on a year-over-year basis (against performance priorities set at the beginning of the year) and on a relative basis (by comparing the Company’s financial performance to that of our key competitors). To further reinforce this philosophy, in January 2008, the CMDS Committee approved a performance-based stock option program with a three-year performance period based on financial metrics and performance relative to our investment bank competitors (see “VII. New Performance-Based Compensation Program—For Fiscal 2008 and Beyond” below).

In evaluating the performance of the Company and our NEOs, the CMDS Committee considered both the progress made toward various financial and other performance priorities, as well as that made in executing the Company’s strategic plan. The CMDS Committee also considered the other factors discussed below in determining compensation for the NEOs.

The Chief Financial Officer (CFO) reviewed the Company’s financial performance with the CMDS Committee periodically throughout fiscal 2007.

The CMDS Committee examined two peer groups: (1) our investment bank competitor group, which consists of Bear Stearns, Goldman Sachs, Lehman Brothers and Merrill Lynch and (2) our core competitor group, which consists of our investment bank competitors, as well as Bank of America, Citigroup, Credit Suisse Group, Deutsche Bank, JPMorgan Chase and UBS. The members of the investment bank competitor group have a business mix most similar to that of the Company, while the core competitors include a broader group of more diversified financial services companies. The CMDS Committee and its consultant believe that our core competitor group is representative of the market in which we compete for talent and that the size of the group provides sufficient data across the range of senior positions at the Company.

The CMDS Committee considered historical compensation data, consultant estimates of competitors’ 2007 compensation, and performance indicators for the Company’s core competitors. The CMDS Committee also reviewed Mr. Mack’s compensation relative to fiscal 2006 and projected fiscal 2007 compensation for the CEOs of seven peer companies (Bank of America, Bear Stearns, Citigroup, Goldman Sachs, JPMorgan Chase, Lehman Brothers and Merrill Lynch). Estimated 2007 compensation amounts were provided by other third-party compensation consultants and were reviewed by the CMDS Committee’s consultant.

The CMDS Committee evaluated fiscal 2007 performance both on a year-over-year basis with respect to financial, strategic and other performance priorities established at the beginning of the year, and on a relative basis compared to the performance of our core competitors. It did so because favorable or unfavorable market and economic conditions that develop during the year (as an example, the extreme displacement in the credit markets in 2007, particularly with respect to U.S. subprime residential mortgages) may render the priorities established at the beginning of the year less meaningful as measures of performance. On December 20, 2007, the day following the Company’s fourth quarter earnings announcement, the CMDS Committee reviewed and approved the incentive compensation to be paid to the NEOs for fiscal 2007.

The following table summarizes the Company’s year-over-year financial performance as of the fourth quarter of fiscal 2007 that the CMDS Committee reviewed. In November and early December, the CFO reviewed the Company’s year-over-year financial performance as of the third quarter of fiscal 2007 with the CMDS Committee. The CMDS Committee was kept apprised of the significant writedowns of mortgage-related instruments that were disclosed on Company Current Reports on Form 8-K and, accordingly, significantly discounted the Company’s third quarter financial performance in determining fiscal 2007 NEO compensation. Moreover, the CMDS Committee reviewed the Company’s final fourth quarter results before making final compensation decisions (most competitor full year results were not available at that time). A detailed analysis of the Company’s financial and operational performance for fiscal 2007 is contained in the Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2007 (2007 Form 10-K).

* Core competitors are Bank of America, Bear Stearns, Citigroup, Credit Suisse Group, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Lehman Brothers, Merrill Lynch and UBS.

⁽¹⁾ For the period December 1, 2005 to November 30, 2006.

⁽²⁾ Historical valuation ratios as reported by Bloomberg for fiscal 2006.

⁽³⁾ For the period December 1, 2006 to November 30, 2007.

⁽⁴⁾ For U.S. firms, Price-to-Earnings based on First Call EPS estimates, as of November 30, 2007. For European firms, Price-to-Earnings based on valuation ratios reported by Bloomberg for November 30, 2007.

⁽⁵⁾ Price-to-Book calculated by Bloomberg based on last filed book value, as of November 30, 2007.

Competition for talent is intense in the securities industry, from our traditional competitors and related businesses such as hedge funds and private equity firms. The Company’s executive compensation program is designed to be competitive in order to help attract, motivate and retain the talent that is essential to achieving our short-term and long-term financial and strategic goals. Set forth below is a discussion of each element of NEO compensation, why the Company pays each element and how each element fits into the Company’s overall compensation philosophy.

Our NEOs are subject to the Morgan Stanley Equity Ownership Commitment, which requires that they retain 75% of the common stock and equity awards (net of tax and exercise cost) held when they became subject to the commitment and subsequently awarded to them. They may not engage in hedging strategies, sell short or trade derivatives involving Company securities. These policies link a portion of NEO net wealth to the Company’s stock price and provide a continuing incentive for NEOs to work toward superior long-term stock performance. Since he returned to the Company in 2005, Mr. Mack has received 100% of his incentive compensation as equity awards.

In 2007, the CMDS Committee permitted the NEOs to participate on the same basis as other eligible employees in LCIP. Each NEO was permitted to elect to receive up to 40% of his long-term incentive award under LCIP, with the remaining portion payable as an equity award. For fiscal 2007, the contribution of each participant in LCIP, including NEOs, includes a notional investment by the Company equal to two times the participant’s contribution. Participant distributions under LCIP are offset by the Company notional investment, excluding any earnings thereon. We believe offering LCIP provides the Company with an important competitive advantage in retaining talent. For fiscal 2007, Messrs. Kelleher, Lynch and Nides elected to receive 40%, 30% and 40%, respectively, of their long-term incentive award under LCIP and the remainder in equity. Mr. Scully elected to receive 100% of his long-term incentive award in equity.

The cancellation provisions and payment schedules of our fiscal 2007 long-term incentive awards provide a continuing strong incentive to our NEOs to increase shareholder value over the long term. The NEOs will not be able to begin to monetize fiscal 2007 long-term incentive awards until the awards become non-cancelable. The cancellation provisions of fiscal 2007 RSUs lift, and the awards become non-cancelable, 50% two years after grant and 50% three years after grant. The cancellation provisions of fiscal 2007 LCIP awards lift, and the awards become non-cancelable, three years after grant.

The fiscal 2007 RSU and LCIP awards granted to our NEOs are not canceled upon termination of employment, provided that the NEO does not leave the Company to join a competitor and the NEO has complied with the other cancellation provisions of the award. Therefore, the cost of leaving the Company to go to a competitor can be significant to the NEO, or a competitor who wants to recruit the NEO would have to incur a significant cost in replacing the NEO’s canceled long-term incentive awards. The other cancellation provisions of fiscal 2007 RSU and LCIP awards include termination for cause, disclosure of proprietary information and solicitation of employees or clients. In addition to their retention value, the cancellation provisions of the long-term incentive awards protect the Company’s interests by, among other things, promoting the protection of confidential business information and serving to maintain the Company’s customer and employee relationships worldwide.

In addition to the cancellation provisions of the long-term incentive awards, all NEOs (other than Mr. Sidwell) signed notice and non-solicitation agreements that, among other things, generally require that they provide the Company with 180 days’ advance notice of their resignation and prohibit them from soliciting certain clients, customers or employees within 180 days following their termination of employment.

The values of fiscal 2007 equity and LCIP awards granted to our NEOs are set forth under “V. 2007 Compensation for NEOs” below.

The CMDS Committee determined the value of the fiscal 2007 cash and long-term incentive awards for each NEO based on its assessment of Company, business unit and individual performance and based on its review of peer group data, relative pay data, compensation expense and compensation recommendations, as discussed above.

In determining fiscal 2007 incentive compensation for our NEOs, the CMDS Committee reviewed the maximum amount yielded by the application of the shareholder-approved performance formula set in accordance with Section 162(m) of the Internal Revenue Code, discussed below, and the CMDS Committee certified that the Company’s financial results for fiscal 2007 satisfied the performance criteria of Section 162(m).

The CMDS Committee’s compensation determinations for the NEOs for fiscal 2007 are set forth in the following table.

⁽¹⁾ Mr. Kelleher’s base salary was £170,000 for fiscal 2007. The amount of British pounds sterling was converted to U.S. dollars using the fiscal year average of daily spot rates of £1 to $1.9977.

⁽²⁾ Represents Mr. Sidwell’s base salary for services through October 31, 2007, the date of Mr. Sidwell’s retirement from the Company, plus $25,000 that was paid in lieu of the base salary that he would have received had he continued employment through November 30, 2007.

⁽³⁾ Mr. Sidwell retired from the Company prior to the grant date of fiscal 2007 RSUs and was paid his entire fiscal 2007 bonus in cash.

⁽⁴⁾ The number of RSUs awarded was determined by dividing the dollar value of the award by $50.8686, the volume weighted average price of the Company’s common stock on the grant date, December 20, 2007, and rounding down to the nearest whole number. Fractional shares are paid in cash to the NEO.

Our policy, in general, is to maximize the tax deductibility of compensation paid to our executive officers under Section 162(m) of the Internal Revenue Code and the regulations of Section 162(m). Our shareholders have approved a performance formula that is designed and administered in order to qualify compensation awarded thereunder as “performance-based.” The formula imposes a cap of 0.5% of our adjusted pre-tax earnings on “performance-based” compensation paid to each executive who is designated by the CMDS Committee at the start of a fiscal year as an individual whose compensation for that year may be subject to the limit imposed by Section 162(m).

In January 2008, the CMDS Committee approved a new performance-based stock option program under our existing shareholder-approved equity plan that is designed to promote and reward improvement in the following criteria over a three-year performance period:

In designing the performance program, the CMDS Committee sought to tie a portion of NEO compensation directly to these three core financial metrics. The grants under this program will be at risk over a three-year performance period, and, if the Company does not achieve specific goals, the awards will not vest and NEOs will lose the compensation related to the performance program. The CMDS Committee adopted the performance program to reinforce senior management accountability for the Company’s financial and strategic goals and the Company’s long-term financial performance.

It is expected that the initial grants under the performance program will be made during fiscal 2008 to the CEO and certain other senior officers. The CMDS Committee will take the awards under consideration as it reviews 2008 year-end compensation. The performance stock option awards will become non-cancelable or be canceled at the conclusion of the performance period based on the Company’s achievement of the performance metrics of the program described below (subject to the other terms and conditions of the award).

The performance measures for the awards will be as follows:

Step 1:    Regardless of the Company’s average ROE, this 50% of the award will be canceled if the Company’s TSR over the performance period does not exceed the TSR of the S&P 500 Index over the performance period.

Step 2:    If the Company’s TSR exceeds the TSR of the S&P 500, the portion of this 50% of the award earned will be based on the Company’s average ROE.

Average ROE:    The Company’s average ROE over the performance period compared with the average ROE of our investment bank competitors over the performance period; and

Change in Average PBT:    The percentage change in the Company’s average PBT over the performance period from the Company’s average PBT over a three-year period preceding the performance period, compared with the percentage change in each investment bank competitor’s average PBT over the performance period from the competitor’s average PBT over a three-year period preceding the performance period.

If an executive’s employment terminates during the performance period under certain circumstances – and the circumstances do not involve a breach of the cancellation provisions of the award – a pro rata portion of the performance stock options will become exercisable, subject to the attainment of the performance goals, either at the time of termination or at the conclusion of the performance period, depending on the circumstances of the termination.

*      *      *

Compensation, Management Development and Succession Committee Report.

We, the Compensation, Management Development and Succession Committee of the Board of Directors of Morgan Stanley, have reviewed and discussed with management the Compensation Discussion and Analysis contained in this proxy statement. Based on such review and discussions, we have recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2007 filed with the SEC.

Respectfully submitted,

C. Robert Kidder, Chair

Erskine B. Bowles

Donald T. Nicolaisen

Summary Compensation Table.    The following table summarizes the compensation of our named executive officers for the fiscal year ended November 30, 2007. Our NEOs are our Chief Executive Officer, Chief Financial Officer, Former Chief Financial Officer and the three other most highly compensated executive officers as determined by their total compensation set forth in the table below, excluding, in accordance with SEC rules, the amount in the column captioned “Change in Pension Value and Nonqualified Deferred Compensation Earnings.” Compensation in the table below includes not only compensation earned for services in fiscal 2007 but, in the case of stock awards and option awards, compensation earned for services in prior fiscal years but recognized as an expense for financial statement reporting purposes with respect to fiscal 2007.

* Mr. Kelleher became Chief Financial Officer, effective October 11, 2007. Mr. Sidwell retired from employment with the Company, effective October 31, 2007. Mr. Sidwell has served as an advisory director of the Company since November 1, 2007 and as a non-employee director of MSCI Inc. since November 14, 2007. Effective December 1, 2007, Mr. Scully became a member of the Office of the Chairman.

⁽¹⁾ Includes elective deferrals to the Company’s employee benefit plans. Mr. Mack’s employment agreement provides that his annual base salary cannot be less than $775,000, the base salary provided to our CEO who immediately preceded him.

⁽²⁾ Includes elective deferrals to the Company’s employee benefit plans and amounts contributed to Morgan Stanley deferred compensation plans. See note 1 to the “Nonqualified Deferred Compensation Table” herein. Annual cash bonus amounts were paid in January 2008.

⁽³⁾ See “Award Values in the Compensation Discussion and Analysis and the Summary Compensation Table” below. Represents amounts recognized as an expense in the Company’s and MSCI Inc.’s 2007 financial statements related to all RSUs awarded to the NEOs in accordance with Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (SFAS No. 123R), including fractional RSUs settled in cash at grant. For Mr. Kelleher, represents (i) $4,430,555, the grant date fair value of RSU awards for services in fiscal 2007 that were granted on December 20, 2007 and (ii) $4,217,957 of expense related to RSU awards for services in fiscal 2003, 2004, 2005 and 2006 that were expensed over the service period. For Mr. Sidwell, represents (x) $1,462,344 of remaining expense related to RSU awards granted for service in fiscal 2003 and 2004 that were expensed over the service period, which ended upon Mr. Sidwell’s retirement, and (y) $4,732 of expense related to an RSU award granted by MSCI Inc. for Mr. Sidwell’s services as a non-employee director of MSCI Inc. For Messrs. Scully, Lynch and Nides, represents the grant date fair value of RSU awards for services in fiscal 2007 that were granted on December 20, 2007. For further information on the Company’s accounting for stock-based compensation, see notes 2 and 18 to the consolidated financial statements included in the 2007 Form 10-K. For the value of RSUs granted to each NEO for services to the Company in fiscal 2007, see the table in the “Compensation Discussion and Analysis” on page 19.

⁽⁴⁾ See “Award Values in the Compensation Discussion and Analysis and the Summary Compensation Table” below. Represents amounts recognized as an expense in the Company’s 2007 financial statements related to all stock options awarded to the NEOs in accordance with SFAS No. 123R. No stock options were awarded to the NEOs for services in fiscal 2007. For all NEOs, includes additional expense recognized in connection with the equitable adjustment of outstanding stock options to reflect the Discover spin-off. For Mr. Kelleher, also includes expense related to stock option awards granted for service in fiscal 2003 and 2006 that were expensed over the service period. For Mr. Sidwell, also includes remaining expense related to a stock option award granted for service in fiscal 2003 that was expensed over the service period, which ended upon Mr. Sidwell’s retirement. For further information on the Company’s accounting for stock-based compensation, see notes 2 and 18 to the consolidated financial statements included in the 2007 Form 10-K.

⁽⁵⁾ Includes the aggregate increase from September 30, 2006 to September 30, 2007 in the actuarially determined present value of the accumulated benefit under the Company-sponsored defined benefit pension plans during the measurement period of $56,039 for Mr. Mack, $209,498 for Mr. Scully, $17,818 for Mr. Lynch and $7,033 for Mr. Nides. Mr. Kelleher experienced a decrease in the present value of his accumulated benefit of ($108,016) primarily due to an increase in the value of benefits payable under the Morgan Stanley U.K. Group Pension Plan, which offsets benefits payable under the Morgan Stanley Supplemental Executive Retirement Plan. Mr. Sidwell experienced a decrease in the present value of his accumulated benefit under the Company-sponsored defined benefit pension plan during the measurement period of ($24,332) primarily due to his retirement with less than five years of vesting service under the Company-sponsored defined benefit pension plan. See the “Pension Benefits Table” herein. Changes in present value also reflect the effect of an additional year of pension accrual. The present value at September 30, 2006 is based on a 5.97% discount rate and the RP-2000 White Collar Combined Mortality Table projected to 2010 with Scale AA, for Males and Females. The present value at September 30, 2007 is based on a 6.34% discount rate and the RP-2000 White Collar Combined Mortality Table projected to 2015 with Scale AA, for Males and Females. Present values are determined using an interest-only discount before retirement. Post-retirement discounts are based on interest and mortality. For each plan, the assumed benefit commencement date is the earliest age at which the executive can receive unreduced benefits under that plan.

⁽⁶⁾ Also includes the aggregate increase, if any, in the value of the NEOs’ accounts under the Company’s nonqualified deferred compensation plans at November 30, 2007 (without giving effect to any distributions made during fiscal 2007) from December 1, 2006 that are attributable to above-market earnings. Above-market earnings represent the difference between market interest rates determined pursuant to SEC rules and the earnings credited on deferred compensation. This column includes $335,805 for Mr. Mack and $170,100 for Mr. Kelleher. For details of the nonqualified deferred compensation plans in which the NEOs participate, see the “Nonqualified Deferred Compensation Table” herein.

⁽⁷⁾ The “All Other Compensation” column includes (a) contributions made by the Company under our defined contribution plans and (b) perquisites and other personal benefits, as detailed below. The amount shown for Mr. Sidwell represents (i) $25,000 that was paid in lieu of the base salary that Mr. Sidwell would have received if he had remained employed through November 30, 2007 and (ii) $95,000 (of which $94,986 was recognized as an expense in MSCI Inc.’s 2007 financial statements) related to shares of MSCI Inc. common stock granted by MSCI Inc. at Mr. Sidwell’s election in lieu of cash retainers paid for his services as a non-employee director of MSCI Inc. In addition, our NEOs may participate on the same terms and conditions as other investors in investment funds that we may form and manage primarily for client investment, except that we may waive or lower applicable fees and charges for our employees.

Mr. Kelleher is covered by Morgan Stanley’s overseas assignment policy, which is designed to eliminate any financial detriment or gain from the overseas assignment. Mr. Kelleher’s amounts include $2,094,387 related to his overseas assignment and his entitlements under the policy, including tax reimbursements and tax equalization payments, financial advisory and tax planning services, relocation assistance, reimbursement for educational costs in the U.K. and cost of living adjustments. The amount reported also includes personal meals.

Pursuant to a written agreement with the Company, Mr. Nides was reimbursed for reasonable commuting and other personal expenses of $81,180 related to travel between his home and the Company’s offices and tax reimbursements of $63,269 related to imputed income for these expenses. These expenses include the cost of airfare, car service and housing arrangements. The amount reported also includes personal meals.

⁽⁸⁾ Mr. Mack did not receive a bonus for fiscal 2007. See the “Compensation Discussion and Analysis” herein for a discussion of Mr. Mack’s fiscal 2007 compensation.

⁽⁹⁾ Mr. Kelleher’s base salary was £170,000 for fiscal 2007. The amount of British pounds sterling was converted to U.S. dollars using the fiscal year average of daily spot rates of £1 to $1.9977.

⁽¹⁰⁾ Represents base salary paid for services through October 31, 2007, the date of Mr. Sidwell’s retirement from the Company.

⁽¹¹⁾ Mr. Sidwell retired from the Company prior to the grant date of fiscal 2007 RSUs and was paid his entire fiscal 2007 bonus in cash.

Award Values in the Compensation Discussion and Analysis and the Summary Compensation Table

The Summary Compensation Table was prepared in accordance with SEC regulations and values equity awards based principally on the treatment of compensation expense in the income statement under the applicable accounting rule, currently SFAS No. 123R. For this reason, the “Option Awards” column of the Summary Compensation Table includes values, even though no stock options were awarded to the NEOs in fiscal 2007, and the values disclosed for fiscal 2007 grants of RSUs in the “Stock Awards” column of the Summary Compensation Table differ from the values disclosed for such grants in the table that appears in the “Compensation Discussion and Analysis” on page 19.

In general, under SFAS No. 123R, an equity award is expensed over the service period of the award. If the employee is retirement-eligible at grant under the terms of the award, then the award is expensed over a service period prior to the grant date. As discussed in the “Compensation Discussion and Analysis” herein, fiscal 2007 RSUs awarded to the NEOs are not canceled upon a termination of employment, provided that the NEO does not leave the Company to join a competitor and the NEO has complied with the other cancellation provisions of the award. In accordance with SFAS No. 123R, we expensed fiscal 2007 year-end RSU awards to our NEOs over fiscal 2007, a service period prior to the grant date. Therefore, the full SFAS No. 123R grant date value of these RSUs is disclosed in the “Stock Awards” column of the above table for Messrs. Kelleher, Scully, Lynch and Nides (Messrs. Mack and Sidwell did not receive fiscal 2007 RSU awards). However, Messrs. Kelleher and Sidwell hold Company RSU awards that were previously granted in respect of prior fiscal years and either (i)

they were not retirement-eligible at grant under the award terms or (ii) the awards were granted prior to the adoption of SFAS No. 123R. Mr. Sidwell also holds an MSCI Inc. RSU award for which he is not retirement-eligible under the award terms. Accordingly, these awards are required to be expensed over the service period specified under the award terms. The portion of these awards that was expensed during fiscal 2007 is aggregated with the expense for fiscal 2007 annual RSU awards in the “Stock Awards” column of the Summary Compensation Table.

Messrs. Kelleher and Sidwell also hold Company stock option awards that were previously granted in respect of prior fiscal years and either (i) they were not retirement-eligible at grant under the award terms or (ii) the awards were granted prior to the adoption of SFAS No. 123R. Accordingly, these awards were expensed over the service period specified under the award terms, and the portion of these awards that was expensed during fiscal 2007 is disclosed in the “Option Awards” column of the Summary Compensation Table.

Additional expense was recognized in fiscal 2007 in connection with the equitable adjustment of certain outstanding stock options held by the NEOs to reflect the Discover spin-off, and this expense is also disclosed in the “Option Awards” column of the Summary Compensation Table.

Grants of Plan-Based Awards Table.    The following table provides information on stock options and RSUs granted to each of our NEOs during fiscal 2007. This table sets forth information with respect to the RSU and stock option awards granted under the Morgan Stanley Employees’ Equity Accumulation Plan (EEAP) to each NEO in December 2006 for performance in fiscal 2006. The information in this table with respect to such awards reflects equitable adjustments made to the awards after grant to reflect the Discover spin-off. For the value of RSUs granted to each NEO in December 2007 for performance in fiscal 2007, see the table that appears in the “Compensation Discussion and Analysis” on page 19. This table also sets forth information with respect to a grant of RSUs under the MSCI Independent Directors’ Equity Compensation Plan (MSCI Director Plan) that Mr. Sidwell received as a non-employee director of MSCI Inc. in connection with the MSCI Inc. initial public offering (IPO) on November 14, 2007. For additional information on these grants, see the discussion following the notes to this table.

⁽¹⁾ The stock options were granted with an exercise price equal to $78.40, the closing price of Company common stock on the date of grant, and were subsequently equitably adjusted to reflect the Discover spin-off.

⁽²⁾ For awards granted on December 12, 2006, represents the fair value in accordance with SFAS No. 123R of the awards as of the grant date. For further information on the Company’s accounting for stock-based compensation, see notes 2 and 18 to the consolidated financial statements included in the 2007 Form 10-K. For awards granted on November 14, 2007, represents the value of the RSUs based on the MSCI Inc. IPO price of $18.00 per share of common stock.

⁽³⁾ Under his employment agreement, Mr. Mack is entitled to year-end equity awards with terms and conditions that are no less favorable than such terms and conditions provided to members of our Management Committee for the applicable year and the terms and conditions provided to members of our Management Committee for fiscal 2004.

⁽⁴⁾ RSUs corresponding to MSCI Inc. common stock granted by MSCI Inc., a subsidiary of the Company, under the MSCI Director Plan, for Mr. Sidwell’s services as a non-employee director of MSCI Inc. The RSUs vest and convert to shares of MSCI common stock on May 1, 2008.

⁽⁵⁾ Shares of MSCI Inc. common stock granted in lieu of cash retainer fees for Mr. Sidwell’s services as a non-employee director of MSCI Inc. Under the terms of the MSCI Director Plan, a director may make an election to receive all or any portion of such director’s retainer fees in shares of MSCI Inc. common stock. Mr. Sidwell made the election to receive his entire fiscal 2007 retainer fees in the form of MSCI Inc. common stock.

Certain Terms of Awards Granted in Fiscal 2007

The dates on which the stock options become exercisable and the conversion dates of the RSUs in the table above can be found in the notes to the “Outstanding Equity Awards at Fiscal Year End Table” herein.

The NEOs are entitled to receive dividend equivalent payments on Company RSUs, which may be made in cash, shares of our common stock, or a combination thereof, at the Company’s discretion. The CMDS Committee equitably adjusted the number of Company stock options and Company RSUs granted to each NEO to reflect the Discover spin-off. The NEOs may direct the vote of the shares underlying the Company RSUs.

With the exception of Mr. Sidwell’s MSCI Inc. RSU award described below, the NEOs are retirement-eligible under the award terms for purposes of all outstanding awards or are otherwise not required to perform future service to earn such awards. However, the awards are subject to cancellation if a cancellation event occurs prior to the scheduled conversion date (in the case of the RSUs) or transfer restriction date (in the case of the stock options or shares acquired upon exercise of a stock option). For further details on cancellation of awards, see “Potential Payments Upon Termination or Change-in-Control” herein.

With respect to Mr. Sidwell’s MSCI Inc. RSU award, Mr. Sidwell is entitled to participate in dividend equivalent payments, which may be settled in cash, shares of MSCI common stock, or a combination thereof, at MSCI Inc.’s discretion. Prior to conversion, Mr. Sidwell will not have the right to vote the underlying shares. The RSUs will vest immediately upon his termination of service as a director of MSCI Inc. due to his death or disability or on a change-in-control, as such terms are defined in the award agreement.

Outstanding Equity Awards at Fiscal Year End Table.    The following table shows the number of shares covered by exercisable and unexercisable stock options and outstanding RSUs held by our NEOs on November 30, 2007 that remain subject to cancellation provisions. The information in this table reflects equitable adjustments made to the awards to reflect the Discover spin-off.

⁽¹⁾ The stock option awards in this table became or will become exercisable as shown in the following table:

⁽²⁾ Stock options were granted with an exercise price equal to the fair market value of the Company’s common stock on the date of grant and were subsequently equitably adjusted to reflect the Discover spin-off.

⁽³⁾ Outstanding RSUs held on November 30, 2007 that remain subject to cancellation provisions. All RSUs are Company RSUs, with the exception of 2,777 RSUs with respect to MSCI Inc. common stock held by Mr. Sidwell. The RSU awards in this table convert to shares as shown in the following table. RSUs may be subject to deferral beyond the scheduled conversion date to preserve deductibility under Section 162(m) of the Internal Revenue Code.