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<SEC-DOCUMENT>0000950103-06-002656.txt : 20061122
<SEC-HEADER>0000950103-06-002656.hdr.sgml : 20061122
<ACCEPTANCE-DATETIME>20061122162057
ACCESSION NUMBER:		0000950103-06-002656
CONFORMED SUBMISSION TYPE:	FWP
PUBLIC DOCUMENT COUNT:		3
FILED AS OF DATE:		20061122
DATE AS OF CHANGE:		20061122

SUBJECT COMPANY:	

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			MORGAN STANLEY
		CENTRAL INDEX KEY:			0000895421
		STANDARD INDUSTRIAL CLASSIFICATION:	SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211]
		IRS NUMBER:				363145972
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1130

	FILING VALUES:
		FORM TYPE:		FWP
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	333-131266
		FILM NUMBER:		061236727

	BUSINESS ADDRESS:	
		STREET 1:		1585 BROADWAY
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10036
		BUSINESS PHONE:		212-761-4000

	MAIL ADDRESS:	
		STREET 1:		1585 BROADWAY
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10036

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	MORGAN STANLEY DEAN WITTER & CO
		DATE OF NAME CHANGE:	19980326

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	DEAN WITTER DISCOVER & CO
		DATE OF NAME CHANGE:	19960315

FILED BY:		

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			MORGAN STANLEY
		CENTRAL INDEX KEY:			0000895421
		STANDARD INDUSTRIAL CLASSIFICATION:	SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211]
		IRS NUMBER:				363145972
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1130

	FILING VALUES:
		FORM TYPE:		FWP

	BUSINESS ADDRESS:	
		STREET 1:		1585 BROADWAY
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10036
		BUSINESS PHONE:		212-761-4000

	MAIL ADDRESS:	
		STREET 1:		1585 BROADWAY
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10036

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	MORGAN STANLEY DEAN WITTER & CO
		DATE OF NAME CHANGE:	19980326

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	DEAN WITTER DISCOVER & CO
		DATE OF NAME CHANGE:	19960315
</SEC-HEADER>
<DOCUMENT>
<TYPE>FWP
<SEQUENCE>1
<FILENAME>dp04079_fwp-ps149.htm
<TEXT>

<HTML>
<HEAD>
   <TITLE></TITLE>
</HEAD>
<BODY bgcolor="#ffffff">
<TABLE border=0 width=100% cellspacing=0 cellpadding=0>
  <TR valign="bottom">
    <TD align=right><img src="biglogo.jpg"></TD>
  </TR>
  <TR valign="bottom">
    <TD align=right><hr width=100% size=2 noshade>    </TD>
  </TR>
  <TR valign="bottom">
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><I><FONT size=2 face="sans-serif">Preliminary
            Terms No. 149</FONT></I></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><I><FONT size=2 face="sans-serif">Registration
            Statement No. 333-131266</FONT></I></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><I><FONT size=2 face="sans-serif">Dated November
            22, 2006</FONT></I></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><I><FONT size=2 face="sans-serif">Rule 433</FONT></I></B> </TD>
  </TR>
</TABLE>
<P align="right">&nbsp;</P>
<P align="center">
<B><FONT size=5 face="sans-serif">10% SPARQS</FONT><SUP><FONT size=5 face="sans-serif">&#174;</FONT></SUP></B><B><FONT face="sans-serif"> </FONT></B><B><FONT size=5 face="sans-serif"> </FONT></B><B><FONT size=4 face="sans-serif">DUE </FONT></B><B><FONT size=5 face="sans-serif">J</FONT></B><B><FONT size=4 face="sans-serif">ANUARY </FONT></B><B><FONT size=5 face="sans-serif">20,
2008</FONT></B><br>
<B><I><FONT face="sans-serif">(Stock Participation Accreting Redemption Quarterly-pay Securities </FONT></I></B><B><SUP><FONT face="sans-serif">SM</FONT></SUP></B><B><I><FONT face="sans-serif">)</FONT></I></B><br>
<B><FONT face="sans-serif">ISSUED BY </FONT></B><B><FONT size=5 face="sans-serif">M</FONT></B><B><FONT face="sans-serif">ORGAN </FONT></B><B><FONT size=5 face="sans-serif">S</FONT></B><B><FONT face="sans-serif">TANLEY</FONT></B><BR>
<BR>
<B><FONT size=5 face="sans-serif">M</FONT></B><B><FONT face="sans-serif">ANDATORILY </FONT></B><B><FONT size=5 face="sans-serif">E</FONT></B><B><FONT face="sans-serif">XCHANGEABLE</FONT></B><br>
<B><FONT face="sans-serif">FOR THE </FONT></B><B><FONT size=5 face="sans-serif">C</FONT></B><B><FONT face="sans-serif">OMMON </FONT></B><B><FONT size=5 face="sans-serif">S</FONT></B><B><FONT face="sans-serif">TOCK OF</FONT></B></P>
<P align="center">
<B><FONT size=5 face="sans-serif">CIRCUIT CITY STORES, INC.</FONT></B></P>
<P align="left">
<B><I><FONT size=1 face="sans-serif">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 </FONT></I></B><B><I><U><FONT size=1
face="sans-serif">www.sec.gov</FONT></U></I></B><B><I><FONT size=1 face="sans-serif">. 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.</FONT></I></B></P>
<p><font size="2"><u><a href="http://www.sec.gov/Archives/edgar/data/895421/000095010306000149/sparqsproductsupp.txt"><font face="serif">Prospectus
      Supplement for SPARQS dated January 25, 2006</font></a></u><font face="serif"><br>
      <a href="http://www.sec.gov/Archives/edgar/data/895421/000095010306000145/jan2506_424b2.txt">Prospectus
dated January 25, 2006</a></font></font></p>
<P align="left">&nbsp;</P>

<table border=0 cellspacing=0 cellpadding=0 width=100%>
  <tr valign="bottom">
    <td colspan="2" align=left><hr width=100% size=2 noshade color="#000066">
    </td>
  </tr>
  <tr valign="bottom">
    <td align=left width=50%>&nbsp;</td>
    <td align=right width=50%><b><font color="#000066" size=3 face="serif">MORGAN
          STANLEY</font></b> </td>
  </tr>
</table>
<br>
<br>
<hr size=3 color=GRAY noshade>
<p style="page-break-before:always"></p>
<PAGE>
<br>
<TABLE border=0 width=100% cellspacing=0 cellpadding=0>
  <TR valign="bottom">
    <TD align=right><img src="smlogo.jpg"></TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><FONT size=2 face="sans-serif">10% SPARQS due
          January 20, 2008</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><FONT size=2 face="sans-serif">Mandatorily
          Exchangeable for the Common Stock of</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><FONT size=2 face="sans-serif">Circuit City
    Stores, Inc.</FONT></B></TD>
  </TR>
  <TR>
    <TD><HR noshade size=1>
    </TD>
  </TR>
  <TR valign="bottom">
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><FONT color="#000066" size=4 face="sans-serif">Overview</FONT></B> </TD>
  </TR>
</TABLE>
<P align="left">
<B><FONT face="sans-serif">Stock Participation Accreting Redemption Quarterly-pay Securities</FONT></B><B><SUP><FONT face="sans-serif">SM</FONT></SUP></B></P>
<P align="left">
<FONT face="sans-serif">SPARQS are short-term yield-enhancement securities that provide enhanced current income with exposure to an underlying security. In exchange for current income, investors forgo upside potential above the yield to
call.</FONT></P>
<P align="left">
<B><FONT face="sans-serif">How SPARQS Work</FONT></B></P>
<P align="left">
<FONT face="sans-serif">SPARQS pay a relatively high fixed quarterly coupon compared to the dividend yield of the underlying stock in exchange for a limit on the opportunity for appreciation. Regardless of the stated maturity, SPARQS are callable by
the issuer at any time after the call date, typically 6 months from the issue date. If called, the SPARQS will return a stated annualized return, inclusive of any coupons previously paid and accrued to the Call Date. If not called, SPARQS will
return a fixed number of shares of the underlying stock per SPARQS. </FONT><B><FONT face="sans-serif">SPARQS are not principal protected.</FONT></B></P>
<P align="left">&nbsp;</P>
<TABLE border=0 cellspacing=0 cellpadding=0 width=100%>
  <TR valign="bottom">
    <TD colspan="2" align=left><hr width=100% size=2 noshade color="#000066"></TD>
  </TR>
  <TR valign="bottom">
    <TD width=50% align=left valign="top"><B><FONT color="#000066" size=1>page
          2 of 10 </FONT></B></TD>
    <TD align=right width=50%><B><FONT color="#000066" size=2 face="serif">MORGAN
          STANLEY</FONT></B> </TD>
  </TR>
</TABLE>
<br>
<br>
<hr size=3 color=GRAY noshade>
<p style="page-break-before:always"></p>
<PAGE>
<br>
<TABLE border=0 width=100% cellspacing=0 cellpadding=0>
  <TR valign="bottom">
    <TD align=right><img src="smlogo.jpg" alt="smlogo.jpg"></TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><FONT size=2 face="sans-serif">10% SPARQS due
          January 20, 2008</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><FONT size=2 face="sans-serif">Mandatorily
          Exchangeable for the Common Stock of</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><FONT size=2 face="sans-serif">Circuit City
          Stores, Inc.</FONT></B></TD>
  </TR>
  <TR>
    <TD><HR noshade size=1>
    </TD>
  </TR>
  <TR valign="bottom">
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><FONT color="#000066" size=4 face="sans-serif">Fact Sheet</FONT></B> </TD>
  </TR>
</TABLE>
<br>
<P align="left">
<I><FONT size=1 face="sans-serif">The SPARQS offered are senior unsecured obligations of Morgan Stanley, will pay 10% interest per year and will have the terms described in the prospectus supplement for SPARQS and the prospectus, as supplemented or
modified by these preliminary terms. At maturity the SPARQS will pay a number of shares of Circuit City Stores, Inc. common stock, subject to the Issuer&#146;s right to call the SPARQS for cash at any time beginning July 20, 2007. The SPARQS do not
guarantee any return of principal at maturity.</FONT></I></P>
<TABLE border=0 width=100% cellspacing=0 cellpadding=0>
  <TR valign="bottom">
    <TD align=left width=100%><P align="left"><B><FONT color="#000066" size=2 face="sans-serif">Expected
            Key Dates</FONT></B></P>
    </TD>
  </TR>
  <TR>
    <TD><hr width=100% size=2 noshade color="#000066">
    </TD>
  </TR>
</TABLE>
<br>
<TABLE width="100%" border=1 cellpadding=4 cellspacing=0>
<TR valign="bottom">
	<TD width=33% align=left valign="top">
<B><FONT size=1 face="sans-serif">Expected Pricing Date: </FONT></B><FONT size=1 face="sans-serif">December
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2006</FONT></TD>
	<TD width=34% align=left valign="top"><B><FONT size=1 face="sans-serif">Expected Issue Date
	      (Settlement Date):</FONT></B>	<br>
	      <FONT size=1 face="sans-serif">December
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2006 (5 trading days after the <br>
    Pricing Date)</FONT></TD>
	<TD width=33% align=left valign="top">
<B><FONT size=1 face="sans-serif">Maturity Date: </FONT></B><FONT size=1 face="sans-serif">January
20, 2008</FONT><B><FONT size=1 face="sans-serif">, </FONT></B><FONT size=1 face="sans-serif">subject
to</FONT>
	<FONT size=1 face="sans-serif"><br>
	postponement due to a Market Disruption <br>
	Event</FONT></TD>
</TR>
<TR>
	<TD width="33%"></TD>
	<TD width="34%">	</TD>
	<TD width="33%">	</TD>
</TR>
</TABLE>
<BR>
<TABLE border=0 width=100% cellspacing=0 cellpadding=0>
  <TR valign="bottom">
    <TD align=left width=100%><P align="left"><B><FONT color="#000066" size=2 face="sans-serif">Key
            Terms</FONT></B></P></TD>
  </TR>
  <TR>
    <TD><hr width=100% size=2 noshade color="#000066">
    </TD>
  </TR>
</TABLE>
<br>
<TABLE width="100%" border=1 cellpadding=4 cellspacing=0>
<TR valign="bottom">
	<TD width=33% align=left valign="top">
<B><FONT size=1 face="sans-serif">Issuer: </FONT></B><FONT size=1 face="sans-serif">Morgan
Stanley</FONT></TD>
	<TD width=34% align=left valign="top">
<B><FONT size=1 face="sans-serif">Underlying Equity: </FONT></B><FONT size=1 face="sans-serif">Circuit City Stores, Inc.</FONT>
	<FONT size=1 face="sans-serif"><br>
	common stock (the &#147;CC Stock&#148;)</FONT></TD>
	<TD width=33% align=left valign="top">
<B><FONT size=1 face="sans-serif">Interest: </FONT></B><FONT size=1 face="sans-serif">10% per annum, payable quarterly</FONT>
	<br>
	<FONT size=1 face="sans-serif">beginning April 20, 2007</FONT></TD>
</TR>
<TR>
	<TD width="33%"></TD>
	<TD width="34%">	</TD>
	<TD width="33%">	</TD>
</TR>
</TABLE>
<BR>
<TABLE width="100%" border=1 cellpadding=4 cellspacing=0>
<TR valign="top">
	<TD width=30%><P><B><FONT size=1 face="sans-serif">Issue Price:</FONT></B></P>	</TD>
	<TD width=70% colspan=1><P><B></B><FONT size=1 face="sans-serif">CC Stock closing
	      price on the Pricing Date, provided that the SPARQS will be issued
	      at 100% of the Stated Principal Amount per SPARQS and the agent&#146;s
	      commissions will be 1.625% of the Stated Principal Amount per SPARQS;
	      provided that the price to public and the agent's commissions for any
	      single transaction to purchase between &#36;1,000,000 to &#36;2,999,999
	      principal  amount of SPARQS will be 99.75% of the Stated Principal Amount
	      per SPARQS and 1.375% of the Stated Principal Amount per SPARQS, respectively,
	      for any single transaction to purchase between &#36;3,000,000 to &#36;4,999,999
	      principal amount of SPARQS  will be 99.625% of the Stated Principal
	      Amount per SPARQS and 1.25% of the Stated Principal Amount per SPARQS,
	      respectively, and for any single transaction to purchase &#36;5,000,000
	      or more principal amount of SPARQS will be 99.50% of the Stated Principal
	      Amount per SPARQS and 1.125% of the Stated Principal Amount per SPARQS,
	      respectively. Selling concessions allowed to dealers in connection with
	      the offering may be reclaimed by the agent, if, within 30 days of the
	      offering, the agent repurchases the SPARQS distributed by such dealers.</FONT></P>	</TD>
</TR>
<TR valign="top">
  <TD><P><B><FONT size=1 face="sans-serif">Stated Principal Amount (Par):</FONT></B></P></TD>
  <TD colspan=1><P><FONT size=1 face="sans-serif">CC Stock closing price on the
    Pricing Date</FONT></P></TD>
</TR>
<TR valign="top">
  <TD><P><B><FONT size=1 face="sans-serif">Interest Payment Dates:</FONT></B></P></TD>
  <TD colspan=1><P><FONT size=1 face="sans-serif">April 20, 2007, July 20, 2007,
    October 20, 2007 and the Maturity Date</FONT></P></TD>
</TR>
<TR valign="top">
	<TD width=30%><P><B><FONT size=1 face="sans-serif">Exchange at Maturity:</FONT></B></P>	</TD>
	<TD width=70% colspan=1><P><FONT size=1 face="sans-serif">At maturity, unless previously called by the Issuer, each SPARQS will be exchanged into CC Stock at the Exchange Ratio</FONT></P>	</TD>
</TR>
<TR valign="top">
	<TD width=30%><P><B><FONT size=1 face="sans-serif">Exchange Ratio:</FONT></B></P>	</TD>
	<TD width=70% colspan=1><P><FONT size=1 face="sans-serif">The initial exchange ratio will be 1.0, subject to adjustment for corporate events; however, if the Issuer determines to price the SPARQS at a fraction of the closing price of CC Stock, the
initial exchange ratio will be adjusted so that it represents that fraction.</FONT></P>	</TD>
</TR>
<TR valign="top">
	<TD width=30%><P><B><FONT size=1 face="sans-serif">Issuer Call Right:</FONT></B></P>	</TD>
	<TD width=70% colspan=1><P><FONT size=1 face="sans-serif">Beginning on July 20, 2007, the Issuer may call the SPARQS for a cash Call Price that, together with coupons paid from the Issue Date through the Call Date, implies an annualized rate of
return on the Stated Principal Amount equal to the Yield to Call</FONT></P>	</TD>
</TR>
<TR valign="top">
	<TD width=30%><P><B><FONT size=1 face="sans-serif">Expected Yield to Call:</FONT></B></P>	</TD>
	<TD width=70% colspan=1><P><FONT size=1 face="sans-serif">20-24% per annum on the Stated Principal Amount (actual yield to call to be determined on the Pricing Date). See &#147;Hypothetical Call Price Calculations&#148; beginning on page
6.</FONT></P>	</TD>
</TR>
<TR valign="top">
	<TD width=30%><P><B><FONT size=1 face="sans-serif">Call Notice Date:</FONT></B></P>	</TD>
	<TD width=70% colspan=1><P><FONT size=1 face="sans-serif">If the Issuer calls the SPARQS, at least 10 but not more than 30 calendar days notice will be given before the Call Date specified in the notice</FONT></P>	</TD>
</TR>
<TR valign="top">
  <TD><P><B><FONT size=1 face="sans-serif">First Call Date:</FONT></B></P></TD>
  <TD colspan=1><P><FONT size=1 face="sans-serif">July 20, 2007</FONT></P></TD>
</TR>
<TR valign="top">
  <TD><P><B><FONT size=1 face="sans-serif">Final Call Date:</FONT></B></P></TD>
  <TD colspan=1><P><FONT size=1 face="sans-serif">January 10, 2008</FONT></P></TD>
</TR>
<TR valign="top">
	<TD width=30%><P><B><FONT size=1 face="sans-serif">Risk Factors:</FONT></B></P>	</TD>
	<TD width=70% colspan=1><P><B><FONT size=1 face="sans-serif">Please see &#147;Risk Factors&#148; on page 9.</FONT></B></P>	</TD>
</TR>
</TABLE>
<BR>
<P align="left">&nbsp;</P>

<TABLE border=0 cellspacing=0 cellpadding=0 width=100%>
  <TR valign="bottom">
    <TD colspan="2" align=left><hr width=100% size=2 noshade color="#000066"></TD>
  </TR>
  <TR valign="bottom">
    <TD width=50% align=left valign="top"><B><FONT color="#000066" size=1>page
          3 of 10 </FONT></B></TD>
    <TD align=right width=50%><B><FONT color="#000066" size=2 face="serif">MORGAN
          STANLEY</FONT></B> </TD>
  </TR>
</TABLE>
<br>
<br>
<hr size=3 color=GRAY noshade>
<p style="page-break-before:always"></p>
<PAGE>
<br>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=right><img src="smlogo.jpg" alt="smlogo.jpg"></TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><FONT size=2 face="sans-serif">10% SPARQS due
          January 20, 2008</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><FONT size=2 face="sans-serif">Mandatorily
          Exchangeable for the Common Stock of</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><FONT size=2 face="sans-serif">Circuit City
          Stores, Inc.</FONT></B></TD>
  </TR>
  <TR>
    <TD><HR noshade size=1>
    </TD>
  </TR>
</TABLE>
<br>
<TABLE border=0 width=100% cellspacing=0 cellpadding=0>
  <TR valign="bottom">
    <TD align=left width=100%><P align="left"><B><FONT color="#000066" size=2 face="sans-serif">General
            Information</FONT></B></P></TD>
  </TR>
  <TR>
    <TD><hr width=100% size=2 noshade color="#000066">
    </TD>
  </TR>
</TABLE>
<br>
<TABLE border=1 cellspacing=0 cellpadding=4>
<TR valign="top">
	<TD width=30%><P><B><FONT size=1 face="sans-serif">Listing:</FONT></B></P>	</TD>
	<TD width=70% colspan=1><P><FONT size=1 face="sans-serif">Application will be made to list the SPARQS on the American Stock Exchange (&#147;AMEX&#148;) under the ticker symbol &#147;CKK&#148;, subject to meeting the listing requirements. If
accepted for listing, the SPARQS will begin trading the day after the Pricing Date.</FONT></P>	</TD>
</TR>
<TR valign="top">
  <TD><P><B><FONT size=1 face="sans-serif">CUSIP:</FONT></B></P></TD>
  <TD colspan=1><P><FONT size=1 face="sans-serif">61750V204</FONT></P></TD>
</TR>
<TR valign="top">
  <TD><P><B><FONT size=1 face="sans-serif">Minimum Ticketing Size:</FONT></B></P></TD>
  <TD colspan=1><P><FONT size=1 face="sans-serif">100 SPARQS</FONT></P></TD>
</TR>
<TR valign="top">
	<TD width=30%><P><B><FONT size=1 face="sans-serif">Tax Consideration:</FONT></B></P>	</TD>
	<TD width=70% colspan=1><P><FONT size=1 face="sans-serif">The U.S. federal income tax consequences of an investment in the SPARQS are uncertain. There is no direct legal authority as to the proper tax treatment of the SPARQS, and the Issuer&#146;s counsel has not rendered
an opinion as to their proper characterization for U.S. federal income tax purposes. Pursuant to the terms of the SPARQS and subject to the discussion in the accompanying prospectus supplement for SPARQS under &#147;United States Federal
Taxation,&#148; you agree with the Issuer to treat a SPARQS as a unit consisting of (i) a terminable forward contract and (ii) a deposit with the Issuer of a fixed amount of cash to secure your obligation under the terminable forward contract.
Assuming the characterization of the SPARQS as set forth above is respected, a portion of the stated interest payments on the SPARQS will be treated as the Yield on the Deposit, and the remainder will be attributable to the Contract Fees, as
described in the section of the accompanying prospectus supplement for SPARQS called &#147;United States Federal Taxation &#151; Tax Treatment of the SPARQS.&#148; The Yield on the Deposit will be determined as of the pricing date and set forth in
the applicable pricing supplement to the accompanying prospectus supplement for SPARQS.</FONT></P>
<P><FONT size=1 face="sans-serif">Assuming the characterization of the SPARQS as set forth above is respected, the following U.S. federal income tax consequences would result. The portion of the stated interest payment on the SPARQS that is
attributable to the deposit will be taxable to a U.S. Holder as ordinary interest income. The Issuer will treat the portion of the stated interest payment that is attributable to the terminable forward contract as ordinary income. Based on the tax
treatment described above, upon sale, exchange or redemption of the SPARQS solely for cash, a U.S. Holder will generally recognize capital gain or loss equal to the difference between the amount realized and the issue price. Upon physical settlement
of the terminable forward contract at maturity, a U.S. Holder generally will not recognize any gain or loss with respect to the underlying equity received and will have a tax basis in the underlying equity received equal to the issue
price.</FONT></P>
<P><FONT size=1 face="sans-serif">Please read the discussion under &#147;Risk Factors </FONT><FONT size=1 face="sans-serif">&#150; Structure Specific Risk Factors&#148; in these preliminary terms </FONT><FONT size=1 face="sans-serif">and the discussion
under &#147;United States Federal Taxation&#148; in the accompanying prospectus supplement for SPARQS concerning the U.S. federal income tax consequences of investing in the SPARQS.</FONT></P>
<P><FONT size=1 face="sans-serif">Notwithstanding the foregoing, any stated interest payments on the SPARQS made to non-U.S. holders (as defined in the accompanying prospectus supplement for SPARQS) will generally be withheld upon at a rate of 30%.
See the section called &#147;United States Federal Taxation &#151; Tax Consequences to Non-U.S. Holders&#148; in the accompanying prospectus supplement for SPARQS. Non-U.S. holders should also note that the discussion in the accompanying prospectus
supplement for SPARQS does not address the tax consequences to non-U.S. holders for whom income or gain in respect of the SPARQS is effectively connected with a trade or business in the United States.</FONT></P>
<P><B><FONT size=1 face="sans-serif">The Issuer does not render any advice on tax matters. This material is not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the
taxpayer under U.S. federal tax laws. You are urged to consult your own tax advisors regarding all aspects of the U.S. federal tax consequences of investing in the SPARQS, as well as any tax consequences arising under the laws of any state, local or
foreign taxing jurisdiction.</FONT></B></P>	</TD>
</TR>
<TR valign="top">
  <TD><P><B><FONT size=1 face="sans-serif">Trustee:</FONT></B></P></TD>
  <TD colspan=1><P><FONT size=1 face="sans-serif">The Bank of New York (as successor
    Trustee to JPMorgan Chase Bank, N.A.)</FONT></P></TD>
</TR>
<TR valign="top">
  <TD><P><B><FONT size=1 face="sans-serif">Calculation Agent:</FONT></B></P></TD>
  <TD colspan=1><P><FONT size=1 face="sans-serif">Morgan Stanley &amp; Co. Incorporated</FONT></P></TD>
</TR>
<TR valign="top">
	<TD width=30%><P><B><FONT size=1 face="sans-serif">Contact:</FONT></B></P>	</TD>
	<TD width=70% colspan=1><P><FONT size=1 face="sans-serif">You may contact your local Morgan Stanley branch office or our principal executive offices at 1585 Broadway, New York, New York, 10036 (telephone number (866) 477-4776 / (914) 225 7000)</FONT></P>	</TD>
</TR>
</TABLE>
<BR>
<P align="left">
<I><FONT size=1 face="sans-serif">This offering summary represents a summary of the terms and conditions of the SPARQS. We encourage you to read the accompanying prospectus supplement for SPARQS and prospectus related to this offering.</FONT></I></P>
<P align="left">&nbsp;</P>
<TABLE border=0 cellspacing=0 cellpadding=0 width=100%>
  <TR valign="bottom">
    <TD colspan="2" align=left><hr width=100% size=2 noshade color="#000066"></TD>
  </TR>
  <TR valign="bottom">
    <TD width=50% align=left valign="top"><B><FONT color="#000066" size=1>page
          4 of 10 </FONT></B></TD>
    <TD align=right width=50%><B><FONT color="#000066" size=2 face="serif">MORGAN
          STANLEY</FONT></B> </TD>
  </TR>
</TABLE>
<br>
<br>
<hr size=3 color=GRAY noshade>
<p style="page-break-before:always"></p>
<PAGE>
<br>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=right><img src="smlogo.jpg" alt="smlogo.jpg"></TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><FONT size=2 face="sans-serif">10% SPARQS due
          January 20, 2008</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><FONT size=2 face="sans-serif">Mandatorily
          Exchangeable for the Common Stock of</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><FONT size=2 face="sans-serif">Circuit City
          Stores, Inc.</FONT></B></TD>
  </TR>
  <TR>
    <TD><HR noshade size=1>
    </TD>
  </TR>
</TABLE>
<br>
<P align="right">
<B><FONT color="#000066" size=4 face="sans-serif">Key Benefits / Key Risks /<br>
Key Investment Rationale</FONT></B></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
  <TD colspan="2" align=left>
    <B><FONT color="#000066" size=2 face="sans-serif">Key Benefits</FONT></B>	</TD>
	<TD  width=4%>&nbsp;</TD>
	<TD colspan="2">
      <B><FONT color="#000066" size=2 face="sans-serif">Key Investment Rationale</FONT></B>	</TD>
  </TR>
<TR>
  <TD colspan="2">
    <HR noshade color="#000066" size=1>	</TD>
	<TD width="4%"></TD>
	<TD colspan="2">
      <HR noshade color="#000066" size=1>	</TD>
  </TR>
<TR valign="bottom">
  <TD align=left width=3%>&#8226; </TD>
	<TD width=45% align=left valign="top"><FONT size=2 face="sans-serif">10% yield, which is higher than the current</FONT>	<FONT size=2 face="sans-serif">dividend
    yield of 0.38% on CC Stock.</FONT></TD>
	<TD  width=4% valign="top">&nbsp;</TD>
	<TD  width=3% valign="top">&nbsp;	</TD>
	<TD width=45% align=left valign="top">
<B><FONT size=2 face="sans-serif">You may be interested in the SPARQS if you are:</FONT></B>	</TD>
</TR>
<TR valign="bottom">
  <TD align=left width=3%>&nbsp;</TD>
	<TD width=45% align=left valign="top">&nbsp;</TD>
	<TD  width=4% valign="top">&nbsp;</TD>
	<TD  width=3% valign="top">&#8226; </TD>
	<TD width=45% align=left valign="top"><FONT size=2 face="sans-serif">Seeking exposure to
	    CC Stock but are willing to limit</FONT>	<FONT size=2 face="sans-serif">your
	    appreciation in exchange for a higher current yield.</FONT></TD>
</TR>
<TR valign="bottom">
  <TD align=left width=3%>&#8226; </TD>
	<TD width=45% align=left valign="top">
<FONT size=2 face="sans-serif">A defensive, total return strategy linked to CC</FONT>	<FONT size=2 face="sans-serif">Stock.</FONT></TD>
	<TD  width=4% valign="top">&nbsp;</TD>
	<TD  width=3% valign="top">&nbsp;	</TD>
	<TD width=45% align=left valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD align=left width=3%>&nbsp;</TD>
	<TD width=45% align=left valign="top">&nbsp;</TD>
	<TD  width=4% valign="top">&nbsp;</TD>
	<TD  width=3% valign="top">&nbsp;	</TD>
	<TD width=45% align=left valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD align=left width=3%>&nbsp;</TD>
	<TD width=45% align=left valign="top">&nbsp;	</TD>
	<TD  width=4% valign="top">&nbsp;</TD>
	<TD  width=3% valign="top">&#8226; </TD>
	<TD width=45% align=left valign="top">
<FONT size=2 face="sans-serif">A holder of CC Stock and, if, consistent with
your</FONT>	 <FONT size=2 face="sans-serif">investment
objectives, after taking into account the tax</FONT>  <FONT size=2 face="sans-serif">considerations,
may consider switching into a security</FONT>  <FONT size=2 face="sans-serif">that
provides a 10% yield while still retaining CC Stock</FONT>  <FONT size=2 face="sans-serif">exposure,
which is limited by the Call Price.</FONT> </TD>
</TR>
<TR valign="bottom">
  <TD align=left width=3%>&nbsp;</TD>
	<TD width=45% align=left valign="top">&nbsp;	</TD>
	<TD  width=4% valign="top">&nbsp;</TD>
	<TD  width=3% valign="top">&nbsp;	</TD>
	<TD width=45% align=left valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD align=left width=3%>&nbsp;</TD>
	<TD width=45% align=left valign="top">&nbsp;	</TD>
	<TD  width=4% valign="top">&nbsp;</TD>
	<TD  width=3% valign="top">&#8226; </TD>
	<TD width=45% align=left valign="top"><FONT size=2 face="sans-serif">Not concerned about
	    principal risk.</FONT>	</TD>
</TR>
</TABLE>
<BR>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
  <TD colspan="2" align=left>
    <B><FONT color="#000066" size=2 face="sans-serif">Key Risks</FONT></B></TD>
	<TD  width=4%>&nbsp;</TD>
	<TD  width=3%>&nbsp;	</TD>
	<TD align=left width=45%>&nbsp;	</TD>
</TR>
<TR>
  <TD colspan="2">
    <HR noshade color="#000066" size=1></TD>
	<TD width="4%"></TD>
	<TD width="3%">	</TD>
	<TD width="45%">	</TD>
</TR>
<TR valign="bottom">
  <TD align=left width=3%>&#8226;</TD>
	<TD align=left width=45%><B><FONT size=2 face="sans-serif">No guaranteed return of principal.</FONT></B>	</TD>
	<TD  width=4%>&nbsp;</TD>
	<TD  width=3%>&nbsp;	</TD>
	<TD align=left width=45%>
<B><I><FONT face="sans-serif">Please carefully review all the &#147;Risk</FONT></I></B>	<B><I><FONT face="sans-serif">Factors&#148; on
page 9</FONT></I></B></TD>
</TR>
<TR valign="bottom">
  <TD align=left width=3%>&#8226;</TD>
	<TD align=left width=45%><FONT size=2 face="sans-serif">Your return on the SPARQS is limited by the</FONT>	 <FONT size=2 face="sans-serif">Issuer&#146;s
    call right.</FONT> </TD>
	<TD  width=4%>&nbsp;</TD>
	<TD  width=3%>&nbsp;	</TD>
	<TD align=left width=45%>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD align=left width=3%>&nbsp;</TD>
	<TD align=left width=45%>&nbsp;</TD>
	<TD  width=4%>&nbsp;</TD>
	<TD  width=3%>&nbsp;	</TD>
	<TD align=left width=45%>&nbsp;	</TD>
</TR>
<TR valign="bottom">
  <TD align=left width=3%>&#8226;</TD>
	<TD align=left width=45%><FONT size=2 face="sans-serif">Secondary trading may be limited, and the</FONT>	 <FONT size=2 face="sans-serif">inclusion
    of commissions and projected profit from</FONT>  <FONT size=2 face="sans-serif">hedging
    in the original issue price is likely to</FONT>  <FONT size=2 face="sans-serif">adversely
    affect secondary market prices.</FONT> </TD>
	<TD  width=4%>&nbsp;</TD>
	<TD  width=3%>&nbsp;	</TD>
	<TD align=left width=45%>&nbsp;	</TD>
</TR>
<TR valign="bottom">
  <TD align=left width=3%>&nbsp;</TD>
	<TD align=left width=45%>&nbsp;</TD>
	<TD  width=4%>&nbsp;</TD>
	<TD  width=3%>&nbsp;	</TD>
	<TD align=left width=45%>&nbsp;	</TD>
</TR>
<TR valign="bottom">
  <TD align=left width=3%>&#8226;</TD>
	<TD align=left width=45%><FONT size=2 face="sans-serif">If the SPARQS are accelerated, you may receive</FONT>	 <FONT size=2 face="sans-serif">an
    amount worth substantially less than the</FONT>  <FONT size=2 face="sans-serif">principal
    amount of the SPARQS.</FONT> </TD>
	<TD  width=4%>&nbsp;</TD>
	<TD  width=3%>&nbsp;	</TD>
	<TD align=left width=45%>&nbsp;	</TD>
</TR>
<TR valign="bottom">
  <TD align=left width=3%>&nbsp;</TD>
	<TD align=left width=45%>&nbsp;</TD>
	<TD  width=4%>&nbsp;</TD>
	<TD  width=3%>&nbsp;	</TD>
	<TD align=left width=45%>&nbsp;	</TD>
</TR>
<TR valign="bottom">
  <TD align=left width=3%>&#8226;</TD>
	<TD align=left width=45%><FONT size=2 face="sans-serif">Circuit City Stores, Inc. is not involved with this</FONT>	 <FONT size=2 face="sans-serif">offering
    in any way. The Issuer has not made any</FONT>  <FONT size=2 face="sans-serif">due
    diligence inquiry in connection with this</FONT>  <FONT size=2 face="sans-serif">offering.</FONT> </TD>
	<TD  width=4%>&nbsp;</TD>
	<TD  width=3%>&nbsp;	</TD>
	<TD align=left width=45%>&nbsp;	</TD>
</TR>
<TR valign="bottom">
  <TD align=left width=3%>&nbsp;</TD>
	<TD align=left width=45%>&nbsp;</TD>
	<TD  width=4%>&nbsp;</TD>
	<TD  width=3%>&nbsp;	</TD>
	<TD align=left width=45%>&nbsp;	</TD>
</TR>
<TR valign="bottom">
  <TD align=left width=3%>&#8226;</TD>
	<TD align=left width=45%><FONT size=2 face="sans-serif">The antidilution adjustments the calculation agent</FONT>	 <FONT size=2 face="sans-serif">is
    required to make do not cover every corporate</FONT>  <FONT size=2 face="sans-serif">event
    that could affect CC Stock.</FONT> </TD>
	<TD  width=4%>&nbsp;</TD>
	<TD  width=3%>&nbsp;	</TD>
	<TD align=left width=45%>&nbsp;	</TD>
</TR>
<TR valign="bottom">
  <TD align=left width=3%>&nbsp;</TD>
	<TD align=left width=45%>&nbsp;</TD>
	<TD  width=4%>&nbsp;</TD>
	<TD  width=3%>&nbsp;	</TD>
	<TD align=left width=45%>&nbsp;	</TD>
</TR>
<TR valign="bottom">
  <TD align=left width=3%>&#8226;</TD>
	<TD align=left width=45%><FONT size=2 face="sans-serif">The U.S. federal income tax consequences of an</FONT>	 <FONT size=2 face="sans-serif">investment
    in the SPARQS are uncertain.</FONT> </TD>
	<TD  width=4%>&nbsp;</TD>
	<TD  width=3%>&nbsp;	</TD>
	<TD align=left width=45%>&nbsp;	</TD>
</TR>
<TR valign="bottom">
  <TD align=left width=3%>&nbsp;</TD>
	<TD align=left width=45%>&nbsp;</TD>
	<TD  width=4%>&nbsp;</TD>
	<TD  width=3%>&nbsp;	</TD>
	<TD align=left width=45%>&nbsp;	</TD>
</TR>
<TR valign="bottom">
  <TD align=left width=3%>&#8226;</TD>
	<TD align=left width=45%><FONT size=2 face="sans-serif">Credit
Risk to Morgan Stanley whose credit rating</FONT>	<FONT size=2 face="sans-serif">is
currently Aa3/A+.</FONT></TD>
	<TD  width=4%>&nbsp;</TD>
	<TD  width=3%>&nbsp;	</TD>
	<TD align=left width=45%>&nbsp;	</TD>
</TR>
</TABLE>
<BR>
<P align="left">&nbsp;</P>
<TABLE border=0 cellspacing=0 cellpadding=0 width=100%>
  <TR valign="bottom">
    <TD colspan="2" align=left><hr width=100% size=2 noshade color="#000066"></TD>
  </TR>
  <TR valign="bottom">
    <TD width=50% align=left valign="top"><B><FONT color="#000066" size=1>page
          5 of 10 </FONT></B></TD>
    <TD align=right width=50%><B><FONT color="#000066" size=2 face="serif">MORGAN
          STANLEY</FONT></B> </TD>
  </TR>
</TABLE>
<br>
<br>
<hr size=3 color=GRAY noshade>
<p style="page-break-before:always"></p>
<PAGE>
<br>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=right><img src="smlogo.jpg" alt="smlogo.jpg"></TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><FONT size=2 face="sans-serif">10% SPARQS due
          January 20, 2008</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><FONT size=2 face="sans-serif">Mandatorily
          Exchangeable for the Common Stock of</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><FONT size=2 face="sans-serif">Circuit City
          Stores, Inc.</FONT></B></TD>
  </TR>
  <TR>
    <TD><HR noshade size=1>
    </TD>
  </TR>
</TABLE>
<br>
<P align="right">
<B><FONT color="#000066" size=4 face="sans-serif">Hypothetical Call Price Calculations</FONT></B></P>
<P align="left">
<FONT size=2 face="sans-serif">The following tables set forth sample values based on calculations of the Call Price for hypothetical Call Dates as indicated based on the following hypothetical terms:</FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
  <TD align=left width=3%>&#8226;</TD>
	<TD align=left width=20%><FONT size=2 face="sans-serif">Original Issue Date:</FONT>	</TD>
	<TD  width=2%>&nbsp;	</TD>
	<TD align=left width=75%>
<FONT size=2 face="sans-serif">December 29, 2006</FONT>	</TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD align=left width=3%>&#8226;</TD>
	<TD align=left width=20%><FONT size=2 face="sans-serif">Interest Payment Dates:</FONT>	</TD>
	<TD  width=2%>&nbsp;	</TD>
	<TD align=left width=75%>
<FONT size=2 face="sans-serif">April 20, 2007, July 20, 2007, October 20, 2007
and the Maturity Date</FONT></TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD align=left width=3%>&#8226;</TD>
	<TD align=left width=20%><FONT size=2 face="sans-serif">Yield to Call:</FONT>	</TD>
	<TD  width=2%>&nbsp;	</TD>
	<TD align=left width=75%>
<FONT size=2 face="sans-serif">22% per annum (computed on the basis of a 360-day
year of twelve 30-day months)</FONT></TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD align=left width=3%>&#8226;</TD>
	<TD align=left width=20%><FONT size=2 face="sans-serif">Stated Principal Amount:</FONT>	</TD>
	<TD  width=2%>&nbsp;	</TD>
	<TD align=left width=75%>
<FONT size=2 face="sans-serif">&#36;24.00 per SPARQS</FONT></TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD align=left width=3%>&#8226;</TD>
	<TD align=left width=20%><FONT size=2 face="sans-serif">Interest Rate:</FONT>	</TD>
	<TD  width=2%>&nbsp;	</TD>
	<TD align=left width=75%>
<FONT size=2 face="sans-serif">10% per annum</FONT></TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD align=left width=3%>&#8226;</TD>
	<TD align=left width=20%><FONT size=2 face="sans-serif">Discount Factor:</FONT>	</TD>
	<TD  width=2%>&nbsp;	</TD>
	<TD align=left width=75%>
<FONT size=2 face="sans-serif">1 / 1.22</FONT><SUP><FONT size=2 face="sans-serif">x </FONT></SUP><FONT size=2 face="sans-serif">,
where x is the number of years from the Original Issue Date to and including
the</FONT><FONT size=2 face="sans-serif"> applicable payment date.</FONT> </TD>
</TR>
<TR valign="bottom">
  <TD align=left width=3%>&nbsp;</TD>
	<TD align=left width=20%>&nbsp;	</TD>
	<TD  width=2%>&nbsp;	</TD>
	<TD align=left width=75%>&nbsp;</TD>
</TR>
</TABLE>
<BR>
<P align="left">
<FONT size=2 face="sans-serif">The Call Price with respect to any Call Date is an amount of cash per SPARQS such that the sum of the present values of all cash flows on each SPARQS to and including the Call Date (</FONT><I><FONT size=2
face="sans-serif">i.e.</FONT></I><FONT size=2 face="sans-serif">, the Call Price and all of the interest payments and accrued interest on each SPARQS), discounted to the Original Issue Date at the applicable Discount Factor, equals the Stated
Principal Amount. The Discount Factor is based on the hypothetical Yield to call rate of 22% per annum and the number of years (or fraction of a year) from the Original Issue Date to and including the applicable payment date.</FONT></P>
<P align="left">
<FONT size=2 face="sans-serif">Each of the Call Price and total amount received calculations below are based upon the hypothetical terms set forth above and the sample Call Dates as indicated. The actual amount you will receive if the Issuer calls
the SPARQS will depend upon the actual terms of the SPARQS and the actual Call Date</FONT><I><FONT size=2 face="sans-serif">.</FONT></I></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
	<TD align=left width=50%>
<B><FONT size=2 face="sans-serif">Call on July 20, 2007 (First Call Date)</FONT></B>	</TD>
	<TD align=left width=50%>&nbsp;	</TD>
</TR>
<TR valign="bottom">
	<TD align=left width=50%>
<FONT size=2 face="sans-serif">Call Price received</FONT>	</TD>
	<TD align=left width=50%> <FONT size=2 face="sans-serif">&#36;</FONT><FONT size=2 face="sans-serif">25.4403</FONT>	</TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
	<TD align=left width=50%>
<FONT size=2 face="sans-serif">Total amount received over the term of the SPARQS</FONT>	</TD>
	<TD align=left width=50%><FONT size=2 face="sans-serif">&#36;</FONT><FONT size=2 face="sans-serif">26.7803</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left width=50%>
<B><FONT size=2 face="sans-serif">Call on August 29, 2007 (random interim Call date)</FONT></B>	</TD>
	<TD align=left width=50%>&nbsp;	</TD>
</TR>
<TR valign="bottom">
	<TD align=left width=50%>
<FONT size=2 face="sans-serif">Call Price received</FONT>	</TD>
	<TD align=left width=50%><FONT size=2 face="sans-serif">&#36;</FONT><FONT size=2 face="sans-serif">25.7345</FONT>	</TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
	<TD align=left width=50%>
<FONT size=2 face="sans-serif">Total amount received over the term of the SPARQS</FONT>	</TD>
	<TD align=left width=50%><FONT size=2 face="sans-serif">&#36;</FONT><FONT size=2 face="sans-serif">27.3345</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left width=50%>
<B><FONT size=2 face="sans-serif">Call on January 20, 2008 (Maturity Date)</FONT></B>	</TD>
	<TD align=left width=50%>&nbsp;	</TD>
</TR>
<TR valign="bottom">
	<TD align=left width=50%>
<FONT size=2 face="sans-serif">Call Price received</FONT>	</TD>
	<TD align=left width=50%><FONT size=2 face="sans-serif">&#36;</FONT><FONT size=2 face="sans-serif">26.8692</FONT>	</TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
	<TD align=left width=50%>
<FONT size=2 face="sans-serif">Total amount received over the term of the SPARQS</FONT>	</TD>
	<TD align=left width=50%><FONT size=2 face="sans-serif">&#36;</FONT><FONT size=2 face="sans-serif">29.4092</FONT></TD>
</TR>
</TABLE>
<BR>
<P align="left">
<FONT size=2 face="sans-serif">The table on the following page sets forth a more detailed sample calculation of the Call Price for a hypothetical Call Date of July 20, 2007 based upon the hypothetical terms set forth above.</FONT></P>
<P align="left">&nbsp;</P>
<TABLE border=0 cellspacing=0 cellpadding=0 width=100%>
  <TR valign="bottom">
    <TD colspan="2" align=left><hr width=100% size=2 noshade color="#000066"></TD>
  </TR>
  <TR valign="bottom">
    <TD width=50% align=left valign="top"><B><FONT color="#000066" size=1>page
          6 of 10 </FONT></B></TD>
    <TD align=right width=50%><B><FONT color="#000066" size=2 face="serif">MORGAN
          STANLEY</FONT></B> </TD>
  </TR>
</TABLE>
<br>
<br>
<hr size=3 color=GRAY noshade>
<p style="page-break-before:always"></p>
<PAGE>
<br>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=right><img src="smlogo.jpg" alt="smlogo.jpg"></TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><FONT size=2 face="sans-serif">10% SPARQS due
          January 20, 2008</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><FONT size=2 face="sans-serif">Mandatorily
          Exchangeable for the Common Stock of</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><FONT size=2 face="sans-serif">Circuit City
          Stores, Inc.</FONT></B></TD>
  </TR>
  <TR>
    <TD><HR noshade size=1>
    </TD>
  </TR>
</TABLE>
<br>
<P align="right">
<B><FONT color="#000066" size=4 face="sans-serif">Hypothetical Call Price Calculation on the First Call Date (continued)</FONT></B></P>
<P align="left">
<FONT size=2 face="sans-serif">The Call Price in the hypothetical example shown below is determined as follows:</FONT></P>
<UL>
<LI>
<FONT size=2 face="sans-serif">The known cash flows on the SPARQS (</FONT><I><FONT size=2 face="sans-serif">i.e.</FONT></I><FONT size=2 face="sans-serif">, the interest payments) are discounted to their present value on the Original Issue Date at
the applicable Discount Factor. The</FONT> <FONT size=2 face="sans-serif">sum of these present values equals the present value on the Original Issue Date of all of the interest payments payable on the SPARQS to and including the applicable
Call</FONT> <FONT size=2 face="sans-serif">Date.</FONT> <br>
<br>
<ul>
  <li><FONT size=2 face="sans-serif">For example, the present value of all of the interest payments for the hypothetical Call Date of July 20, 2007 is &#36;1.2330 (&#36;0.6960 + &#36;0.5370).</FONT><br>
    <br>
  </li>
</ul>
</LI>

<LI>
  <FONT size=2 face="sans-serif">Since the present value of all payments on the
  SPARQS to and including the Call Date (</FONT><I><FONT size=2 face="sans-serif">i.e.</FONT></I><FONT size=2 face="sans-serif">,
  the Call Price and all of the interest  payment on each SPARQS) must equal
  the</FONT> <FONT size=2 face="sans-serif">Stated Principal Amount, the Issuer
  can determine the present value of the applicable Call Price by subtracting
  the sum of the present values of the interest payments  from</FONT> <FONT size=2 face="sans-serif">the
  Stated Principal Amount.<br>
  <br>
  </FONT>
  <ul>
    <li><FONT size=2 face="sans-serif">For
      example, for the hypothetical Call Date of July 20, 2007, the present value
      of the Call Price is &#36;22.7670 (&#36;24.0000 - &#36;1.2330).</FONT><br>
      <br>
    </li>
  </ul>
</LI>

<li><FONT size=2 face="sans-serif">The Call Price is then derived by determining the amount that, when discounted to the Original Issue Date from the applicable Call Date at the applicable Discount Factor,</FONT> <FONT size=2 face="sans-serif">equals
  the present value of the Call Price.</FONT><br>
  <br>
  <br>
  <ul>
    <li><FONT size=2 face="sans-serif">For the hypothetical Call Date of July 20, 2007, the Call Price is therefore &#36;25.4403, which is the amount that if paid on July 20, 2007 has a present value on the Original</FONT> <FONT size=2
face="sans-serif">Issue Date of &#36;22.7670, based on the applicable Discount Factor.</FONT></li>
  </ul>
</li>
</UL>
<P align="left">
<I><FONT size=2 face="sans-serif">The Call Price calculated in the following table is based upon the hypothetical terms set forth above and the sample Call Date of July 20, 2007. The actual amount you will receive if the Issuer calls the SPARQS will
depend upon the actual terms of the SPARQS and the actual Call Date.</FONT></I></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
	<TD width=17% align=center nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<B><FONT size=2 face="sans-serif">Payment Date</FONT></B>	</TD>
	<TD  width=1% align="center" nowrap>&nbsp;	</TD>
	<TD width=8% align=center nowrap>
<B><FONT size=2 face="sans-serif">Stated<br>
</FONT></B><B><FONT size=2 face="sans-serif">Principal<br>
</FONT></B><B><FONT size=2 face="sans-serif">Amount</FONT></B> </TD>
	<TD width=1% align=center nowrap GUTTER>&nbsp;	</TD>
	<TD width=8% align=center nowrap>
<B><FONT size=2 face="sans-serif">Interest<br>
</FONT></B><B><FONT size=2 face="sans-serif">Payments<br>
</FONT></B><B><FONT size=2 face="sans-serif">Received</FONT></B> </TD>
	<TD  width=1% align="center" nowrap>&nbsp;	</TD>
	<TD width=8% align=center nowrap>
<B><FONT size=2 face="sans-serif">Accrued but<br>
Unpaid<br>
</FONT></B><B><FONT size=2 face="sans-serif">Interest<br>
</FONT></B><B><FONT size=2 face="sans-serif">Received on<br>
</FONT></B><B><FONT size=2 face="sans-serif">Call Date</FONT></B> </TD>
	<TD  width=1% align="center" nowrap>&nbsp;	</TD>
	<TD width=8% align=center nowrap>
<B><FONT size=2 face="sans-serif">Call Price<br>
</FONT></B><B><FONT size=2 face="sans-serif">Received</FONT></B><SUP><FONT size=2 face="sans-serif">1</FONT></SUP>	</TD>
	<TD  width=1% align="center" nowrap>&nbsp;	</TD>
	<TD width=8% align=center nowrap>
<B><FONT size=2 face="sans-serif">Total Cash<br>
</FONT></B><B><FONT size=2 face="sans-serif">Received<br>
</FONT></B><B><FONT size=2 face="sans-serif">on<br>
</FONT></B><B><FONT size=2 face="sans-serif">Payment<br>
</FONT></B><B><FONT size=2 face="sans-serif">Date</FONT></B> </TD>
	<TD  width=1% align="center" nowrap>&nbsp;	</TD>
	<TD width=8% align=center nowrap>
<B><FONT size=2 face="sans-serif">Days from<br>
</FONT></B><B><FONT size=2 face="sans-serif">Original<br>
</FONT></B><B><FONT size=2 face="sans-serif">Issue
Date</FONT></B><SUP><FONT size=2 face="sans-serif">2</FONT></SUP>	</TD>
	<TD  width=1% align="center" nowrap>&nbsp;	</TD>
	<TD width=8% align=center nowrap>
<B><FONT size=2 face="sans-serif">Years from<br>
</FONT></B><B><FONT size=2 face="sans-serif">Original<br>
</FONT></B><B><FONT size=2 face="sans-serif">Issue Date<br>
</FONT></B><B><FONT size=2 face="sans-serif">(Days</FONT></B><SUP><FONT size=2 face="sans-serif">2 </FONT></SUP><B><FONT size=2 face="sans-serif">/360)</FONT></B>	</TD>
	<TD  width=1% align="center" nowrap>&nbsp;	</TD>
	<TD width=8% align=center nowrap>
<B><FONT size=2 face="sans-serif">Discount<br>
</FONT></B><B><FONT size=2 face="sans-serif">Factor at<br>
</FONT></B>&nbsp;<B><FONT size=2 face="sans-serif">Yield to<br>
</FONT></B><B><FONT size=2 face="sans-serif">Call</FONT></B><SUP><FONT size=2 face="sans-serif">3</FONT></SUP>	</TD>
	<TD  width=1% align="center" nowrap>&nbsp;	</TD>
	<TD width=10% align=center nowrap>
<B><FONT size=2 face="sans-serif">Present Value at</FONT></B> <br>
<B><FONT size=2 face="sans-serif">Original Issue<br>
</FONT></B><B><FONT size=2 face="sans-serif">Date of Call<br>
</FONT></B><B><FONT size=2 face="sans-serif">Received on<br>
</FONT></B><B><FONT size=2 face="sans-serif">Payment Date at<br>
</FONT></B><B><FONT size=2 face="sans-serif">Yield
to Call</FONT></B> </TD>
</TR>
<TR>
	<TD width="17%">
<HR noshade size=1>	</TD>
	<TD width="1%">	</TD>
	<TD width="8%">
<HR noshade size=1>	</TD>
	<TD width="1%" GUTTER>
<HR noshade size=1>	</TD>
	<TD width="8%">
<HR noshade size=1>	</TD>
	<TD width="1%">	</TD>
	<TD width="8%">
<HR noshade size=1>	</TD>
	<TD width="1%">	</TD>
	<TD width="8%">
<HR noshade size=1>	</TD>
	<TD width="1%">	</TD>
	<TD width="8%">
<HR noshade size=1>	</TD>
	<TD width="1%">	</TD>
	<TD width="8%">
<HR noshade size=1>	</TD>
	<TD width="1%">	</TD>
	<TD width="8%">
<HR noshade size=1>	</TD>
	<TD width="1%">	</TD>
	<TD width="8%">
<HR noshade size=1>	</TD>
	<TD width="1%">	</TD>
	<TD width="10%">
<HR noshade size=1>	</TD>
</TR>
<TR valign="bottom">
	<TD align=left width=17%>
<FONT size=2 face="sans-serif">December 29, 2006</FONT>	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=right width=8%>
<FONT size=2 face="sans-serif">(&#36;24.00)</FONT>	</TD>
	<TD GUTTER align=left width=1%>&nbsp;</TD>
	<TD align=left width=8%>&nbsp;	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=left width=8%>&nbsp;	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=left width=8%>&nbsp;	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=left width=8%>&nbsp;	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=center width=8%>
<FONT size=2 face="sans-serif">0</FONT>	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=center width=8%>
<FONT size=2 face="sans-serif">.00000</FONT>	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=right width=8%>
<FONT size=2 face="sans-serif">100.000%</FONT>	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=left width=10%>&nbsp;	</TD>
</TR>
<TR valign="bottom">
	<TD align=left width=17%>
<FONT size=2 face="sans-serif">April 20, 2007</FONT>	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=left width=8%>&nbsp;	</TD>
	<TD GUTTER align=left width=1%>&nbsp;	</TD>
	<TD align=left width=8%>
 &nbsp;<font size=2 face="sans-serif">&#36;</font><FONT size=2 face="sans-serif">0.7400</FONT>	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=left width=8%>&nbsp;	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=left width=8%>&nbsp;	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=left width=8%>
 &nbsp;<font size=2 face="sans-serif">&#36;</font><FONT size=2 face="sans-serif">0.7400</FONT>	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=center width=8%>
<FONT size=2 face="sans-serif">111</FONT>	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=center width=8%>
<FONT size=2 face="sans-serif">.30833</FONT>	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=right width=8%>
<FONT size=2 face="sans-serif">94.053%</FONT>	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=center width=10%>
<FONT size=2 face="sans-serif">&#36;0.6960</FONT>	</TD>
</TR>
<TR valign="bottom">
	<TD align=left width=17%>
<FONT size=2 face="sans-serif">Call Date (July 20, 2007)</FONT>	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=left width=8%>&nbsp;	</TD>
	<TD GUTTER align=left width=1%>&nbsp;	</TD>
	<TD align=left width=8%>&nbsp;	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=left width=8%>
 &nbsp;<font size=2 face="sans-serif">&#36;</font><FONT size=2 face="sans-serif">0.6000</FONT>	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=left width=8%>&nbsp;	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=left width=8%>
 &nbsp;<font size=2 face="sans-serif">&#36;</font><FONT size=2 face="sans-serif">0.6000</FONT>	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=center width=8%>
<FONT size=2 face="sans-serif">201</FONT>	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=center width=8%>
<FONT size=2 face="sans-serif">.55833</FONT>	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=right width=8%>
<FONT size=2 face="sans-serif">89.492%</FONT>	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=center width=10%>
<FONT size=2 face="sans-serif">&#36;0.5370</FONT>	</TD>
</TR>
<TR valign="bottom">
	<TD align=left width=17%>
<FONT size=2 face="sans-serif">Call Date (July 20, 2007)</FONT>	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=left width=8%>&nbsp;	</TD>
	<TD GUTTER align=left width=1%>&nbsp;	</TD>
	<TD align=left width=8%>&nbsp;	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=left width=8%>&nbsp;	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=left width=8%>
 &nbsp;<FONT size=2 face="sans-serif">&#36;25.4403</FONT>	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=left width=8%>
 &nbsp;<font size=2 face="sans-serif">&#36;</font><FONT size=2 face="sans-serif">25.4403</FONT>	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=center width=8%>
<FONT size=2 face="sans-serif">201</FONT>	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=center width=8%>
<FONT size=2 face="sans-serif">.55833</FONT>	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=right width=8%>
<FONT size=2 face="sans-serif">89.492%</FONT>	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=center width=10%>
<FONT size=2 face="sans-serif">&#36;22.7670</FONT>	</TD>
</TR>
<TR valign="bottom">
	<TD colspan=7 align=left>
<B><FONT size=2 face="sans-serif">Total amount received on the Call Date: &#36;26.0403</FONT></B>			</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=left width=8%>&nbsp;	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=left width=8%>&nbsp;	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=left width=8%>&nbsp;	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=left width=8%>&nbsp;	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=right width=8%>
<B><FONT size=2 face="sans-serif">Total:</FONT></B>	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=center width=10%>
<B><FONT size=2 face="sans-serif">&#36;24.0000</FONT></B>	</TD>
</TR>
<TR valign="bottom">
	<TD colspan=9 align=left>
<B><FONT size=2 face="sans-serif">Total amount received over the term of the SPARQS: &#36;26.7803</FONT></B>			</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=left width=8%>&nbsp;	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=left width=8%>&nbsp;	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=left width=8%>&nbsp;	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=left width=8%>&nbsp;	</TD>
	<TD  width=1%>&nbsp;	</TD>
	<TD align=left width=10%>&nbsp;	</TD>
</TR>
</TABLE>
<BR>
<TABLE border=0 cellspacing=0 cellpadding=0>
<TR>
	<TD width="3%" valign=top nowrap>
<SUP><FONT size=2 face="sans-serif">1</FONT></SUP>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width=97%>
<FONT size=2 face="sans-serif">The Call Price of &#36;25.4403 is the dollar amount that has a present value of &#36;22.7670, which has been discounted to the Original Issue Date from the Call Date at the Yield to Call rate of 22% so that the sum of
the present values of all of the interest payments on the SPARQS and the present value of the Call Price is equal to the Stated Principal Amount of &#36;24.0000.</FONT>	</TD>
</TR><TR>
	<TD width="3%" valign=top nowrap>
<SUP><FONT size=2 face="sans-serif">2</FONT></SUP>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width=97%>
<FONT size=2 face="sans-serif">Based upon a 360-day year of twelve 30-day months.</FONT>	</TD>
</TR><TR>
	<TD width="3%" valign=top nowrap>
<SUP><FONT size=2 face="sans-serif">3</FONT></SUP>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width=97%>
<FONT size=2 face="sans-serif">Discount Factor = 1 / 1.22</FONT><SUP><FONT size=2 face="sans-serif">x </FONT></SUP><FONT size=2 face="sans-serif">, where </FONT><I><FONT size=2 face="sans-serif">x </FONT></I><FONT size=2 face="sans-serif">is years
from Original Issue Date to and including the applicable payment date</FONT>	</TD>
</TR></TABLE>
<P align="left">&nbsp;</P>
<TABLE border=0 cellspacing=0 cellpadding=0 width=100%>
  <TR valign="bottom">
    <TD colspan="2" align=left><hr width=100% size=2 noshade color="#000066"></TD>
  </TR>
  <TR valign="bottom">
    <TD width=50% align=left valign="top"><B><FONT color="#000066" size=1>page
          7 of 10 </FONT></B></TD>
    <TD align=right width=50%><B><FONT color="#000066" size=2 face="serif">MORGAN
          STANLEY</FONT></B> </TD>
  </TR>
</TABLE>
<br>
<br>
<hr size=3 color=GRAY noshade>
<p style="page-break-before:always"></p>
<PAGE>
<br>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=right><img src="smlogo.jpg" alt="smlogo.jpg"></TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><FONT size=2 face="sans-serif">10% SPARQS due
          January 20, 2008</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><FONT size=2 face="sans-serif">Mandatorily
          Exchangeable for the Common Stock of</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><FONT size=2 face="sans-serif">Circuit City
          Stores, Inc.</FONT></B></TD>
  </TR>
  <TR>
    <TD><HR noshade size=1>
    </TD>
  </TR>
</TABLE>
<br>
<P align="right">
<B><FONT color="#000066" size=4 face="sans-serif">Information about Circuit City Stores, Inc.</FONT></B></P>
<P align="left">
<FONT size=2 face="sans-serif">Circuit City Stores, Inc. is a specialty retailer of consumer electronics, home office products, entertainment software and related services. CC Stock is registered under the Exchange Act. Information provided to or
filed with the Commission by Circuit City Stores, Inc. pursuant to the Exchange Act can be located by reference to Commission file number 001-05767 through the Commission&#146;s website at http://www.sec.gov. In addition, information regarding
Circuit City Stores, Inc. may be obtained from other sources including, but not limited to, press releases, newspaper articles and other publicly disseminated documents. See the section called &#147;Underlying Company and Stock&#151;Public
Information&#148; in the prospectus supplement for SPARQS.</FONT></P>
<P align="left">
<B><FONT size=2 face="sans-serif">These preliminary terms relate only to the SPARQS offered hereby and do not relate to CC Stock or other securities of Circuit City Stores, Inc. The Issuer has derived all disclosures contained in these preliminary
terms regarding Circuit City Stores, Inc. from the publicly available documents described in the preceding paragraph. In connection with the offering of the SPARQS, neither the Issuer nor the Agent has participated in the preparation of such
documents or made any due diligence inquiry with respect to Circuit City Stores, Inc. Neither the Issuer nor the Agent makes any representation that such publicly available documents or any other publicly available information regarding Circuit City
Stores, Inc. is accurate or complete.</FONT></B></P>
<P align="left">
<B><FONT size=2 face="sans-serif">Neither the Issuer nor any of its affiliates makes any representation to you as to the performance of CC Stock.</FONT></B></P>
<P align="right">
<B><FONT color="#000066" size=4 face="sans-serif">Historical Information</FONT></B></P>
<P align="left">
<FONT size=2 face="sans-serif">The following graph presents the published high and low closing prices of CC Stock for 2003, 2004, 2005 and 2006 through November 20, 2006. The closing price of CC Stock on November 20, 2006 was &#36;23.55. The Issuer
obtained the closing prices and other information below from Bloomberg Financial Markets, without independent verification. You should not take the historical prices of CC Stock as an indication of future performance.</FONT></P>
<div align="center">
  <TABLE width="75%" border=0 cellpadding=0 cellspacing=0>
    <TR valign="bottom">
      <TD align=left width=49%>&nbsp;	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <B><FONT size=2 face="sans-serif">High</FONT></B>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <B><FONT size=2 face="sans-serif">Low</FONT></B>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <B><FONT size=2 face="sans-serif">Dividends</FONT></B>	</TD>
    </TR>
    <TR>
      <TD width="49%">	</TD>
      <TD>      </TD>
      <TD width="15%">
        <HR noshade size=1>      </TD>
      <TD>      </TD>
      <TD width="15%">
        <HR noshade size=1>      </TD>
      <TD>      </TD>
      <TD width="15%">
        <HR noshade size=1>      </TD>
    </TR>
    <TR valign="bottom">
      <TD align=left width=49%>
      <B><FONT size=2 face="sans-serif">(CUSIP 172737108)</FONT></B>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=left width=15%>&nbsp;	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=left width=15%>&nbsp;	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=left width=15%>&nbsp;	</TD>
    </TR>
    <TR valign="bottom">
      <TD align=left width=49%>
      <B><FONT size=2 face="sans-serif">2003</FONT></B>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=left width=15%>&nbsp;	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=left width=15%>&nbsp;	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=left width=15%>&nbsp;	</TD>
    </TR>
    <TR valign="bottom">
      <TD align=left width=49%>
      <FONT size=2 face="sans-serif">First Quarter</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">7.55</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">4.13</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">0.0175</FONT>	</TD>
    </TR>
    <TR valign="bottom">
      <TD align=left width=49%>
      <FONT size=2 face="sans-serif">Second Quarter</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">8.87</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">5.14</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">0.0175</FONT>	</TD>
    </TR>
    <TR valign="bottom">
      <TD align=left width=49%>
      <FONT size=2 face="sans-serif">Third Quarter</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">11.35</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">8.66</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">0.0175</FONT>	</TD>
    </TR>
    <TR valign="bottom">
      <TD align=left width=49%>
      <FONT size=2 face="sans-serif">Fourth Quarter</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">13.02</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">9.36</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">0.0175</FONT>	</TD>
    </TR>
    <TR valign="bottom">
      <TD align=left width=49%>
      <B><FONT size=2 face="sans-serif">2004</FONT></B>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=left width=15%>&nbsp;	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=left width=15%>&nbsp;	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=left width=15%>&nbsp;	</TD>
    </TR>
    <TR valign="bottom">
      <TD align=left width=49%>
      <FONT size=2 face="sans-serif">First Quarter</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">11.90</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">8.84</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">0.0175</FONT>	</TD>
    </TR>
    <TR valign="bottom">
      <TD align=left width=49%>
      <FONT size=2 face="sans-serif">Second Quarter</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">13.21</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">10.60</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">0.0175</FONT>	</TD>
    </TR>
    <TR valign="bottom">
      <TD align=left width=49%>
      <FONT size=2 face="sans-serif">Third Quarter</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">15.59</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">12.09</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">0.0175</FONT>	</TD>
    </TR>
    <TR valign="bottom">
      <TD align=left width=49%>
      <FONT size=2 face="sans-serif">Fourth Quarter</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">17.49</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">14.45</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">0.0175</FONT>	</TD>
    </TR>
    <TR valign="bottom">
      <TD align=left width=49%>
      <B><FONT size=2 face="sans-serif">2005</FONT></B>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=left width=15%>&nbsp;	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=left width=15%>&nbsp;	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=left width=15%>&nbsp;	</TD>
    </TR>
    <TR valign="bottom">
      <TD align=left width=49%>
      <FONT size=2 face="sans-serif">First Quarter</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">16.53</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">13.46</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">0.0175</FONT>	</TD>
    </TR>
    <TR valign="bottom">
      <TD align=left width=49%>
      <FONT size=2 face="sans-serif">Second Quarter</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">17.65</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">15.35</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">0.0175</FONT>	</TD>
    </TR>
    <TR valign="bottom">
      <TD align=left width=49%>
      <FONT size=2 face="sans-serif">Third Quarter</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">18.63</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">15.51</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">0.0175</FONT>	</TD>
    </TR>
    <TR valign="bottom">
      <TD align=left width=49%>
      <FONT size=2 face="sans-serif">Fourth Quarter</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">23.08</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">16.28</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">0.0175</FONT>	</TD>
    </TR>
    <TR valign="bottom">
      <TD align=left width=49%>
      <B><FONT size=2 face="sans-serif">2006</FONT></B>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=left width=15%>&nbsp;	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=left width=15%>&nbsp;	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=left width=15%>&nbsp;	</TD>
    </TR>
    <TR valign="bottom">
      <TD align=left width=49%>
      <FONT size=2 face="sans-serif">First Quarter</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">25.57</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">22.79</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">0.0175</FONT>	</TD>
    </TR>
    <TR valign="bottom">
      <TD align=left width=49%>
      <FONT size=2 face="sans-serif">Second Quarter</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">31.29</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">23.41</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">0.0175</FONT>	</TD>
    </TR>
    <TR valign="bottom">
      <TD align=left width=49%>
      <FONT size=2 face="sans-serif">Third Quarter</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">26.85</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">22.50</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">0.0175</FONT>	</TD>
    </TR>
    <TR valign="bottom">
      <TD align=left width=49%>
      <FONT size=2 face="sans-serif">Fourth Quarter</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=left width=15%>&nbsp;	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=left width=15%>&nbsp;	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=left width=15%>&nbsp;	</TD>
    </TR>
    <TR valign="bottom">
      <TD align=left width=49%>
      &nbsp; &nbsp;<FONT size=2 face="sans-serif">(through November 20, 2006)</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">28.82</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">23.55</FONT>	</TD>
      <TD  width=2%>&nbsp;	    </TD>
      <TD align=center width=15%>
      <FONT size=2 face="sans-serif">0.0400</FONT>	</TD>
    </TR>
  </TABLE>
  <BR>
</div>
<P align="left">
<FONT size=2 face="sans-serif">The Issuer makes no representation as to the amount of dividends, if any, that Circuit City Stores, Inc. will pay in the future. </FONT><B><FONT size=2 face="sans-serif">In any event, as an investor in the SPARQS, you
will not be entitled to receive dividends, if any, that may be payable on CC Stock.</FONT></B></P>
<P align="left">&nbsp;</P>
<TABLE border=0 cellspacing=0 cellpadding=0 width=100%>
  <TR valign="bottom">
    <TD colspan="2" align=left><hr width=100% size=2 noshade color="#000066"></TD>
  </TR>
  <TR valign="bottom">
    <TD width=50% align=left valign="top"><B><FONT color="#000066" size=1>page
          8 of 10 </FONT></B></TD>
    <TD align=right width=50%><B><FONT color="#000066" size=2 face="serif">MORGAN
          STANLEY</FONT></B> </TD>
  </TR>
</TABLE>
<br>
<br>
<hr size=3 color=GRAY noshade>
<p style="page-break-before:always"></p>
<PAGE>
<br>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=right><img src="smlogo.jpg" alt="smlogo.jpg"></TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><FONT size=2 face="sans-serif">10% SPARQS due
          January 20, 2008</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><FONT size=2 face="sans-serif">Mandatorily
          Exchangeable for the Common Stock of</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><FONT size=2 face="sans-serif">Circuit City
          Stores, Inc.</FONT></B></TD>
  </TR>
  <TR>
    <TD><HR noshade size=1>
    </TD>
  </TR>
</TABLE>
<br>
<P align="right">
<B><FONT color="#000066" size=4 face="sans-serif">Risk Factors</FONT></B></P>
<P align="left">
<I><FONT size=2 face="sans-serif">The SPARQS are financial instruments that are suitable only for investors who are capable of understanding the complexities and risks specific to the SPARQS. Accordingly, investors should consult their own financial
and legal advisors as to the risks entailed by an investment in the SPARQS and the suitability of such SPARQS in light of an investor&#146;s particular circumstances.</FONT></I></P>
<P align="left">
<I><FONT size=2 face="sans-serif">The following is a non-exhaustive list of certain key considerations for investors in the SPARQS. For a complete list of considerations and risk factors, please see the accompanying prospectus supplement for SPARQS
and the accompanying prospectus.</FONT></I></P>
<P align="left">
<B><FONT size=2 face="sans-serif">Structure Specific Risk Factors</FONT></B></P>
<TABLE border=0 cellspacing=0 cellpadding=0>
<TR>
	<TD width="3%" valign=top nowrap>
<LI></LI> 	</TD>
	<TD width=97%>
<B><FONT size=2 face="sans-serif">No guaranteed return of principal</FONT></B><FONT size=2 face="sans-serif">. If at maturity the closing price of CC Stock has declined from the closing price on the day the SPARQS were priced for initial sale to the
public, and the Issuer has not called the SPARQS, the payout at maturity will be less than the principal amount of the SPARQS.</FONT>	</TD>
</TR>
<TR><TD width="3%">&nbsp;</TD>
  <TD width="97%">&nbsp;</TD>
</TR><TR>
	<TD width="3%" valign=top nowrap>
<LI></LI> 	</TD>
	<TD width=97%>
<B><FONT size=2 face="sans-serif">The return on the SPARQS is limited by the Issuer&#146;s call right</FONT></B><FONT size=2 face="sans-serif">. The return you realize on the SPARQS is limited by the Issuer&#146;s call right. The Issuer may call the
SPARQS at any time beginning July 20, 2007, including at maturity, for the cash Call Price, which will be calculated based on the Call Date. The Call Price will be an amount of cash per SPARQS that, together with all of the interest paid on the
SPARQS to and including the Call Date, gives you a yield to call of 20-24% per annum on the Stated Principal Amount of each SPARQS from and including the date of issuance to but excluding the Call Date. </FONT><B><FONT size=2 face="sans-serif">You
should not expect to obtain a total yield (including interest payments) of more than 20-24% per annum on the Stated Principal Amount of the SPARQS to the Call Date</FONT></B><FONT size=2 face="sans-serif">.</FONT>	</TD>
</TR>
<TR><TD width="3%">&nbsp;</TD>
  <TD width="97%">&nbsp;</TD>
</TR><TR>
	<TD width="3%" valign=top nowrap>
<LI></LI> 	</TD>
	<TD width=97%>
<B><FONT size=2 face="sans-serif">Market price influenced by many unpredictable
factors</FONT></B><FONT size=2 face="sans-serif">. Several factors will influence
the value of the SPARQS in the secondary market. It is expected that generally
the  trading price of CC Stock on any day will affect the value of the SPARQS
more than any other single factor. However, because of the Issuer&#146;s call
right, the SPARQS may trade differently from CC Stock.</FONT><FONT size=2 face="sans-serif"> Other
factors that may influence the value of the SPARQS include: the volatility of
CC Stock, geopolitical conditions and economic, financial, political, regulatory
or judicial events, interest and yield rates, time remaining until the Issuer
can call the SPARQS and until the SPARQS mature, the dividend rate on CC Stock,
the Issuer&#146;s creditworthiness and the occurrence of certain events affecting
Circuit City Stores, Inc. that may or may not require an adjustment to the exchange
ratio.</FONT>	</TD>
</TR>
<TR><TD width="3%">&nbsp;</TD>
  <TD width="97%">&nbsp;</TD>
</TR><TR>
	<TD width="3%" valign=top nowrap>
<LI></LI> 	</TD>
	<TD width=97%>
<B><FONT size=2 face="sans-serif">Maturity date of the SPARQS may be accelerated. </FONT></B><FONT size=2 face="sans-serif">The maturity of the SPARQS will be accelerated if (i) the closing price of</FONT>	<FONT size=2 face="sans-serif">CC
<FONT size=2 face="sans-serif">Stock on any two consecutive trading days is less
than &#36;2.00 or (ii) there is an event of default with respect to the SPARQS.</FONT> </FONT></TD>
</TR>
<TR><TD width="3%">&nbsp;</TD>
  <TD width="97%">&nbsp;</TD>
</TR><TR>
<TD width="3%">&nbsp;</TD>	<TD width=97%>
<FONT size=2 face="sans-serif">The amount payable to you if the maturity of the SPARQS is accelerated will differ depending on the reason for the acceleration and may be substantially less than the principal amount of the SPARQS.</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="3%" valign=top nowrap>
<LI></LI> 	</TD>
	<TD width=97%>
<B><FONT size=2 face="sans-serif">No shareholder rights. </FONT></B><FONT size=2 face="sans-serif">Investing in SPARQS is not equivalent to investing in CC Stock. As an investor in the SPARQS, you will not have voting rights or rights to receive
dividends or other distributions or any other rights with respect to CC Stock.</FONT>	</TD>
</TR>
<TR><TD width="3%">&nbsp;</TD>
  <TD width="97%">&nbsp;</TD>
</TR><TR>
	<TD width="3%" valign=top nowrap>
<LI></LI> 	</TD>
	<TD width=97%>
<B><FONT size=2 face="sans-serif">The SPARQS may become exchangeable into the common stock of companies other than Circuit City Stores, Inc.</FONT></B>	</TD>
</TR><TR>
<TD width="3%">&nbsp;</TD>	<TD width=97%>
<FONT size=2 face="sans-serif">Following certain corporate events relating to CC Stock, you will receive at maturity either the common stock of three companies in the same industry group as Circuit City Stores, Inc. in lieu of, or in addition to, CC
Stock or the common stock of a successor corporation to Circuit City Stores, Inc. The occurrence of such corporate events and the consequent adjustments may materially and adversely affect the market price of the SPARQS.</FONT>	</TD>
</TR>
<TR><TD width="3%">&nbsp;</TD>
  <TD width="97%">&nbsp;</TD>
</TR><TR>
	<TD width="3%" valign=top nowrap>
<LI></LI> 	</TD>
	<TD width=97%>
<B><FONT size=2 face="sans-serif">Antidilution adjustments. </FONT></B><FONT size=2 face="sans-serif">Although the calculation agent will adjust the amount payable at maturity for certain corporate events affecting CC Stock, other corporate events
may occur (such as partial tender or exchange offers) for which the calculation agent is not required to make any adjustments. If an event occurs that does not require the calculation agent to adjust the amount of</FONT>	<FONT size=2 face="sans-serif">CC
<FONT size=2 face="sans-serif">Stock payable at maturity, the market price of
the SPARQS may be materially and adversely affected.</FONT> </FONT></TD>
</TR>
<TR><TD width="3%">&nbsp;</TD>
  <TD width="97%">&nbsp;</TD>
</TR><TR>
	<TD width="3%" valign=top nowrap>
<LI></LI> 	</TD>
	<TD width=97%>
<B><FONT size=2 face="sans-serif">The inclusion of commissions and projected profit from hedging in the original issue price is likely to adversely affect secondary market prices. </FONT></B><FONT size=2 face="sans-serif">Assuming no change in
market conditions or any other relevant factors, the price, if any, at which MS &amp; Co. is willing to purchase SPARQS 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 SPARQS, as well as the projected profit included in the cost of hedging the Issuer&#146;s obligations under the SPARQS.</FONT>	</TD>
</TR>
<TR><TD width="3%">&nbsp;</TD>
  <TD width="97%">&nbsp;</TD>
</TR><TR>
	<TD width="3%" valign=top nowrap>
<LI></LI> 	</TD>
	<TD width=97%>
<B><FONT size=2 face="sans-serif">The U.S. federal income tax consequences of an investment in the SPARQS are uncertain. There is no direct legal authority as to the proper tax treatment of the SPARQS, and
the Issuer&#146;s counsel has not rendered an opinion as to their proper characterization for U.S. federal income tax purposes.</FONT>	</TD>
</TR>
<TR><TD width="3%">&nbsp;</TD>
  <TD width="97%">&nbsp;</TD>
</TR><TR>
<TD width="3%">&nbsp;</TD>
<TD width=97%>
<FONT size=2 face="Arial, Helvetica, sans-serif">Please read the discussion under &#147;Fact Sheet &#8211; General
Information &#8211;
Tax Consideration&#148; in these preliminary terms and the
discussion under &#147;United States Federal Taxation&#148; in the accompanying
prospectus supplement for SPARQS (together the &#147;Tax Disclosure Sections&#148;)
 concerning the U.S. federal income tax consequences of investing in the SPARQS.
If the Internal Revenue Service (the &#147;IRS&#148;) were successful in asserting
an alternative characterization for the SPARQS, the timing and character  of</FONT>	</TD>
</TR></TABLE>
<P align="left">&nbsp;</P>
<TABLE border=0 cellspacing=0 cellpadding=0 width=100%>
  <TR valign="bottom">
    <TD colspan="2" align=left><hr width=100% size=2 noshade color="#000066"></TD>
  </TR>
  <TR valign="bottom">
    <TD width=50% align=left valign="top"><B><FONT color="#000066" size=1>page
          9 of 10 </FONT></B></TD>
    <TD align=right width=50%><B><FONT color="#000066" size=2 face="serif">MORGAN
          STANLEY</FONT></B> </TD>
  </TR>
</TABLE>
<br>
<br>
<hr size=3 color=GRAY noshade>
<p style="page-break-before:always"></p>
<PAGE>
<br>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=right><img src="smlogo.jpg" alt="smlogo.jpg"></TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><FONT size=2 face="sans-serif">10% SPARQS due
          January 20, 2008</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><FONT size=2 face="sans-serif">Mandatorily
          Exchangeable for the Common Stock of</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=right width=100%><B><FONT size=2 face="sans-serif">Circuit City
          Stores, Inc.</FONT></B></TD>
  </TR>
  <TR>
    <TD><HR noshade size=1>
    </TD>
  </TR>
</TABLE>
<br>
<blockquote>
  <p align="left">
    <FONT size=2 face="sans-serif">income on the SPARQS might differ from the tax treatment described in the Tax Disclosure Sections. The Issuer does not plan to request a ruling from the IRS regarding the tax treatment of the SPARQS, and the IRS or a
    court may not agree with the tax treatment described in these preliminary terms and the prospectus supplement for SPARQS.</FONT></p>
</blockquote>
<P align="left">
<B><FONT size=2 face="sans-serif">Other Risk Factors</FONT></B></P>
<UL>
<LI>
<B><FONT size=2 face="sans-serif">Secondary trading may be limited. </FONT></B><FONT size=2 face="sans-serif">There may be little or no secondary market for the SPARQS. The Issuer will apply to</FONT> <FONT size=2 face="sans-serif">list the SPARQS
on the American Stock Exchange or AMEX under the symbol &#147;CKK.&#148; For a security to be listed on the</FONT> <FONT size=2 face="sans-serif">AMEX, the AMEX requires, among other things, that there be 1 million units and 400 holders of such
security. It is not</FONT> <FONT size=2 face="sans-serif">possible to predict whether the SPARQS will meet the requirements for listing or trade in the secondary market and we do not</FONT> <FONT size=2 face="sans-serif">expect to announce whether
or not the SPARQS will meet those requirements prior to the pricing of the SPARQS. In</FONT> <FONT size=2 face="sans-serif">addition, the SPARQS could be delisted under certain circumstances, such as the delisting of the underlying stock.
Because</FONT> <FONT size=2 face="sans-serif">it is not possible to predict whether the market for the SPARQS will be liquid or illiquid, you should be willing to hold your</FONT> <FONT size=2 face="sans-serif">SPARQS to maturity.</FONT><br>
<br>
</LI>
<LI>
<B><FONT size=2 face="sans-serif">No affiliation with Circuit City Stores, Inc. </FONT></B><FONT size=2 face="sans-serif">Circuit City Stores, Inc. is not an affiliate of ours, is not involved with this offering</FONT> <FONT size=2
face="sans-serif">in any way, and has no obligation to consider your interests in taking any corporate actions that might affect the value of the</FONT> <FONT size=2 face="sans-serif">SPARQS. The Issuer has not made any due diligence inquiry with
respect to Circuit City Stores, Inc. in connection with this</FONT> <FONT size=2 face="sans-serif">offering.</FONT><br>
<br>
</LI>
<LI>
<B><FONT size=2 face="sans-serif">Potential adverse economic interest of the
calculation agent. </FONT></B><FONT size=2 face="sans-serif">The economic interest
of the calculation agent and other</FONT> <FONT size=2 face="sans-serif">affiliates
of  ours that will carry out hedging activities related to the SPARQS or that
trade CC Stock on a regular basis are</FONT> <FONT size=2 face="sans-serif">potentially
adverse to your interests as an investor in the SPARQS. The hedging or trading
 activities of the Issuer&#146;s affiliates</FONT> <FONT size=2 face="sans-serif">on
 or prior to the pricing date and on the valuation dates could adversely affect
 the price of CC Stock on the pricing date and</FONT> <FONT size=2 face="sans-serif">at
  maturity and, as a result, could decrease the value of the payment you receive
 on the SPARQS at maturity. Any of these</FONT> <FONT size=2 face="sans-serif">hedging
 or trading activities on or prior to the day the Issuer prices the SPARQS for
  initial sale to the public could potentially</FONT> <FONT size=2 face="sans-serif">affect
  the price of CC Stock and, accordingly, potentially increase the issue price
  of the SPARQS and, therefore, the price at</FONT> <FONT size=2
face="sans-serif">which CC Stock must close before you would receive at maturity
  an amount of CC Stock worth as much as or more than the</FONT> <FONT size=2 face="sans-serif">principal
  amount of the SPARQS. Additionally, such hedging or trading  activities during
  the term of the SPARQS could</FONT> <FONT size=2 face="sans-serif">adversely
  affect the price of CC Stock at maturity and, accordingly, if the Issuer has
  not called the SPARQS, the value of CC</FONT> <FONT size=2 face="sans-serif">Stock
  or in certain circumstances cash, you will receive at maturity, including upon
  an acceleration event.</FONT><br>
  <br>
<LI>
<B><FONT size=2 face="sans-serif">Morgan Stanley may engage in business with or involving Circuit City Stores, Inc. without regard to your interests.</FONT></B><BR>
<FONT size=2 face="sans-serif">The Issuer or its affiliates may presently or from time to time engage in business with Circuit City Stores, Inc. without regard</FONT><FONT size=2 face="sans-serif">to your interests, and thus may acquire non-public
information about Circuit City Stores, Inc. Neither the Issuer nor any of its</FONT><FONT size=2 face="sans-serif">affiliates undertakes to disclose any such information to you. In addition, the Issuer or its affiliates from time to time
have</FONT><FONT size=2 face="sans-serif">published and in the future may publish research reports with respect to Circuit City Stores, Inc., which may or may not</FONT><FONT size=2 face="sans-serif">recommend that investors buy or hold CC
Stock.</FONT></UL>
<P align="left">&nbsp;</P>
<TABLE border=0 cellspacing=0 cellpadding=0 width=100%>
  <TR valign="bottom">
    <TD colspan="2" align=left><hr width=100% size=2 noshade color="#000066"></TD>
  </TR>
  <TR valign="bottom">
    <TD width=50% align=left valign="top"><B><FONT color="#000066" size=1>page
          10 of 10 </FONT></B></TD>
    <TD align=right width=50%><B><FONT color="#000066" size=2 face="serif">MORGAN
          STANLEY</FONT></B> </TD>
  </TR>
</TABLE>
<HR noshade align="center" width="100%" size=2>

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