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| Preliminary Terms No. 150 |
| Registration Statement No. 333-131266 |
| Dated November 22, 2006 |
| Rule 433 |
8.50% to 9.50% HITSSM Due January 20, 2008
(High Income Trigger SecuritiesSM)
ISSUED BY MORGAN STANLEY
BASED ON THE COMMON STOCK OF
ARCHER-DANIELS-MIDLAND COMPANY
The issuer has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents the issuer has filed with the SEC for more complete information about the issuer and this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, the issuer, any underwriter or any dealer participating in the offering will arrange to send you the prospectus if you request it by calling toll-free 1-800-584-6837.
You may access these documents on the SEC web site at www.sec.gov as follows:
Prospectus
Supplement for HITS dated March 30, 2006
Prospectus
dated January 25, 2006
| MORGAN STANLEY | |
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| 8.50% to 9.50% HITS due January 20, 2008 |
| Based on the Common Stock of |
| Archer-Daniels-Midland Company |
| Overview |
High Income Trigger Securities
HITS offer the opportunity to receive a periodic, above-market, fixed rate coupon in exchange for downside exposure to the common stock of an underlying company with little opportunity to participate in any upside. They are for investors who want to receive above-market current income and who are not concerned about principal protection.
How HITS work
HITS pay a periodic, above-market, fixed rate coupon. At maturity, HITS will pay either the principal amount in cash, or, if the price of the common stock of the underlying company has decreased to or below a specified trigger price during the term of the HITS, common stock of the underlying company at a specified exchange ratio. HITS are not principal protected and offer little potential for appreciation. The value of any stock delivered at maturity per HITS may be less than the principal amount of the HITS, and may be zero. Unless the price of the common stock has decreased to or below the specified trigger price during the term of the HITS and subsequently recovered to a level above the price of the common stock at the issue date of the HITS, investors will not receive the benefit of any increase in the value of the common stock over the term of the HITS.
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| 8.50% to 9.50% HITS due January 20, 2008 |
| Based on the Common Stock of |
| Archer-Daniels-Midland Company |
| Fact Sheet |
The HITS offered are senior unsecured obligations of Morgan Stanley, will pay a coupon of 8.50% to 9.50% per year and will have the terms described in the prospectus supplement for HITS and the prospectus, as supplemented or modified by these preliminary terms. At maturity the HITS will pay either (i) an amount of cash equal to the principal amount of the HITS, or (ii) a number of shares of common stock of Archer-Daniels-Midland Company, if the trading price of the common stock of Archer-Daniels-Midland Company decreases to or below the Trigger Price over the term of the HITS. The HITS do not guarantee any return of principal at maturity.
Expected Key Dates |
| Expected Pricing Date: December , 2006 |
Expected Issue Date: December , 2006 (5 trading days after the Pricing Date) |
Maturity Date: January 20, 2008 |
Key Terms |
| Issuer: Morgan Stanley | Underlying Stock: Archer-Daniels-Midland Company common stock (the “ADM Stock”) |
Initial Underlying Stock Price: ADM Stock closing price on the Pricing Date |
Issue Price: |
$10 per HITS The HITS will be issued at $10 per HITS and the agent’s commissions will be $0.20 per HITS; provided that the price to public and the agent’s commissions for any single transaction to purchase between $1,000,000 to $2,999,999 principal amount of HITS will be $9.9625 per HITS and $0.1625 per HITS, respectively; for any single transaction to purchase between $3,000,000 to $4,999,999 principal amount of HITS will be $9.9438 per HITS and $0.14375 per HITS, respectively; and for any single transaction to purchase $5,000,000 or more principal amount of HITS will be $9.9250 per HITS and $0.125 per HITS, 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 HITS distributed by such dealers. |
| Stated Principal Amount (Par): | $10 per HITS |
Coupon: |
8.50%-9.50% per annum, payable quarterly beginning April 20, 2007. The actual coupon rate will be determined on the Pricing Date. |
Payment at Maturity: |
If the Underlying Stock has not declined to or below the Trigger Price at any time up to and including the Determination Date, the Stated Principal Amount of $10; otherwise a number of shares of the Underlying Stock equal to the Exchange Ratio |
Exchange Ratio: |
The Stated Principal Amount divided by the Initial Underlying Stock Price, subject to adjustments for corporate events |
| Trigger Price: | $ (20% below the Initial Underlying Stock Price) |
Determination Date: |
January 17, 2008 (2 trading days before the Maturity Date), subject to postponement in the event of certain market disruption events |
General Information |
Listing: |
Application will be made to list the HITS on the American Stock Exchange under the ticker symbol “AND”, subject to meeting the listing requirements. We do not expect to announce whether the HITS will meet such requirements prior to the pricing of the HITS. If accepted for listing, the HITS will begin trading the day after the Pricing Date. |
CUSIP: |
61748A189 |
Minimum Ticketing Size: |
100 HITS |
Tax Consideration: |
The U.S. federal income tax consequences of an investment in the HITS are uncertain. There is no direct legal authority as to the proper tax treatment of the HITS, and the Issuer’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 HITS and subject to the discussion in the accompanying prospectus supplement for HITS under “United States Federal Taxation,” you agree with the Issuer to treat a HITS as a unit consisting of (i) an option granted by you to the Issuer, to enter into, upon the occurrence of certain events, a forward contract pursuant to which you agree to purchase ADM Stock from the Issuer at maturity and (ii) a deposit with the Issuer of a fixed amount of cash to secure your obligation under the forward contract. Assuming the characterization of the HITS as set forth above is respected, a portion of the coupon on the HITS will be treated as the Yield on the Deposit, and the remainder will be attributable to the Option Premium, as described in the section of the accompanying prospectus supplement for HITS called “United States Federal Taxation—Tax Treatment of the HITS.” 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 HITS. Please read the discussion under “Risk Factors — Structure Specific Risk Factors” in these preliminary |
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terms and the discussion under “United States Federal Taxation” in the accompanying prospectus supplement for HITS concerning the U.S. federal income tax consequences of investing in the HITS. 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 HITS, as well as any tax consequences arising under the laws of any state, local or foreign taxing jurisdiction. |
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Trustee: |
The Bank of New York (as successor Trustee to JPMorgan Chase Bank, N.A.) |
Calculation Agent: |
Morgan Stanley & Co. Incorporated (“MS & Co.”) |
Contact: |
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) |
This offering summary represents a summary of the terms and conditions of the HITS. The Issuer encourages you to read the accompanying prospectus supplement for HITS and prospectus related to this offering.
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Key Benefits / Key Risks /
Key Investment Rationale
| Key Benefits | Key Investment Rationale | |||
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| • | 8.50%-9.50% interest, which is higher than the current dividend yield of 1.18% on ADM Stock. | You may be interested in the HITS if you are: | ||
| • | An income-oriented strategy linked to ADM Stock. | • | A current holder of ADM Stock who, consistent with your investment objectives, elects to switch into a security that provides a 8.50%-9.50% yield in lieu of appreciation in ADM Stock. | |
| • | Not concerned about principal risk. | |||
| Key Risks | Please carefully review all the “Risk Factors” on page 8 | |||
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| • | No guaranteed return of principal. | |||
| • | The HITS will not provide investors with any appreciation in ADM Stock unless ADM Stock drops below the Trigger Price and then recovers to a level above the Initial Underlying Stock Price on the Determination Date. | |||
| • | Secondary trading may be limited, and the inclusion of commissions and projected profit from hedging in the original issue price is likely to adversely affect secondary market prices. | |||
| • | If the HITS are accelerated, you may receive an amount worth substantially less than the principal amount of the HITS. | |||
| • | Archer-Daniels-Midland Company is not involved in this offering in anyway. Neither the Issuer nor the underwriter has made any due diligence inquiry in connection with this offering. | |||
| • | The antidilution adjustments the Calculation Agent is required to make do not cover every corporate event that could affect ADM Stock. | |||
| • | Credit Risk to Morgan Stanley whose credit rating is currently Aa3/A+. | |||
| • | The U.S. federal income tax consequences of an investment in the HITS are uncertain. | |||
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Hypothetical Payments on the HITS
The following examples illustrate the payment at maturity on the HITS for a range of hypothetical closing prices for ADM Stock on a hypothetical Determination Date, depending on whether an intraday trading price during the term of the HITS has or has not decreased to or below the Trigger Price.
The hypothetical examples are based on the following hypothetical values:
| • | Stated Principal Amount: | $10 |
| • | Initial Share Price: | $33 (the hypothetical closing price of one share of ADM Stock on the Pricing Date) |
| • | Exchange Ratio: | 0.303 (the Stated Principal Amount of $10 divided by the hypothetical Initial Share Price) |
| • | Trigger Price: | $26.40 (80% of the Initial Share Price) |
| • | Annual Coupon: | 9% |
Table 1: This table represents the hypothetical payment and the total payment over the term of the HITS (assuming a one-year term) on a $10 investment in the HITS if the trading price of ADM Stock has not decreased to or below the hypothetical Trigger Price of $26.40 at any time on any trading day from and including the Pricing Date to and including the Determination Date. Consequently, the payment at maturity in each of these examples would be made in cash.
| Hypothetical ADM Stock closing | Value of cash delivery amount | Total quarterly coupon | Value of total payment per | |||
| price on Determination Date | at maturity per HITS | payments per HITS | HITS | |||
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| $27.000 | $10.000 | $0.900 | $10.900 | |||
| $30.000 | $10.000 | $0.900 | $10.900 | |||
| $33.000 | $10.000 | $0.900 | $10.900 | |||
| $36.000 | $10.000 | $0.900 | $10.900 | |||
| $39.000 | $10.000 | $0.900 | $10.900 | |||
| $42.000 | $10.000 | $0.900 | $10.900 | |||
| $45.000 | $10.000 | $0.900 | $10.900 | |||
| $48.000 | $10.000 | $0.900 | $10.900 |
TABLE 2: This table represents the hypothetical payment at maturity and the total payment over the term of the HITS (assuming a one-year term) on a $10 investment in the HITS if the trading price of ADM Stock has decreased to or below the hypothetical Trigger Price of $26.40 at any time on any trading day from and including the Pricing Date to and including the Determination Date. Consequently, the payment at maturity in each of these examples would be made by delivery of shares of ADM Stock.
| Hypothetical ADM Stock closing | Value of shares of ADM Stock | Total quarterly coupon | Value of total payment per | |||
| price on Determination Date | delivered at maturity per HITS | payments per HITS | HITS | |||
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| $0.000 | $0.000 | $0.900 | $0.900 | |||
| $18.000 | $5.454 | $0.900 | $6.354 | |||
| $21.000 | $6.363 | $0.900 | $7.263 | |||
| $24.000 | $7.272 | $0.900 | $8.172 | |||
| $27.000 | $8.181 | $0.900 | $9.081 | |||
| $30.000 | $9.090 | $0.900 | $9.990 | |||
| $33.000 | $9.999 | $0.900 | $10.899 | |||
| $36.000 | $10.908 | $0.900 | $11.808 | |||
| $39.000 | $11.817 | $0.900 | $12.717 |
Because the trading price of ADM Stock may be subject to significant fluctuation over the term of the HITS, it is not possible to present a chart or table illustrating the complete range of possible payouts at maturity. The examples of the hypothetical payout calculations above are intended to illustrate how the amount payable to you at maturity will depend both on (a) whether the price of ADM Stock falls to or below the Trigger Price from and including the Pricing Date to and including the Determination Date and (b) the closing price of ADM Stock on the Determination Date.
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Information about Archer-Daniels-Midland Company
Archer-Daniels-Midland Company is principally engaged in procuring, transporting, storing, processing, and merchandising agricultural commodities and products. ADM Stock is registered under the Exchange Act. Information provided to or filed with the Commission by Archer-Daniels-Midland Company pursuant to the Exchange Act can be located by reference to Commission file number 001-00044 through the Commission’s website at http://www.sec.gov. In addition, information regarding Archer-Daniels-Midland Company may be obtained from other sources including, but not limited to, press releases, newspaper articles and other publicly disseminated documents. See the section called “Underlying Company and Stock—Public Information” in the prospectus supplement for HITS.
These preliminary terms relate only to the HITS offered hereby and do not relate to ADM Stock or other securities of Archer-Daniels-Midland Company. The Issuer has derived all disclosures contained in these preliminary terms regarding Archer-Daniels-Midland Company from the publicly available documents described in the preceding paragraph. In connection with the offering of the HITS, neither the Issuer nor the Agent has participated in the preparation of such documents or made any due diligence inquiry with respect to Archer-Daniels-Midland Company. Neither the Issuer nor the Agent makes any representation that such publicly available documents or any other publicly available information regarding Archer-Daniels-Midland Company is accurate or complete.
Neither Issuer nor any of its affiliates makes any representation to you as to the performance of ADM Stock.
Historical Information
Historical Information. The following table sets forth the published high and low closing prices of ADM Stock for 2003, 2004, 2005 and 2006 through November 20, 2006. The closing price of ADM Stock on November 20, 2006 was $33.50. 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 ADM Stock as an indication of future performance.
| High | Low | Dividends | ||||
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| (CUSIP 039483102) | ||||||
| 2003 | ||||||
| First Quarter | 12.76 | 10.54 | 0.060 | |||
| Second Quarter | 13.12 | 10.78 | 0.060 | |||
| Third Quarter | 14.06 | 12.08 | 0.060 | |||
| Fourth Quarter | 15.22 | 13.31 | 0.060 | |||
| 2004 | ||||||
| First Quarter | 17.59 | 14.95 | 0.075 | |||
| Second Quarter | 17.56 | 16.21 | 0.075 | |||
| Third Quarter | 16.98 | 15.43 | 0.075 | |||
| Fourth Quarter | 22.36 | 16.80 | 0.075 | |||
| 2005 | ||||||
| First Quarter | 25.32 | 21.35 | 0.085 | |||
| Second Quarter | 24.97 | 17.99 | 0.085 | |||
| Third Quarter | 24.66 | 20.56 | 0.085 | |||
| Fourth Quarter | 25.20 | 23.25 | 0.085 | |||
| 2006 | ||||||
| First Quarter | 35.26 | 24.38 | 0.100 | |||
| Second Quarter | 45.25 | 35.21 | 0.100 | |||
| Third Quarter | 44.00 | 37.17 | 0.100 | |||
| Fourth Quarter (through | ||||||
| November 20, 2006) | 39.87 | 33.50 | - |
The Issuer makes no representation as to the amount of dividends, if any, that Archer-Daniels-Midland Company will pay in the future. In any event, as an investor in the HITS, you will not be entitled to receive dividends, if any, that may be payable on ADM Stock.
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Risk Factors
The HITS are financial instruments that are suitable only for investors who are capable of understanding the complexities and risks specific to the HITS. Accordingly, investors should consult their own financial and legal advisors as to the risks entailed by an investment in the HITS and the suitability of such HITS in light of an investor’s particular circumstances.
The following is a non-exhaustive list of certain key risk factors for investors in the HITS. For a complete list of risk factors, please see the accompanying prospectus supplement for HITS and the accompanying prospectus.
Structure Specific Risk Factors
| • | No guaranteed return of principal. The payment to investors at maturity will either be (i) cash equal to the principal amount of each HITS or (ii) a number of shares of ADM Stock, if the trading price of ADM Stock decreases to or below the Trigger Price over the term of the HITS. If investors receive shares of ADM Stock at maturity in exchange for each HITS, the value of those shares may be less than the principal amount of each HITS and could be zero. |
| • | Except in certain circumstances, investors will not participate in any appreciation in the value of ADM Stock. Generally, investors will not participate in any appreciation in the price of ADM Stock, and the return on the HITS will be limited to the interest payable on the HITS. |
| • | Market price influenced by many unpredictable factors. Several factors will influence the value of the HITS in the secondary market. Although the Issuer expects that generally the trading price of ADM Stock on any day will affect the value of the HITS more than any other single factor, other factors that may influence the value of the HITS include: whether the trading price of ADM Stock has decreased to or below the Trigger Price at any time on any trading day, the volatility, the dividend rate on ADM Stock,geopolitical conditions and economic, financial, political, regulatory or judicial events, interest and yield rates in the market, thetime remaining to the maturity of the HITS, the Issuer’s creditworthiness and the occurrence of certain events affecting ADM Stockthat may or may not require an adjustment to the exchange ratio. |
| • | Market price influenced by inclusion of commissions and projected profit from hedging activities. The inclusion of commissions and projected profit from hedging in the original issue price is likely to adversely affect secondary market prices. Assuming no change in market conditions or any other relevant factors, the price, if any, at which MS & Co. is willing to purchaseHITS in secondary market transactions will likely be lower than the original issue price, since the original issue price included, andsecondary market prices are likely to exclude, commissions paid with respect to the HITS, as well as the projected profit includedin the cost of hedging the Issuer’s obligations under the HITS. |
| • | Maturity date of the HITS may be accelerated. The maturity of the HITS will be accelerated if (i) the closing price of ADM Stock on any two consecutive trading days is less than $2.00 or (ii) there is an event of default with respect to the HITS. The amount payable to the investor will differ depending on the reason for the acceleration and may be substantially less than the principal amount of the HITS. |
| • | No shareholder rights. Investing in the HITS is not equivalent to investing in ADM Stock. Investors in the HITS will not have voting rights or rights to receive dividends or other distributions or any other rights with respect to ADM Stock. |
| • | The HITS may become exchangeable into the common stock of a company other than Archer-Daniels-Midland Company. Following certain corporate events relating to ADM Stock, you may receive at maturity the common stock of a successorcorporation to Archer-Daniels-Midland Company. The occurrence of such corporate events and the consequent adjustments maymaterially and adversely affect the market price of the HITS. |
| • | Antidilution adjustments. Although the Calculation Agent will adjust the amount payable at maturity for certain corporate events affecting ADM Stock, there may be other corporate events (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 ADM Stock payable at maturity, the market price of the HITS may be materially and adversely affected. |
| • | The U.S. federal income tax consequences
of an investment in the HITS are uncertain. There is no direct legal authority as to the proper tax treatment of the HITS, and the Issuer’s counsel has not rendered an opinionas to their proper characterization for U.S. federal income tax purposes. |
| Please read the discussion under “Fact Sheet — General Information —Tax Consideration” in these preliminary terms and the discussion under “United States Federal Taxation” in the accompanying prospectus supplement for HITS (together the “Tax Disclosure Sections”) concerning the U.S. federal income tax consequences of investing in the HITS. If the Internal Revenue Service (the “IRS”) were successful in asserting an alternative characterization for the HITS, the timing and character of income on the HITS 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 HITS, and the IRS or a court may not agree with the tax treatment described in these preliminary terms and the prospectus supplement for HITS. | |
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Other Risk Factors
| • | Secondary trading may be limited. There may be little or no secondary market for the HITS. Application will be made to list the HITS on the American Stock Exchange under the symbol “AND”. Such listing is subject to certain conditions. For a security to be listed on the AMEX, the AMEX requires, among other things, that there be 1 million units and 400 holders of such security. It is not possible to predict whether the HITS will meet the requirements for listing or trade in the secondary market or if suchmarket will be liquid or illiquid. You should be willing to hold your HITS to maturity. |
| • | No affiliation with Archer-Daniels-Midland Company. Archer-Daniels-Midland Company is not an affiliate of the Issuer, is not involved with this offering in any way, and has no obligation to consider the interests of investors in taking any corporate actions that might affect the value of the HITS. The Issuer has not made any due diligence inquiry with respect to Archer-Daniels-Midland Company in connection with this offering. |
| • | Potential adverse economic interest of the Calculation Agent. The economic interests of MS & Co., as the Calculation Agent and of MS & Co. and other affiliates of the Issuer that will carry out hedging activities related to the HITS or that trade ADM Stock on a regular basis are potentially adverse to your interests as an investor in the HITS. The hedging or trading activities of the Issuer’s affiliates on or prior to the Pricing Date and during the term of the HITS could adversely affect the price of ADM Stock on the Pricing Date and at maturity and, as a result, could decrease the amount you may receive on the HITS at maturity. Any of these hedging or trading activities on or prior to the Pricing Date could potentially affect the price of ADM Stock and, accordingly, potentially increase the Initial Share Price used to calculate the Trigger Price and, therefore, potentially have raised the Trigger Price relative to the price of ADM Stock absent such hedging or trading activity. Additionally, such hedging or trading activities during the term of the HITS could potentially affect whether the price of ADM Stock decreases to or below the Trigger Price and, therefore, whether or not you will receive the principal amount of the HITS or shares of ADM Stock at maturity. Furthermore, if the price of ADM Stock has decreased to or below the Trigger Price such that you will receive shares of ADM Stock at maturity, the Issuer’s trading activities prior to or at maturity could adversely affect the value of the shares of ADM Stock the Issuer will deliver at maturity. |
| • | Morgan Stanley may engage in business
with or involving Archer-Daniels-Midland Company without regard to
your interests. The
Issuer or its affiliates may presently or from time to time engage
in business with Archer-Daniels-Midland Company
without regard to your interests, and thus may acquire non-public information
about Archer-Daniels-Midland Company. Neither the Issuer nor any of its affiliates undertakes to disclose any such information to you. In addition, the Issuer or itsaffiliates from time to time have published and in the future may publish research reports with respect to Archer-Daniels-MidlandCompany, which may or may not recommend that investors buy or hold ADM Stock. |
For further discussion of these and other risks you should read the section entitled “Risk Factors” beginning on S-7 of the prospectus supplement for HITS. The Issuer also urges you to consult your investment, legal, tax, accounting and other advisers before you invest in the HITS.
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