- The pre-tax margin was 16% compared with 15% in last year''s first quarter.
- The return on average common equity was 42% compared with 32% a year ago.

- Net revenues of $1.6 billion were up 6% from a year ago reflecting higher net interest revenue from growth in the bank deposit sweep program and stronger transactional revenues.
- Lower asset management revenues reflect the discontinuance of certain fee-based brokerage programs in the fourth quarter of 2007 and a change in the classification of sub-advisory fees relating to certain customer agreements, partly offset by growth in other fee-based products.

- Non-interest expenses were $1.4 billion, up 5% from a year ago. Compensation costs, including the severance costs noted above, increased from a year ago, primarily reflecting higher revenues. Non-compensation expenses declined from a year ago, as higher levels of business activity were more than offset by a change in the classification of certain sub-advisory fees noted above.
- Total client assets were $722 billion, a 5% increase from last year’s first quarter. Client assets in fee-based accounts were $185 billion, an 8% decrease from a year ago and represent 26% of total assets.
- The 8,456 global representatives at quarter-end achieved average annualized revenue per global representative of $761,000 and total client assets per global representative of $85 million.

Asset Management posted a pre-tax loss of $161 million compared with pre-tax income of $379 million in last year’s first quarter.

- Net revenues decreased 60% to $543 million as real estate business posted losses on principal investments compared to strong gains posted in the first quarter of last year.
- Lower trading results reflect losses of approximately $187 million related to securities issued by structured investment vehicles. These decreases were partly offset by higher management and administration fees primarily resulting from an increase in assets under management.

- Non-interest expenses decreased 29% to $704 million from a year ago.
- Compensation costs, including the severance costs noted above, declined on lower revenues including losses associated with the employee deferred compensation and co-investment plans.
- Non-compensation expenses increased from a year ago reflecting higher levels of business activity.

- Asset Management recorded net customer inflows of $6.6 billion for the quarter, primarily from institutional money markets, the sixth consecutive quarter of net customer inflows.
- Assets under management or supervision at February 29, 2008 were $577 billion, up $56 billion, or 11%, from a year ago, driven by increases in the alternative and institutional money market asset classes. These increases primarily resulted from net customer inflows.
- The percent of the company''s long-term fund assets performing in the top half of the Lipper rankings was 48% over one year, 54% over three years, 66% over five years and 75% over 10 years.

The quarter’s effective tax rate from continuing operations was 30%, down from 32.5% a year ago.

- The decrease in the rate primarily reflects a change in the geographic mix of earnings, partly offset by an increase in the rate due to lower domestic tax credits.
- On January 28, 2008, the company announced that it had reached an agreement to sell Morgan Stanley Wealth Management S.V., S.A.U. (“MSWM”), its Spanish onshore mass affluent wealth management business. The transaction is expected to close during the second quarter of fiscal 2008 subject to customary closing conditions, including regulatory approvals. The results of MSWM are included within the Global Wealth Management Group business segment.

- As of February 29, 2008, the company has not repurchased any shares of its common stock this fiscal year.
- The company announced that its Board of Directors declared a $0.27 quarterly dividend per common share. The dividend is payable on April 30, 2008, to common shareholders of record on April 11, 2008. The company also announced that its Board of Directors declared a quarterly dividend of $313.29 per share of Series A Floating Rate Non-Cumulative Preferred Stock (represented by depositary shares, each representing 1/1,000th interest in a share of preferred stock and each having a dividend of $0.31329) to be paid on April 15, 2008 to preferred shareholders of record on March 31, 2008.
- Total capital as of February 29, 2008 was $198.2 billion, including $43.9 billion of common shareholders'' equity, preferred equity and junior subordinated debt issued to capital trusts. Book value per common share was $29.11, based on 1.1 billion shares outstanding.

Key questions from the first quarter earnings call conducted by Morgan Stanley on March 19, 2008.

Guy Moszkowski (Merrill Lynch): You alluded in the press release to a $1.2 billion charge. Could you comment on that specifically to the items in the table on page 15?

Colm Kelleher: The financial supplement schedule represents all of our U.S. sub-prime net exposure. We are continually managing down our net exposure to the areas where we incurred our greatest losses in 2007. That is through a combination of disposition and write downs. You see a decline in the net exposure. If you look at our super senior the CVO mez line and the AVS bond positions there was a $2 billion decline there. However, within that coordinated sub-prime position we are supporting client business. The combination of those two resulted in the aggregate exposure remaining at $1.8 billion but within the prop trading element which is part of that you do see the reduction of super senior CVO mez where we did take the write downs and residuals. When we spoke about mortgage proprietary trading losses of $1.2 billion you see those write down within the sub-prime and then we took additional write downs in our AltA positions which were about $600 million.

Guy Moszkowski (Merrill Lynch): Could you expand on the reduction in the CDS hedge sort of short from 5.1 to 3.3 over the course of the quarter?

Colm Kelleher: The reduction in that is when we reduced that as we reduced the positions itself, as a function of dispositions either write downs or sales. We are looking for further opportunities in this space to manage position. The message I want to give about that infamous trade is we have got in a situation now where we are managing it efficiently under shorts of working against it going.

Guy Moszkowski (Merrill Lynch): You said that organizationally you had broken out the mortgage prop trading group. Is that something that is going to be an ongoing business or essentially is that a work out group?

Colm Kelleher: At the moment our priority is to work out those positions and that is the way I would look at that activity.

Guy Moszkowski (Merrill Lynch): Are you seeing asset growth in the institutional business that at all material as the result of seizure of collateral from prime mortgage or repo clients?

Colm Kelleher: No.

Guy Moszkowski (Merrill Lynch): Whatever you see are you able to dispose of quickly?

Colm Kelleher: Yes.