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INVESTING IN EQUITIES WITH MORGAN STANLEY

At Morgan Stanley, we bring the global resources of our investment banking, underwriting and trading organizations to support your individual style of investing. We can offer you access to investment resources, including award-winning equity research, analytics, and products, along with an unwavering dedication to helping you reach your goals in the equity marketplace.

Why Stocks? Many individuals incorporate equities, or stocks, as they are often referred to, within their investment portfolios to help build long-term wealth. They buy equities either directly or through planned savings programs such as 401(k) plans or stock purchase programs.

It's easy to see why. Over the past 20 years, the average annual return on equities is more than twice that of long-term government bonds and more than three times the inflation rate.1 Historically, equities have proven to be the best investment for keeping your money growing faster than inflation2 (please remember past performance is no guarantee of future results). As the chart below illustrates, a $100,000 investment in equities made 20 years ago would have returned $884,869, while the same investment in 10-year Treasury bonds would have yielded only $310,726.

$800,000

S&P 500

$700,000

Long-Term Govt. Bonds

Inflation

$1,000, 000 $900,000

$600,000

$500,000 $400,000 $300,000

$200,000 $100,000

U.S. Dollar Return on U.S. Capital Market Indices

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

This chart is for illustrative purposes only and does not represent the performance of any specific investment. Past performance is no guarantee of future results.

Access, Opportunity, Value One of the first steps towards achieving your financial goals is to determine if your portfolio includes the appropriate mix of assets. This mix, known as asset allocation, is the appropriate balance of equities, bonds and cash (or cash alternatives) within your portfolio. For investors looking for capital appreciation, long-term growth and portfolio diversification3, a portion of your portfolio should be allocated to equity investing.

For your portfolio to be allocated among the securities that can most effectively meet your needs it is important that you have access to the right range of investments. That’s where Morgan Stanley can help. Our extensive array of equity products and research materials can help you meet your financial goals and objectives.

1

Source: Federal Reserve Release 10-yr Treasury bond average annual nominal yields; S&P 500 average annual total return; Inflation: Consumer Price Index (CPI-U), Bureau of Labor Statistics. October 2007. The Consumer Price Index (CPI) is compiled by the Bureau of Labor Statistics. It represents the average change in consumer prices for a fixed market basket of goods and services purchased for consumption by urban wage earners and clerical workers, professional, managerial, and technical workers, the self employed, short-term workers, the unemployed, retirees and others not in the labor force. The S&P Index is an unmanaged index of common stocks that is generally representative of the U.S. stock market as a whole. One cannot invest directly in an index.

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While stocks offer the potential for capital appreciation, their value will fluctuate with changes in market conditions. Asset Allocation and/or diversification does not assure a profit or protect against loss in declining financial markets.

This material has been prepared for informational purposes only and is not an offer to buy or sell or a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. This is not a research report and was not prepared by the Morgan Stanley research department. It was prepared by Morgan Stanley sales, trading or other non-research personnel. Past performance is not necessarily a guide to future performance. Please see additional important information and qualifications at the end of this material.

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