Morgan Stanley Sets Discover Card Spin-off for June 30

Morgan Stanley announced Friday that its Board of Directors has approved the spin-off of Discover Financial Services. The distribution of all of the outstanding shares of Discover common stock will be made on June 30, 2007 to Morgan Stanley stockholders of record as of the close of business on June 18, 2007. Morgan Stanley will distribute one share of Discover common stock for every two shares of Morgan Stanley common stock outstanding on the record date. Stockholders will receive cash in lieu of fractional shares for amounts less than one full Discover share.

Following the distribution, Discover will be an independent, publicly traded company. Discover’s common stock has been authorized for listing on the New York Stock Exchange (NYSE) under the symbol “DFS.” Morgan Stanley has received a favorable tax ruling to the effect that the distribution will be tax-free to Morgan Stanley stockholders for U.S. federal income tax purposes.

John J. Mack, Chairman and CEO of Morgan Stanley, said, “We believe the spin-off of Discover will enhance value for the shareholders of Morgan Stanley, and position both companies for continued success. As a well-capitalized company with an independent board of directors, Discover will be able to build on its strong brand and significant scale to execute its growth strategy. At the same time, we believe the spin-off of Discover will position Morgan Stanley to continue accelerating our growth and building on the positive momentum we have achieved across our securities businesses.”

David Nelms, CEO of Discover, said, “Discover will be even better positioned to create long-term value as a standalone company. We have a clear strategy to increase profitability by continuing to grow our card-issuing business and realizing the substantial opportunities in the fast-growing payments business. We believe we are well positioned to build on the success we have achieved as part of Morgan Stanley.”

Shares of Morgan Stanley will trade “regular way” throughout the period leading up to and including the distribution date. Anyone who buys or sells shares of Morgan Stanley common stock in the “regular way” market prior to and on the distribution date will be buying or selling Morgan Stanley stock that includes the entitlement to receive shares of Discover common stock at the distribution date. Accordingly, prior to the distribution date, the Morgan Stanley stock price will reflect the benefit of the Discover distribution. On July 2, the first day of trading following the distribution date, Morgan Stanley stock will trade “regular way” without the benefit of the Discover distribution and Discover stock will trade “regular way” as a standalone company.

In addition, Morgan Stanley has been advised by the NYSE that shares of Morgan Stanley and Discover will trade on a “when issued” basis on the NYSE beginning during the week of June 11, 2007 and continuing throughout the period leading up to the distribution under the symbols “MS wd” and “DFS wi,” respectively. Morgan Stanley “when issued” trades will settle after the distribution date without the benefit of the Discover distribution. Discover “when issued” trades will settle after the distribution date with shares of Discover as a standalone company.