Morgan Stanley – ‘424B3’ on 7/27/05

On:  Wednesday, 7/27/05, at 3:18pm ET   ·   Accession #:  950103-5-1781   ·   File #:  333-117752

in

this entire Filing. an “Entity” Search.

Show

Documents searched

and

each “hit”. the 1st “hit”.

↓↑Hints

Prospectus   —   Rule 424(b)(3)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B3       Prospectus                                            40    205K 

Document Table of Contents

424B3
1st Page of 40
TOC
↑Top
Previous
Next
↓Bottom
Just 1st
 
PROSPECTUS Dated November 10, 2004                  Pricing Supplement No. 56 to
PROSPECTUS SUPPLEMENT                      Registration Statement No. 333-117752
Dated November 10, 2004                                      Dated July 22, 2005
                                                                  Rule 424(b)(3)

 $46,500,002
Morgan Stanley

GLOBAL MEDIUM-TERM NOTES, SERIES F
 Senior Fixed Rate Notes
 ---------------------------

7% SPARQS due August 1, 2006
Mandatorily Exchangeable for
Shares of Common Stock of THE WILLIAMS COMPANIES, INC.
   Stock Participation Accreting Redemption Quarterly-pay Securities(SM)
 ("SPARQS(R)")

The SPARQS will pay 7% interest per year but do not guarantee any return of     
principal at maturity. Instead, the SPARQS will pay at maturity a number of     
shares of The Williams Companies, Inc. common stock, subject to our right to    
call the SPARQS for cash at any time beginning February 1, 2006.                
o    The principal amount and issue price of each SPARQS is $20.80, which is    
   equal to the closing price of The Williams Companies common stock on July
22, 2005, the day we priced the SPARQS for initial sale to the public.

o    We will pay 7% interest per year (equivalent to $1.456 per year) on the    
  $20.80 principal amount of each SPARQS. Interest will be paid quarterly,
beginning November 1, 2005.                                           

o    At maturity, unless we have called the SPARQS for the cash call price, you 
   will receive one share of The Williams Companies common stock in exchange
for each SPARQS, subject to adjustment for certain corporate events   
    relating to The Williams Companies, Inc. The maturity of the SPARQS may be
accelerated under limited circumstances, including in the event of a  
  substantial decline in the price of The Williams Companies common stock.

o    Beginning February 1, 2006, we have the right to call all of the SPARQS at 
     any time and pay to you 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 17% per annum on the issue price of
  each SPARQS from and including the date of issuance to but excluding the
   call date. The calculation of the call price for any call date takes into
     account the time value of all of the payments made per SPARQS from the date
of issuance to and including the applicable call date.                

o    If we decide to call the SPARQS, we will give you notice at least 10 but   
not more than 30 days before the call date specified in the notice.   

o    Investing in SPARQS is not equivalent to investing in The Williams         
     Companies common stock. You will not have the right to exchange your SPARQS
for The Williams Companies common stock prior to maturity.            

o    The Williams Companies, Inc. is not involved in this offering of SPARQS in 
     any way and will have no obligation of any kind with respect to the SPARQS.

o    The SPARQS have been approved for listing on the American Stock Exchange   
  LLC, subject to official notice of issuance. The AMEX listing symbol for
the SPARQS is "WCS."                                                  

o    The CUSIP number for the SPARQS is 61746Y239.                              

You should read the more detailed description of the SPARQS in this pricing     
supplement. You should review and understand the descriptions in "Summary of    
Pricing Supplement" and "Description of SPARQS."                                

The SPARQS are riskier than ordinary debt securities. See "Risk Factors"        
beginning on PS-8.                                                              

 -------------------------
 PRICE $20.80 PER SPARQS
 -------------------------

                       Price to        Agent's       Proceeds to
                      Public(1)     Commissions(2)    Company(1)
                      ---------     --------------    ----------
Per SPARQS................     $20.800           $.338         $20.462          
Total.....................  $46,500,001.60   $755,625.03    $45,744,376.57      

---------------------------------------                                         

(1)  Plus accrued interest, if any, from the original issue date.               
(2)  For additional information see "Supplemental Information Concerning Plan of
Distribution" in this pricing supplement.                             

MORGAN STANLEY

424B3
2nd Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 2nd
(This page intentionally left blank)

PS-2

424B3
3rd Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 3rd
 SUMMARY OF PRICING SUPPLEMENT

 The following summary describes the SPARQS(R) we are offering to you in
general terms only. You should read the summary together with the more detailed 
information that is contained in the rest of this pricing supplement and in the 
accompanying prospectus and prospectus supplement. You should carefully         
consider, among other things, the matters set forth in "Risk Factors."          

   The SPARQS offered are medium-term debt securities of Morgan Stanley. The
return on the SPARQS at maturity is linked to the performance of the common     
stock of The Williams Companies, Inc., which we refer to as The Williams        
Companies Stock, subject to our right to call the SPARQS for cash at any time on
or after February 1, 2006.                                                      

    "Stock Participation Accreting Redemption Quarterly-pay Securities" is our
service mark and "SPARQS" is our registered service mark.                       

Each SPARQS costs $20.80        We, Morgan Stanley, are offering 7% Stock       
                                Participation Accreting Redemption Quarterly-pay
                              Securities(SM) due August 1, 2006, Mandatorily
                              Exchangeable for Shares of Common Stock of The
                              Williams Companies, Inc., which we refer to as
                                the SPARQS. The principal amount and issue price
                                of each SPARQS is $20.80 , which is equal to the
                                closing price of The Williams Companies Stock on
                               July 22, 2005, the day we priced the SPARQS for
           initial sale to the public.

                               The original issue price of the SPARQS includes
                                the agent's commissions paid with respect to the
                              SPARQS and the cost of hedging our obligations
                              under the SPARQS. The cost of hedging includes
                              the projected profit that our subsidiaries may
                               realize in consideration for assuming the risks
                              inherent in managing the hedging transactions.
                             The fact that the original issue price of the
                             SPARQS includes these commissions and hedging
                         costs is expected to adversely affect the
                                secondary market prices of the SPARQS. See "Risk
                         Factors--The inclusion of commissions and
                             projected profit from hedging in the original
                         issue price is likely to adversely affect
                            secondary market prices" and "Description of
                     SPARQS--Use of Proceeds and Hedging."

No guaranteed return of         Unlike ordinary debt securities, the SPARQS do  
principal                       not guarantee any return of principal at        
                               maturity. Instead the SPARQS will pay an amount
                                of The Williams Companies Stock at the scheduled
                               maturity date, subject to our prior call of the
                             SPARQS for the applicable call price in cash.
                        Investing in SPARQS is not equivalent to
                                investing in The Williams Companies Stock. If at
                               maturity (including upon an acceleration of the
                         SPARQS) the closing price of The Williams
                             Companies Stock has declined from the closing
                             price on July 22, 2005, the day we priced the
                           SPARQS for initial sale to the public, your
                                payout will be less than the principal amount of
                            the SPARQS. In certain cases of acceleration
                             described below under "--The maturity date of
                               the SPARQS may be accelerated," you may instead
                            receive an early cash payment on the SPARQS.

7% interest on the principal    We will pay interest on the SPARQS at the rate  
amount                          of 7% of the principal amount per year on       
                               November 1, 2005, February 1, 2006, May 1, 2006
                                and the maturity date. If we call the SPARQS, we
                           will pay accrued but unpaid interest on the
                           SPARQS to but excluding the applicable call
                          date. The interest rate we will pay on the
                                SPARQS is more than the current dividend rate on
             The Williams Companies Stock.

Payout at maturity              If we have not called the SPARQS and the        
                                maturity of the SPARQS has not been accelerated,
                                we will deliver to you at the scheduled maturity
                       date a number of shares of The Williams
                               Companies Stock equal to the exchange ratio for
each $20.80     

PS-3

424B3
4th Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 4th
                                principal amount of SPARQS you hold. The initial
                           exchange ratio is one share of The Williams
                      Companies Stock per SPARQS, subject to
                                adjustment for certain corporate events relating
                                to The Williams Companies Stock. You do not have
                         the right to exchange your SPARQS for The
                           Williams Companies Stock prior to maturity.

                           You can review the historical prices of The
                               Williams Companies Stock in the section of this
                         pricing supplement called "Description of
                SPARQS--Historical Information."

                                If July 21, 2006, the final call notice date, is
                              not a trading day or a market disruption event
                           occurs on that day and we elect to call the
                               SPARQS, both the final call notice date and the
                             scheduled maturity date of the SPARQS will be
                               postponed so that the maturity date will be the
                              tenth calendar day after we send notice of our
                         election. See the section of this pricing
                 supplement called "Description of
                           SPARQS--Maturity Date." The maturity of the
                    SPARQS will be accelerated under the
                          circumstances described below under "--The
                                maturity date of the SPARQS may be accelerated."

Your return on the SPARQS may   The return investors realize on the SPARQS may  
be limited by our call right    be limited by our call right. We have the right 
                               to call all of the SPARQS at any time beginning
                                February 1, 2006, 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 17% per annum on the issue price of each
                              SPARQS from and including the date of issuance
               to but excluding the call date.

                             You should not expect to obtain a total yield
                              (including interest payments) of more than 17%
                             per annum on the issue price of the SPARQS to
                              the call date. If we call the SPARQS, you will
                                receive the cash call price and not The Williams
                           Companies Stock or an amount based upon the
                              closing price of The Williams Companies Stock.

                           The yield to call, and the call price for a
                           particular call date that the yield to call
                             implies, takes into account the time value of
                              any periodic payments that are made on a given
                               investment. That is, in the case of the SPARQS,
                             the yield to call assumes that an investor in
                            the SPARQS earns the yield to call rate on a
                              particular cash flow on the SPARQS, such as an
                           interest payment or the payment of the call
                              price on a particular call date, from the date
                              of issuance of the SPARQS to but excluding the
                                date of the applicable payment. As a result, the
                             call price for any call date is an amount per
                                SPARQS such that the present value of all of the
                                payments made on the SPARQS to and including the
                              applicable call date (i.e., including the call
                             price and all of the interest payments), when
                           discounted to the date of issuance from the
                              payment date of those cash flows at a yield to
                            call rate of 17% per annum, equals the issue
    price of the SPARQS.

                                If we call the SPARQS, we will do the following:

                                o  send a notice announcing that we have decided
         to call the SPARQS;

                             o  specify in the notice a call date when you
                          will receive payment in exchange for
                                 delivering your SPARQS to the trustee; that
                                 call date will not be less than 10 nor more
                                than 30 days after the date of the notice;
and       

                            o  specify in the notice the cash call price
                                  that we will pay to you in exchange for each
SPARQS.   

PS-4

424B3
5th Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 5th
                            If we were to call the SPARQS on February 1,
                               2006, which is the earliest day on which we may
                            call the SPARQS, the total payment you would
                              receive on the SPARQS, including interest paid
                                from the date of issuance through the call date,
                                would be $22.5035 per SPARQS. If we were to call
                              the SPARQS on the scheduled maturity date, the
                              total payment you would receive on the SPARQS,
                        including interest paid from the date of
                            issuance through the call date (which is the
                            same date that would have otherwise been the
                               scheduled maturity date), would be $24.2663 per
SPARQS.         

The yield to call on the        The yield to call on the SPARQS is 17% per      
SPARQS is 17%                   annum, which means that the annualized rate of  
                               return that you will receive on the issue price
                                of the SPARQS if we call the SPARQS will be 17%.
                               The calculation of the yield to call takes into
                               account the issue price of the SPARQS, the time
                              to the call date, and the amount and timing of
                               interest payments on the SPARQS, as well as the
                        call price. If we call the SPARQS on any
                               particular call date, the call price will be an
                              amount so that the yield to call on the SPARQS
                              to but excluding the call date will be 17% per
annum.          

The maturity date of the        The maturity date of the SPARQS will be         
SPARQS may be accelerated       accelerated upon the occurrence of either of the
 following events:

                               o  a price event acceleration, which will occur
                          if the closing price of The Williams
                            Companies Stock on any two consecutive
                                 trading days is less than $2.00 (subject to
                             adjustment for certain corporate events
                                   related to The Williams Companies Stock); and

                               o  an event of default acceleration, which will
                                occur if there is an event of default with
            respect to the SPARQS.

                               The amount payable to you will differ depending
                   on the reason for the acceleration.

                             o  If there is a price event acceleration, we
                                will owe you (i) a number of shares of The
                                  Williams Companies Stock at the then current
                                exchange ratio and (ii) accrued but unpaid
                           interest to but excluding the date of
                         acceleration plus an amount of cash
                                  determined by the Calculation Agent equal to
                          the sum of the present values of the
                                 remaining scheduled payments of interest on
                                   the SPARQS (excluding such accrued but unpaid
                         interest) discounted to the date of
                                  acceleration, as described in the section of
                                 this pricing supplement called "Description
                           of SPARQS--Price Event Acceleration."

                               o  If there is an event of default acceleration
                                  and if we have not already called the SPARQS
                                in accordance with our call right, we will
                                  owe you (i) the lesser of (a) the product of
                           (x) the closing price of The Williams
                             Companies Stock, as of the date of such
                           acceleration and (y) the then current
                           exchange ratio and (b) the call price
                                   calculated as though the date of acceleration
                                   were the call date (but in no event less than
                                 the call price for the first call date) and
                             (ii) accrued but unpaid interest to but
                         excluding the date of acceleration.

                                o  If we have already called the SPARQS in
                                   accordance with our call right, we will
                               owe you (i) the call price and (ii)
                                      accrued but unpaid interest to the date of
         acceleration.

                                The amount payable to you if the maturity of the
                               SPARQS is accelerated may be substantially less
                               than the $20.80 principal amount of the SPARQS.

PS-5

424B3
6th Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 6th
The SPARQS may become           Following certain corporate events relating to  
exchangeable into the common    The Williams Companies Stock, such as a         
stock of companies other than   stock-for-stock merger where The Williams       
The Williams Companies, Inc.    Companies, Inc., which we refer to as The       
                                Williams Companies, is not the surviving entity,
                                you will receive at maturity the common stock of
                       a successor corporation to The Williams
                            Companies. Following certain other corporate
                                events relating to The Williams Companies Stock,
                           such as a merger event where holders of The
                               Williams Companies Stock would receive all or a
                             substantial portion of their consideration in
                      cash or a significant cash dividend or
                            distribution of property with respect to The
                             Williams Companies Stock, you will receive at
                               maturity the common stock of three companies in
                       the same industry group as The Williams
                            Companies in lieu of, or in addition to, The
                               Williams Companies Stock, as applicable. In the
                    event of such a corporate event, the
                           equity-linked nature of the SPARQS would be
                               significantly altered. We describe the specific
                       corporate events that can lead to these
                            adjustments and the procedures for selecting
                              those other reference stocks in the section of
                              this pricing supplement called "Description of
                             SPARQS--Antidilution Adjustments." You should
                              read this section in order to understand these
                              and other adjustments that may be made to your
SPARQS.         

MS & Co. will be the            We have appointed our affiliate, Morgan Stanley 
calculation agent               & Co. Incorporated, which we refer to as MS &   
                             Co., to act as calculation agent for JPMorgan
                            Chase Bank, N.A. (formerly known as JPMorgan
                              Chase Bank), the trustee for our senior notes.
                             As calculation agent, MS & Co. will determine
                               the call price that you will receive if we call
                            the SPARQS. MS & Co. will also calculate the
                           amount payable per SPARQS in the event of a
                             price event acceleration, adjust the exchange
                                ratio for certain corporate events affecting The
                          Williams Companies Stock and determine the
                                appropriate underlying security or securities to
                                be delivered at maturity in the event of certain
                              reorganization events relating to The Williams
                               Companies Stock that we describe in the section
                              of this pricing supplement called "Description
                     of SPARQS--Antidilution Adjustments."

No affiliation with The         The Williams Companies is not an affiliate of   
Williams Companies              ours and is not involved with this offering in  
                           any way. The obligations represented by the
                                SPARQS are obligations of Morgan Stanley and not
          of The Williams Companies.

Where you can find more         The SPARQS are senior notes issued as part of   
information on the SPARQS       our Series F medium-term note program. You can  
                          find a general description of our Series F
                            medium-term note program in the accompanying
                              prospectus supplement dated November 10, 2004.
                              We describe the basic features of this type of
                           note in the sections called "Description of
                            Notes--Fixed Rate Notes" and "--Exchangeable
Notes."         

                              For a detailed description of the terms of the
                            SPARQS, including the specific mechanics for
                               exercise of our call right, you should read the
                               "Description of SPARQS" section in this pricing
                              supplement. You should also read about some of
                                the risks involved in investing in SPARQS in the
                          section called "Risk Factors." The tax and
                      accounting treatment of investments in
                          equity-linked notes such as the SPARQS may
                                differ from that of investments in ordinary debt
                          securities or common stock. We urge you to
                         consult with your investment, legal, tax,
                                accounting and other advisors with regard to any
                            proposed or actual investment in the SPARQS.

How to reach us                 Please contact your local Morgan Stanley branch 
                            office or our principal executive offices at
                       1585 Broadway, New York, New York 10036
                  (telephone number (212) 761-4000).

PS-6

424B3
7th Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 7th
RISK FACTORS

The SPARQS are not secured debt and are riskier than ordinary debt    
securities. Because the return to investors is linked to the performance of The 
Williams Companies Stock, there is no guaranteed return of principal. This      
section describes the most significant risks relating to the SPARQS. You should 
carefully consider whether the SPARQS are suited to your particular             
circumstances before you decide to purchase them.                               

SPARQS are not ordinary senior  The SPARQS combine features of equity and debt. 
notes -- no guaranteed return   The terms of the SPARQS differ from those of    
of principal                    ordinary debt securities in that we will not pay
                             you a fixed amount at maturity. Our payout to
                            you at the scheduled maturity date will be a
                          number of shares of The Williams Companies
                              Stock, unless we have exercised our call right
                      or the maturity of the SPARQS has been
                        accelerated. If the closing price of The
                               Williams Companies Stock at maturity (including
                                upon an acceleration of the SPARQS) is less than
                              the closing price on July 22, 2005, the day we
                         priced the SPARQS for initial sale to the
                             public, and we have not called the SPARQS, we
                                will pay you an amount of The Williams Companies
                            Stock or, under some circumstances, cash, in
                               either case, with a value that is less than the
               principal amount of the SPARQS.

Your appreciation potential     The appreciation potential of the SPARQS is     
is limited by our call right    limited by our call right. The $20.80 issue     
                           price of one SPARQS is equal to the closing
                            price of one share of The Williams Companies
                             Stock on July 22, 2005, the day we priced the
                            SPARQS for initial sale to the public. If we
                             exercise our call right, you will receive the
                               cash call price described under "Description of
                              SPARQS--Call Price" below and not The Williams
                           Companies Stock or an amount based upon the
                              closing price of The Williams Companies Stock.
                              The payment you will receive in the event that
                               we exercise our call right will depend upon the
                           call date and 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, represents a yield to call of 17% per
                               annum on the issue price of the SPARQS from the
                                date of issuance to but excluding the call date.
                              We may call the SPARQS at any time on or after
                           February 1, 2006, including on the maturity
                             date. You should not expect to obtain a total
                                yield (including interest payments) of more than
                              17% per annum on the issue price of the SPARQS
 to the call date.

Secondary trading may be        There may be little or no secondary market for  
limited                         the SPARQS. Although the SPARQS have been       
                          approved for listing on the American Stock
                           Exchange LLC, it is not possible to predict
                              whether the SPARQS will trade in the secondary
                               market. Even if there is a secondary market, it
                               may not provide significant liquidity. MS & Co.
                              currently intends to act as a market maker for
                              the SPARQS but is not required to do so. If at
                           any time MS & Co. were to cease acting as a
                              market maker, it is likely that there would be
                             significantly less liquidity in the secondary
                            market, in which case the price at which you
                              would be able to sell your SPARQS would likely
                                be lower than if an active market existed. If at
                          any time the SPARQS were not listed on any
                              securities exchange and MS & Co. were to cease
                           acting as a market maker, it is likely that
                                there would be little or no secondary market for
the SPARQS.     

Market price of the SPARQS      Several factors, many of which are beyond our   
will be influenced by many      control, will influence the value of the SPARQS 
unpredictable factors           in the secondary market and the price at which  
                               MS & Co. may be willing to purchase or sell the
                              SPARQS in the secondary market. We expect that
                           generally the trading price of The Williams
                                Companies Stock on any day will affect the value
                                of the SPARQS more than any other single factor.
                              However, because we have the right to call the
                             SPARQS at any time beginning February 1, 2006
                          for a call price that is not linked to the
                              closing price of The Williams Companies Stock,
                         the SPARQS may trade differently from The
                                Williams Companies Stock. Other factors that may
                          influence the value of the SPARQS include:

PS-7

424B3
8th Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 8th
                             o  the volatility (frequency and magnitude of
                                 changes in price) of The Williams Companies
Stock     

                        o  geopolitical conditions and economic,
                                  financial, political, regulatory or judicial
                                events that affect stock markets generally
                                and that may affect The Williams Companies
                           and the trading price of The Williams
     Companies Stock

                         o  interest and yield rates in the market

                           o  the time remaining until we can call the
                        SPARQS and until the SPARQS mature

                              o  the dividend rate on The Williams Companies
Stock     

       o  our creditworthiness

                             o  the occurrence of certain events affecting
                                The Williams Companies that may or may not
                                 require an adjustment to the exchange ratio

                               Some or all of these factors will influence the
                              price you will receive if you sell your SPARQS
                               prior to maturity. For example, you may have to
                               sell your SPARQS at a substantial discount from
                                the principal amount if the trading price of The
                             Williams Companies Stock is at, below, or not
                             sufficiently above the initial closing price.

                                You cannot predict the future performance of The
                                Williams Companies Stock based on its historical
                                performance. The price of The Williams Companies
                              Stock may decrease so that you will receive at
                            maturity an amount of The Williams Companies
                            Stock or, under some circumstances, cash, in
                          either case, worth less than the principal
                               amount of the SPARQS. In addition, there can be
                           no assurance that the price of The Williams
                              Companies Stock will increase so that you will
                             receive at maturity an amount of The Williams
                             Companies Stock worth more than the principal
                             amount of the SPARQS. If we exercise our call
                               right and call the SPARQS, you will receive the
                              cash call price and not The Williams Companies
                      Stock, and your yield to the call date
                          (including all of the interest paid on the
                                SPARQS) will be 17% per annum on the issue price
                              of each SPARQS, which may be more or less than
                                the yield on a direct investment in The Williams
Companies Stock.

The inclusion of commissions    Assuming no change in market conditions or any  
and projected profit from       other relevant factors, the price, if any, at   
hedging in the original issue   which MS & Co. is willing to purchase SPARQS in 
price is likely to adversely    secondary market transactions will likely be    
affect secondary market prices  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
                              our obligations under the SPARQS. In addition,
                      any such prices may differ from values
                              determined by pricing models used by MS & Co.,
                            as a result of dealer discounts, mark-ups or
        other transaction costs.

If the SPARQS are accelerated,  The maturity of the SPARQS will be accelerated  
you may receive an amount       if there is a price event acceleration or an    
worth substantially less than   event of default acceleration. The amount       
the principal amount of the     payable to you if the maturity of the SPARQS is 
SPARQS                          accelerated will differ depending on the reason 
                             for the acceleration and may be substantially
                             less than the principal amount of the SPARQS.
                       See "Description of SPARQS--Price Event
                 Acceleration" and "Description of
                              SPARQS--Alternate Exchange Calculation in Case
        of an Event of Default."

Morgan Stanley is not           The Williams Companies is not an affiliate of   
affiliated with The Williams    ours and is not involved with this offering in  
Companies                       any way. Consequently, we have no ability to    
                              control the actions of The Williams Companies,
                               including any corporate actions of the type tha
                             would require the calculation agent to adjust
                           the payout to you at maturity. The Williams
                            Companies has no obligation to consider your
                     interest as an investor in the SPARQS

PS-8

424B3
9th Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 9th
                           in takingt any corporate actions that might
                            affect the value of your SPARQS. None of the
                           money you pay for the SPARQS will go to The
   Williams Companies.

Morgan Stanley may engage in    We or our affiliates may presently or from time 
business with or involving The  to time engage in business with The Williams    
Williams Companies without      Companies without regard to your interests,     
regard to your interests        including extending loans to, or making equity  
                         investments in, The Williams Companies or
                           providing advisory services to The Williams
                         Companies, such as merger and acquisition
                       advisory services. In the course of our
                          business, we or our affiliates may acquire
                         non-public information about The Williams
                               Companies. Neither we nor any of our affiliates
                              undertakes to disclose any such information to
                                you. In addition, we or our affiliates from time
                            to time have published and in the future may
                            publish research reports with respect to The
                              Williams Companies. These research reports may
                               or may not recommend that investors buy or hold
             The Williams Companies Stock.

You have no shareholder rights  Investing in the SPARQS is not equivalent to    
                                investing in The Williams Companies 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 The Williams Companies Stock. In addition,
                          you do not have the right to exchange your
                                SPARQS for The Williams Companies Stock prior to
maturity.       

The SPARQS may become           Following certain corporate events relating to  
exchangeable into the common    The Williams Companies Stock, such as a merger  
stock of companies other than   event where holders of The Williams Companies   
The Williams Companies          Stock would receive all or a substantial portion
                               of their consideration in cash or a significant
                              cash dividend or distribution of property with
                            respect to The Williams Companies Stock, you
                            will receive at maturity the common stock of
                             three companies in the same industry group as
                        The Williams Companies in lieu of, or in
                          addition to, The Williams Companies Stock.
                              Following certain other corporate events, such
                              as a stock-for-stock merger where The Williams
                               Companies is not the surviving entity, you will
                         receive at maturity the common stock of a
                                successor corporation to The Williams Companies.
                              We describe the specific corporate events that
                                can lead to these adjustments and the procedures
                             for selecting those other reference stocks in
                             the section of this pricing supplement called
                    "Description of SPARQS--Antidilution
                              Adjustments." The occurrence of such corporate
                         events and the consequent adjustments may
                                materially and adversely affect the market price
of the SPARQS.  

The antidilution adjustments    MS & Co., as calculation agent, will adjust the 
the calculation agent is        amount payable at maturity for certain corporate
required to make do not         events affecting The Williams Companies Stock,  
cover every corporate event     such as stock splits and stock dividends, and   
that could affect The           certain other corporate actions involving The   
Williams Companies Stock        Williams Companies, such as mergers. However,   
                      the calculation agent will not make an
                               adjustment for every corporate event that could
                        affect The Williams Companies Stock. For
                              example, the calculation agent is not required
                       to make any adjustments if The Williams
                               Companies or anyone else makes a partial tender
                          or partial exchange offer for The Williams
                             Companies Stock. If an event occurs that does
                               not require the calculation agent to adjust the
                              amount of The Williams Companies Stock payable
                               at maturity, the market price of the SPARQS may
                     be materially and adversely affected.

PS-9

424B3
10th Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 10th
The economic interests of the   The economic interests of the calculation agent 
calculation agent and other of  and other of our affiliates are potentially     
our affiliates are potentially  adverse to your interests as an investor in the 
adverse to your interests       SPARQS.                                         

                             As calculation agent, MS & Co. will calculate
                               the cash amount you will receive if we call the
                           SPARQS and the amount payable to you in the
                                event of a price acceleration and will determine
                               what adjustments should be made to the exchange
                            ratio to reflect certain corporate and other
                              events and the appropriate underlying security
                                or securities to be delivered at maturity in the
                       event of certain reorganization events.
                               Determinations made by MS & Co, in its capacity
                              as calculation agent, including adjustments to
                            the exchange ratio or the calculation of the
                             amount payable to you in the event of a price
                         event acceleration, may affect the amount
                                payable to you at maturity or upon a price event
                               acceleration of the SPARQS. See the sections of
                              this pricing supplement called "Description of
                              SPARQS--Antidilution Adjustments" and "--Price
    Event Acceleration."

                               The original issue price of the SPARQS includes
                            the agent's commissions and certain costs of
                             hedging our obligations under the SPARQS. The
                       subsidiaries through which we hedge our
                             obligations under the SPARQS expect to make a
                             profit. Since hedging our obligations entails
                           risk and may be influenced by market forces
                             beyond our or our subsidiaries' control, such
                              hedging may result in a profit that is more or
              less than initially projected.

Hedging and trading activity    MS & Co. and other affiliates of ours have      
by the calculation agent and    carried out, and will continue to carry out,    
its affiliates could            hedging activities related to the SPARQS,       
potentially affect the value    including trading in The Williams Companies     
of the SPARQS                   Stock as well as in other instruments related to
                               The Williams Companies Stock. MS & Co. and some
                        of our other subsidiaries also trade The
                            Williams Companies Stock and other financial
                             instruments related to The Williams Companies
                         Stock on a regular basis as part of their
                               general broker-dealer and other businesses. Any
                                of these hedging or trading activities as of the
                     date of this pricing supplement could
                           potentially have increased the price of The
                               Williams Companies Stock and, accordingly, have
                            increased the issue price of the SPARQS and,
                          therefore, the price at which The Williams
                           Companies Stock must close before you would
                             receive at maturity an amount of The Williams
                             Companies Stock worth as much as or more than
                   the principal amount of the SPARQS.
                                Additionally, such hedging or trading activities
                               during the term of the SPARQS could potentially
                                affect the price of The Williams Companies Stock
                            at maturity and, accordingly, if we have not
                            called the SPARQS, the value of The Williams
                            Companies Stock, or in certain circumstances
                             cash, you will receive at maturity, including
           upon an acceleration event.

Because the characterization    You should also consider the U.S. federal income
of the SPARQS for U.S. federal  tax consequences of investing in the SPARQS.    
income tax purposes is          There is no direct legal authority as to the    
uncertain, the material U.S.    proper tax treatment of the SPARQS, and         
federal income tax              consequently our special tax counsel is unable  
consequences of an investment   to render an opinion as to their proper         
in the SPARQS are uncertain     characterization for U.S. federal income tax    
                        purposes. Significant aspects of the tax
                               treatment of the SPARQS are uncertain. Pursuant
                             to the terms of the SPARQS and subject to the
                               discussion under "Description of SPARQS--United
                        States Federal Income Taxation--Non-U.S.
                            Holders," you have agreed with us to treat a
                               SPARQS as a unit consisting of (i) a terminable
                                forward contract and (ii) a deposit with us of a
                              fixed amount of cash to secure your obligation
                         under the terminable forward contract, as
                        described in the section of this pricing
                                supplement called "Description of SPARQS--United
                             States Federal Income Taxation--General." The
                            terminable forward contract (i) requires you
                           (subject to our call right) to purchase The
                             Williams Companies Stock from us at maturity,
                             and (ii) allows us, upon exercise of our call
                          right, to terminate the terminable forward
                                contract by returning your deposit and paying to
                             you an amount of cash equal to the difference

PS-10 

424B3
11th Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 11th
                              between the call price and the deposit. If the
                         Internal Revenue Service (the "IRS") were
                      successful in asserting an alternative
                               characterization for the SPARQS, the timing and
                              character of income on the SPARQS and your tax
                               basis for The Williams Companies Stock received
                              in exchange for the SPARQS might differ. We do
                         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 this pricing supplement.
                         Please read carefully the section of this
                         pricing supplement called "Description of
                               SPARQS--United States Federal Income Taxation."

                                If you are a non-U.S. investor, please also read
                             the section of this pricing supplement called
                             "Description of SPARQS--United States Federal
                        Income Taxation--Non-U.S. Holders" for a
                              discussion of the withholding tax consequences
               of an investment in the SPARQS.

                             You are urged to consult your own tax advisor
                                regarding all aspects of the U.S. federal income
                               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.   

PS-11 

424B3
12th Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 12th
 DESCRIPTION OF SPARQS

Terms not defined herein have the meanings given to such terms in the 
accompanying prospectus supplement. The term "SPARQS" refers to each $20.80     
principal amount of our 7% SPARQS due August 1, 2006, Mandatorily Exchangeable  
for Shares of Common Stock of The Williams Companies, Inc. In this pricing      
supplement, the terms "we," "us" and "our" refer to Morgan Stanley.             

Aggregate Principal Amount....  $46,500,001.60                                  

Maturity Date.................  August 1, 2006, subject to acceleration as      
                               described below in "--Price Event Acceleration"
                                and "--Alternate Exchange Calculation in Case of
                                an Event of Default" and subject to extension if
                          the Final Call Notice Date is postponed in
                        accordance with the following paragraph.

                          If the Final Call Notice Date is postponed
                           because it is not a Trading Day or due to a
                           Market Disruption Event or otherwise and we
                                elect to call the SPARQS, the scheduled Maturity
                                Date will be postponed so that the Maturity Date
                            will be the tenth calendar day following the
                                Final Call Notice Date. See "--Final Call Notice
Date."          

Interest Rate.................  7% per annum (equivalent to $1.456 per annum per
SPARQS)         

Interest Payment Dates........  November 1, 2005, February 1, 2006, May 1, 2006 
      and the Maturity Date.

                               If the scheduled Maturity Date is postponed due
                             to a Market Disruption Event or otherwise, we
                         will pay interest on the Maturity Date as
                               postponed rather than on August 1, 2006, but no
                             interest will accrue on the SPARQS or on such
                           payment during the period from or after the
        scheduled Maturity Date.

Record Date...................  The Record Date for each Interest Payment Date, 
                                including the Interest Payment Date scheduled to
                              occur on the Maturity Date, will be the date 5
                              calendar days prior to such scheduled Interest
                           Payment Date, whether or not that date is a
                            Business Day; provided, however, that in the
                          event that we call the SPARQS, no Interest
                                Payment Date will occur after the Morgan Stanley
                            Notice Date, except for any Interest Payment
                             Date for which the Morgan Stanley Notice Date
                                falls on or after the "ex-interest" date for the
                           related interest payment, in which case the
                             related interest payment will be made on such
                             Interest Payment Date; and provided, further,
                               that accrued but unpaid interest payable on the
                                Call Date, if any, will be payable to the person
                      to whom the Call Price is payable. The
                              "ex-interest" date for any interest payment is
                              the date on which purchase transactions in the
                                SPARQS no longer carry the right to receive such
 interest payment.

Specified Currency............  U.S. dollars                                    

Issue Price...................  $20.80 per SPARQS                               

Original Issue Date                                                             
(Settlement Date)...........  July 29, 2005                                 

CUSIP Number..................  61746Y239                                       

PS-12 

424B3
13th Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 13th
Denominations.................  $20.80 and integral multiples thereof           

Morgan Stanley Call Right.....  On any scheduled Trading Day on or after        
                        February 1, 2006 or on the Maturity Date
                         (including the Maturity Date as it may be
                               extended and regardless of whether the Maturity
                               Date is a Trading Day), we may call the SPARQS,
                                in whole but not in part, for the Call Price. If
                               we call the SPARQS, the cash Call Price and any
                              accrued but unpaid interest on the SPARQS will
                               be delivered to the Trustee for delivery to the
                               Depositary, which we refer to as DTC, as holder
                               of the SPARQS, on the Call Date fixed by us and
                              set forth in our notice of mandatory exchange,
                              upon delivery of the SPARQS to the Trustee. We
                             will, or will cause the Calculation Agent to,
                                deliver such cash to the Trustee for delivery to
                            DTC, as holder of the SPARQS. We expect such
                               amount of cash will be distributed to investors
                                on the Call Date in accordance with the standard
                              rules and procedures of DTC and its direct and
                                indirect participants. See "--Book Entry Note or
                      Certificated Note" below, and see "The
                          Depositary" in the accompanying prospectus
supplement.     

Morgan Stanley Notice Date....  The scheduled Trading Day on which we issue our 
                              notice of mandatory exchange, which must be at
                               least 10 but not more than 30 days prior to the
Call Date.      

Final Call Notice Date........  July 21, 2006; provided that if July 21, 2006 is
                           not a Trading Day or if a Market Disruption
                               Event occurs on such day, the Final Call Notice
                               Date will be the immediately succeeding Trading
                               Day on which no Market Disruption Event occurs.

Call Date.....................  The day specified by us in our notice of        
                            mandatory exchange, on which we will deliver
                         cash to DTC, as holder of the SPARQS, for
                        mandatory exchange, which day may be any
                             scheduled Trading Day on or after February 1,
                        2006 or the Maturity Date (including the
                       Maturity Date as it may be extended and
                            regardless of whether the Maturity Date is a
       scheduled Trading Day).

Call Price....................  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 (i.e., the
                            Call Price and all of the interest payments,
                                including accrued and unpaid interest payable on
                                the Call Date), discounted to the Original Issue
                            Date from the applicable payment date at the
                                Yield to Call rate of 17% per annum, computed on
                            the basis of a 360-day year of twelve 30-day
                                months, equals the Issue Price, as determined by
      the Calculation Agent.

                             The table of indicative Call Prices set forth
                                below illustrates what the Call Price per SPARQS
                         would be if we were to call the SPARQS on
                               February 1, 2006 (which is the earliest date on
                        which we may call the SPARQS) and on any
                          subsequent scheduled Interest Payment Date
                    through the scheduled Maturity Date:

PS-13 

424B3
14th Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 14th
                              Call Date                           Call Price
                               ------------------------------    -------------
                              February 1, 2006..............    $    21.7674
                              May 1, 2006...................    $    22.2746
                              August 1, 2006................    $    22.8022

                             The indicative Call Prices set forth above do
                                not include the accrued but unpaid interest that
                           would also be payable on each SPARQS on the
                               applicable Call Date. We may call the SPARQS on
                              any scheduled Trading Day on or after February
                              1, 2006 or on the Maturity Date (including the
                       Maturity Date as it may be extended and
                            regardless of whether the Maturity Date is a
       scheduled Trading Day).

                                For more information regarding the determination
                              of the Call Price and examples of how the Call
                           Price is calculated in certain hypothetical
                      scenarios, see Annex A to this pricing
supplement.     

Yield to Call.................  The Yield to Call on the SPARQS is 17% per      
                              annum, which means that the annualized rate of
                               return that you will receive on the Issue Price
                                of the SPARQS if we call the SPARQS will be 17%.
                               The calculation of the Yield to Call takes into
                               account the Issue Price of the SPARQS, the time
                              to the Call Date, and the amount and timing of
                               interest payments on the SPARQS, as well as the
                        Call Price. If we call the SPARQS on any
                               particular Call Date, the Call Price will be an
                              amount so that the Yield to Call on the SPARQS
                               to but excluding the Call Date will be 17%. See
                   Annex A to this pricing supplement.

Exchange at the                                                                 
Maturity Date...............  Unless we have called the SPARQS or their     
                          maturity has accelerated, at the scheduled
                             Maturity Date, upon delivery of the SPARQS to
                               the Trustee, we will apply the $20.80 principal
                              amount of each SPARQS as payment for, and will
                           deliver, a number of shares of The Williams
                      Companies Stock at the Exchange Ratio.

                              We shall, or shall cause the Calculation Agent
                             to, (i) provide written notice to the Trustee
                            and to DTC, on or prior to 10:30 a.m. on the
                              Trading Day immediately prior to the scheduled
                                Maturity Date of the SPARQS (but if such Trading
                                Day is not a Business Day, prior to the close of
                          business on the Business Day preceding the
                             Maturity Date), of the amount of The Williams
                               Companies Stock to be delivered with respect to
                              the $20.80 principal amount of each SPARQS and
                        (ii) deliver such shares of The Williams
                                Companies Stock (and cash in respect of interest
                         and any fractional shares of The Williams
                               Companies Stock) to the Trustee for delivery to
                              DTC, as holder of the SPARQS, on the scheduled
                             Maturity Date. We expect such shares and cash
                                will be distributed to investors on the Maturity
                              Date in accordance with the standard rules and
                             procedures of DTC and its direct and indirect
                       participants. See "--Book Entry Note or
                      Certificated Note" below, and see "The
                          Depositary" in the accompanying prospectus
supplement.     

                            If the maturity of the SPARQS is accelerated
                         because of a Price Event Acceleration (as
              described under "--Price Event

PS-14 

424B3
15th Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 15th
                              Acceleration" below) or because of an Event of
                      Default Acceleration (as defined under
                               "--Alternate Exchange Calculation in Case of an
                               Event of Default" below), we shall provide such
                              notice as promptly as possible and in no event
                         later than (i) in the case of an Event of
                                Default Acceleration, two Trading Days after the
                                date of acceleration (but if such second Trading
                                Day is not a Business Day, prior to the close of
                           business on the Business Day preceding such
                             second Trading Day) and (ii) in the case of a
                           Price Event Acceleration, 10:30 a.m. on the
                            Trading Day immediately prior to the date of
                              acceleration (but if such Trading Day is not a
                               Business Day, prior to the close of business on
                      the Business Day preceding the date of
acceleration).  

Price Event Acceleration......  If on any two consecutive Trading Days during   
                           the period prior to and ending on the third
                               Business Day immediately preceding the Maturity
                             Date, the product of the Closing Price of The
                               Williams Companies Stock and the Exchange Ratio
                            is less than $2.00, the Maturity Date of the
                              SPARQS will be deemed to be accelerated to the
                             third Business Day immediately following such
                                second Trading Day (the "date of acceleration").
                       See "--Exchange Ratio" below. Upon such
                        acceleration, with respect to the $20.80
                                principal amount of each SPARQS, we will deliver
                               to DTC, as holder of the SPARQS, on the date of
acceleration:   

                           o  a number of shares of The Williams
                               Companies Stock at the then current
               Exchange Ratio; and

                           o  accrued but unpaid interest to but
                                      excluding the date of acceleration plus an
                                amount of cash, as determined by the
                                      Calculation Agent, equal to the sum of the
                                     present values of the remaining scheduled
                              payments of interest on the SPARQS
                                      (excluding any portion of such payments of
                           interest accrued to the date of
                                   acceleration) discounted to the date of
                                   acceleration at the yield that would be
                                 applicable to a non-interest bearing,
                                    senior unsecured debt obligation of ours
                   with a comparable term.

                      We expect such shares and cash will be
                       distributed to investors on the date of
                            acceleration in accordance with the standard
                              rules and procedures of DTC and its direct and
                                indirect participants. See "--Book Entry Note or
                      Certificated Note" below, and see "The
                          Depositary" in the accompanying prospectus
                               supplement. The present value of each remaining
                      scheduled payment will be based on the
                       comparable yield that we would pay on a
                           non-interest bearing, senior unsecured debt
                              obligation having a maturity equal to the term
                            of each such remaining scheduled payment, as
                    determined by the Calculation Agent.

                             Investors will not be entitled to receive the
                             return of the $20.80 principal amount of each
                       SPARQS upon a Price Event Acceleration.

No Fractional Shares..........  Upon delivery of the SPARQS to the Trustee at   
                              maturity, we will deliver the aggregate number
         of shares of The Williams

PS-15 

424B3
16th Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 16th
                               Companies Stock due with respect to all of such
                                SPARQS, as described above, but we will pay cash
                             in lieu of delivering any fractional share of
                               The Williams Companies Stock in an amount equal
                                to the corresponding fractional Closing Price of
                        such fraction of a share of The Williams
                                Companies Stock as determined by the Calculation
                            Agent as of the second scheduled Trading Day
                prior to maturity of the SPARQS.

Exchange Ratio................  1.0, subject to adjustment for certain corporate
                                events relating to The Williams Companies Stock.
                       See "--Antidilution Adjustments" below.

Closing Price.................  The Closing Price for one share of The Williams 
                         Companies Stock (or one unit of any other
                          security for which a Closing Price must be
                          determined) on any Trading Day (as defined
below) means:   

                                o  if The Williams Companies Stock (or any
                                      such other security) is listed or admitted
                               to trading on a national securities
                                   exchange, the last reported sale price,
                                 regular way, of the principal trading
                                session on such day on the principal
                             United States securities exchange
                                    registered under the Securities Exchange
                                  Act of 1934, as amended (the "Exchange
                                  Act"), on which The Williams Companies
                                 Stock (or any such other security) is
                          listed or admitted to trading,

                                o  if The Williams Companies Stock (or any
                                     such other security) is a security of the
                                     Nasdaq National Market (and provided that
                                    the Nasdaq National Market is not then a
                                     national securities exchange), the Nasdaq
                                   official closing price published by The
                                     Nasdaq Stock Market, Inc. on such day, or

                                o  if The Williams Companies Stock (or any
                                     such other security) is neither listed or
                               admitted to trading on any national
                                     securities exchange nor a security of the
                                     Nasdaq National Market but is included in
                                    the OTC Bulletin Board Service (the "OTC
                                     Bulletin Board") operated by the National
                                   Association of Securities Dealers, Inc.
                                      (the "NASD"), the last reported sale price
                                   of the principal trading session on the
                           OTC Bulletin Board on such day.

                            If The Williams Companies Stock (or any such
                                other security) is listed or admitted to trading
                           on any national securities exchange or is a
                              security of the Nasdaq National Market but the
                           last reported sale price or Nasdaq official
                              closing price, as applicable, is not available
                            pursuant to the preceding sentence, then the
                           Closing Price for one share of The Williams
                              Companies Stock (or one unit of any such other
                               security) on any Trading Day will mean the last
                            reported sale price of the principal trading
                         session on the over-the-counter market as
                             reported on the Nasdaq National Market or the
                                OTC Bulletin Board on such day. If, because of a
                             Market Disruption Event (as defined below) or
                          otherwise, the last reported sale price or
       Nasdaq official closing

PS-16 

424B3
17th Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 17th
                                price, as applicable, for The Williams Companies
                         Stock (or any such other security) is not
                       available pursuant to either of the two
                               preceding sentences, then the Closing Price for
                               any Trading Day will be the mean, as determined
                               by the Calculation Agent, of the bid prices for
                               The Williams Companies Stock (or any such other
                          security) obtained from as many recognized
                           dealers in such security, but not exceeding
                                three, as will make such bid prices available to
                              the Calculation Agent. Bids of MS & Co. or any
                        of its affiliates may be included in the
                                calculation of such mean, but only to the extent
                            that any such bid is the highest of the bids
                          obtained. The term "security of the Nasdaq
                        National Market" will include a security
                             included in any successor to such system, and
                                the term OTC Bulletin Board Service will include
              any successor service thereto.

Trading Day...................  A day, as determined by the Calculation Agent,  
                              on which trading is generally conducted on the
                           New York Stock Exchange, Inc. ("NYSE"), the
                             AMEX, the Nasdaq National Market, the Chicago
                            Mercantile Exchange and the Chicago Board of
                            Options Exchange and in the over-the-counter
                          market for equity securities in the United
States.         

Book Entry Note or                                                              
Certificated Note...........  Book Entry. The SPARQS will be issued in the  
                           form of one or more fully registered global
                              securities which will be deposited with, or on
                            behalf of, DTC and will be registered in the
                               name of a nominee of DTC. DTC's nominee will be
                              the only registered holder of the SPARQS. Your
                         beneficial interest in the SPARQS will be
                               evidenced solely by entries on the books of the
                                securities intermediary acting on your behalf as
                                a direct or indirect participant in DTC. In this
                             pricing supplement, all references to actions
                           taken by you or to be taken by you refer to
                        actions taken or to be taken by DTC upon
                            instructions from its participants acting on
                              your behalf, and all references to payments or
                               notices to you will mean payments or notices to
                                DTC, as the registered holder of the SPARQS, for
                               distribution to participants in accordance with
                                DTC's procedures. For more information regarding
                          DTC and book entry notes, please read "The
                          Depositary" in the accompanying prospectus
                          supplement and "Form of Securities--Global
                                Securities--Registered Global Securities" in the
        accompanying prospectus.

Senior Note or                                                                  
Subordinated Note...........  Senior                                        

Trustee.......................  JPMorgan Chase Bank, N.A. (formerly known as    
    JPMorgan Chase Bank)

Agent.........................  MS & Co.                                        

Calculation Agent.............  MS & Co.                                        

                                All determinations made by the Calculation Agent
                     will be at the sole discretion of the
                             Calculation Agent and will, in the absence of
                              manifest error, be conclusive for all purposes
                        and binding on you, the Trustee, and us.

PS-17 

424B3
18th Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 18th
                             All calculations with respect to the Exchange
                                Ratio and Call Price for the SPARQS will be made
                               by the Calculation Agent and will be rounded to
                             the nearest one hundred-thousandth, with five
                            one-millionths rounded upward (e.g., .876545
                               would be rounded to .87655); all dollar amounts
                             related to the Call Price resulting from such
                           calculations will be rounded to the nearest
             ten-thousandth, with five one
                                hundred-thousandths rounded upward (e.g., .76545
                          would be rounded to .7655); and all dollar
                              amounts paid with respect to the Call Price on
                              the aggregate number of SPARQS will be rounded
                               to the nearest cent, with one-half cent rounded
upward.         

                               Because the Calculation Agent is our affiliate,
                               the economic interests of the Calculation Agent
                         and its affiliates may be adverse to your
                       interests as an investor in the SPARQS,
                                including with respect to certain determinations
                             and judgments that the Calculation Agent must
                                make in making adjustments to the Exchange Ratio
                             or determining any Closing Price or whether a
                       Market Disruption Event has occurred or
                            calculating the amount payable to you in the
                        event of a Price Event Acceleration. See
                          "--Antidilution Adjustments" and "--Market
                          Disruption Event" below and "--Price Event
                             Acceleration" above. MS & Co. is obligated to
                     carry out its duties and functions as
                             Calculation Agent in good faith and using its
    reasonable judgment.

Antidilution Adjustments......  The Exchange Ratio will be adjusted as follows: 

                                1. If The Williams Companies Stock is subject to
                               a stock split or reverse stock split, then once
                             such split has become effective, the Exchange
                              Ratio will be adjusted to equal the product of
                          the prior Exchange Ratio and the number of
                            shares issued in such stock split or reverse
                            stock split with respect to one share of The
         Williams Companies Stock.

                             2. If The Williams Companies Stock is subject
                               (i) to a stock dividend (issuance of additional
                               shares of The Williams Companies Stock) that is
                             given ratably to all holders of shares of The
                     Williams Companies Stock or (ii) to a
                               distribution of The Williams Companies Stock as
                              a result of the triggering of any provision of
                                the corporate charter of The Williams Companies,
                               then once the dividend has become effective and
                       The Williams Companies Stock is trading
                                ex-dividend, the Exchange Ratio will be adjusted
                              so that the new Exchange Ratio shall equal the
                                prior Exchange Ratio plus the product of (i) the
                           number of shares issued with respect to one
                              share of The Williams Companies Stock and (ii)
         the prior Exchange Ratio.

                             3. If The Williams Companies issues rights or
                       warrants to all holders of The Williams
                                Companies Stock to subscribe for or purchase The
                             Williams Companies Stock at an exercise price
                            per share less than the Closing Price of The
                             Williams Companies Stock on both (i) the date
                                the exercise price of such rights or warrants is
                               determined and (ii) the expiration date of such
                              rights or warrants, and if the expiration date
                                of such rights or warrants precedes the maturity
                      of the SPARQS, then the Exchange Ratio

PS-18 

424B3
19th Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 19th
                            will be adjusted to equal the product of the
                        prior Exchange Ratio and a fraction, the
                                numerator of which shall be the number of shares
                           of The Williams Companies Stock outstanding
                                immediately prior to the issuance of such rights
                                or warrants plus the number of additional shares
                           of The Williams Companies Stock offered for
                                subscription or purchase pursuant to such rights
                              or warrants and the denominator of which shall
                       be the number of shares of The Williams
                                Companies Stock outstanding immediately prior to
                                the issuance of such rights or warrants plus the
                           number of additional shares of The Williams
                            Companies Stock which the aggregate offering
                          price of the total number of shares of The
                       Williams Companies Stock so offered for
                                subscription or purchase pursuant to such rights
                               or warrants would purchase at the Closing Price
                        on the expiration date of such rights or
                      warrants, which shall be determined by
                               multiplying such total number of shares offered
                                by the exercise price of such rights or warrants
                            and dividing the product so obtained by such
Closing Price.  

                               4. There will be no adjustments to the Exchange
                        Ratio to reflect cash dividends or other
                               distributions paid with respect to The Williams
                        Companies Stock other than distributions
                         described in paragraph 2, paragraph 3 and
                               clauses (i), (iv) and (v) of the first sentence
                           of paragraph 5 and Extraordinary Dividends.
                              "Extraordinary Dividend" means each of (a) the
                               full amount per share of The Williams Companies
                              Stock of any cash dividend or special dividend
                         or distribution that is identified by The
                         Williams Companies as an extraordinary or
                                special dividend or distribution, (b) the excess
                               of any cash dividend or other cash distribution
                        (that is not otherwise identified by The
                         Williams Companies as an extraordinary or
                             special dividend or distribution) distributed
                              per share of The Williams Companies Stock over
                                the immediately preceding cash dividend or other
                           cash distribution, if any, per share of The
                                Williams Companies Stock that did not include an
                           Extraordinary Dividend (as adjusted for any
                       subsequent corporate event requiring an
                              adjustment hereunder, such as a stock split or
                              reverse stock split) if such excess portion of
                               the dividend or distribution is more than 5% of
                           the Closing Price of The Williams Companies
                      Stock on the Trading Day preceding the
                           "ex-dividend date" (that is, the day on and
                        after which transactions in The Williams
                          Companies Stock on an organized securities
                              exchange or trading system no longer carry the
                            right to receive that cash dividend or other
                               cash distribution) for the payment of such cash
                         dividend or other cash distribution (such
                                Closing Price, the "Base Closing Price") and (c)
                               the full cash value of any non-cash dividend or
                                distribution per share of The Williams Companies
                          Stock (excluding Marketable Securities, as
                             defined in paragraph 5 below). Subject to the
                           following sentence, if any cash dividend or
                                distribution of such other property with respect
                           to The Williams Companies Stock includes an
                               Extraordinary Dividend, the Exchange Ratio with
                               respect to The Williams Companies Stock will be
                                adjusted on the ex-dividend date so that the new
                                Exchange Ratio will equal the product of (i) the
                             prior Exchange Ratio and (ii) a fraction, the
                             numerator of which is the Base Closing Price,

PS-19 

424B3
20th Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 20th
                             and the denominator of which is the amount by
                        which the Base Closing Price exceeds the
                            Extraordinary Dividend. If any Extraordinary
                            Dividend is at least 35% of the Base Closing
                              Price, then, instead of adjusting the Exchange
                          Ratio, the amount payable upon exchange at
                           maturity will be determined as described in
                        paragraph 5 below, and the Extraordinary
                              Dividend will be allocated to Reference Basket
                              Stocks in accordance with the procedures for a
                             Reference Basket Event as described in clause
                              (c)(ii) of paragraph 5 below. The value of the
                               non-cash component of an Extraordinary Dividend
                              will be determined on the ex-dividend date for
                           such distribution by the Calculation Agent,
                              whose determination shall be conclusive in the
                                absence of manifest error. A distribution on The
                            Williams Companies Stock described in clause
                         (i), (iv) or (v) of the first sentence of
                              paragraph 5 below shall cause an adjustment to
                               the Exchange Ratio pursuant only to clause (i),
                              (iv) or (v) of the first sentence of paragraph
 5, as applicable.

                          5. Any of the following shall constitute a
                                Reorganization Event: (i) The Williams Companies
                            Stock is reclassified or changed, including,
                               without limitation, as a result of the issuance
                                of any tracking stock by The Williams Companies,
                               (ii) The Williams Companies has been subject to
                               any merger, combination or consolidation and is
                            not the surviving entity, (iii) The Williams
                           Companies completes a statutory exchange of
                               securities with another corporation (other than
                        pursuant to clause (ii) above), (iv) The
                         Williams Companies is liquidated, (v) The
                       Williams Companies issues to all of its
                           shareholders equity securities of an issuer
                                other than The Williams Companies (other than in
                                a transaction described in clause (ii), (iii) or
                           (iv) above) (a "spinoff stock") or (vi) The
                            Williams Companies Stock is the subject of a
                         tender or exchange offer or going private
                                transaction on all of the outstanding shares. If
                                any Reorganization Event occurs, in each case as
                             a result of which the holders of The Williams
                           Companies Stock receive any equity security
                           listed on a national securities exchange or
                       traded on The Nasdaq National Market (a
                           "Marketable Security"), other securities or
                            other property, assets or cash (collectively
                             "Exchange Property"), the amount payable upon
                               exchange at maturity with respect to the $20.80
                             principal amount of each SPARQS following the
                            effective date for such Reorganization Event
                          (or, if applicable, in the case of spinoff
                                stock, the ex-dividend date for the distribution
                       of such spinoff stock) and any required
                        adjustment to the Exchange Ratio will be
                            determined in accordance with the following:

                                   (a) if The Williams Companies Stock continues
                               to be outstanding, The Williams Companies
                                Stock (if applicable, as reclassified upon
                                the issuance of any tracking stock) at the
                                   Exchange Ratio in effect on the third Trading
                              Day prior to the scheduled Maturity Date
                                  (taking into account any adjustments for any
                                 distributions described under clause (c)(i)
 below); and

PS-20 

424B3
21st Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 21st
                                  (b) for each Marketable Security received in
                            such Reorganization Event (each a "New
                            Stock"), including the issuance of any
                            tracking stock or spinoff stock or the
                                   receipt of any stock received in exchange for
                                 The Williams Companies Stock, the number of
                                   shares of the New Stock received with respect
                                  to one share of The Williams Companies Stock
                              multiplied by the Exchange Ratio for The
                                 Williams Companies Stock on the Trading Day
                                immediately prior to the effective date of
                              the Reorganization Event (the "New Stock
                                Exchange Ratio"), as adjusted to the third
                                 Trading Day prior to the scheduled Maturity
                                   Date (taking into account any adjustments for
                                 distributions described under clause (c)(i)
 below); and

                                (c) for any cash and any other property or
                                 securities other than Marketable Securities
                                received in such Reorganization Event (the
                     "Non-Stock Exchange Property"),

                                      (i) if the combined value of the amount of
                                    Non-Stock Exchange Property received per
                                     share of The Williams Companies Stock, as
                                      determined by the Calculation Agent in its
                                    sole discretion on the effective date of
                                     such Reorganization Event (the "Non-Stock
                                    Exchange Property Value"), by holders of
                                     The Williams Companies Stock is less than
                                    25% of the Closing Price of The Williams
                              Companies Stock on the Trading Day
                                      immediately prior to the effective date of
                                  such Reorganization Event, a number of
                                      shares of The Williams Companies Stock, if
                                     applicable, and of any New Stock received
                                  in connection with such Reorganization
                                      Event, if applicable, in proportion to the
                                   relative Closing Prices of The Williams
                                   Companies Stock and any such New Stock,
                                    and with an aggregate value equal to the
                             Non-Stock Exchange Property Value
                                      multiplied by the Exchange Ratio in effect
                                   for The Williams Companies Stock on the
                                Trading Day immediately prior to the
                                 effective date of such Reorganization
                                   Event, based on such Closing Prices, in
                                      each case as determined by the Calculation
                               Agent in its sole discretion on the
                                 effective date of such Reorganization
                                   Event; and the number of such shares of
                                   The Williams Companies Stock or any New
                                    Stock determined in accordance with this
                                      clause (c)(i) will be added at the time of
                                    such adjustment to the Exchange Ratio in
                                 subparagraph (a) above and/or the New
                                    Stock Exchange Ratio in subparagraph (b)
                    above, as applicable, or

                                   (ii) if the Non-Stock Exchange Property
                                   Value is equal to or exceeds 25% of the
                                   Closing Price of The Williams Companies
                                      Stock on the Trading Day immediately prior
                                  to the effective date relating to such
                                    Reorganization Event or, if The Williams
                                      Companies Stock is surrendered exclusively
                  for Non-Stock Exchange

PS-21 

424B3
22nd Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 22nd
                                Property (in each case, a "Reference
                                     Basket Event"), an initially equal-dollar
                                     weighted basket of three Reference Basket
                             Stocks (as defined below) with an
                                    aggregate value on the effective date of
                                  such Reorganization Event equal to the
                             Non-Stock Exchange Property Value
                                      multiplied by the Exchange Ratio in effect
                                   for The Williams Companies Stock on the
                                Trading Day immediately prior to the
                                 effective date of such Reorganization
                                     Event. The "Reference Basket Stocks" will
                                be the three stocks with the largest
                                  market capitalization among the stocks
                                     that then comprise the S&P 500 Index (or,
                           if publication of such index is
                                     discontinued, any successor or substitute
                                      index selected by the Calculation Agent in
                                      its sole discretion) with the same primary
                                   Standard Industrial Classification Code
                                   ("SIC Code") as The Williams Companies;
                                      provided, however, that a Reference Basket
                                    Stock will not include any stock that is
                                      subject to a trading restriction under the
                                  trading restriction policies of Morgan
                                 Stanley or any of its affiliates that
                                 would materially limit the ability of
                                      Morgan Stanley or any of its affiliates to
                                 hedge the SPARQS with respect to such
                                     stock (a "Hedging Restriction"); provided
                                  further that if three Reference Basket
                                    Stocks cannot be identified from the S&P
                                     500 Index by primary SIC Code for which a
                                   Hedging Restriction does not exist, the
                                    remaining Reference Basket Stock(s) will
                                     be selected by the Calculation Agent from
                                      the largest market capitalization stock(s)
                                    within the same Division and Major Group
                                    classification (as defined by the Office
                                    of Management and Budget) as the primary
                                     SIC Code for The Williams Companies. Each
                                     Reference Basket Stock will be assigned a
                                    Basket Stock Exchange Ratio equal to the
                                     number of shares of such Reference Basket
                             Stock with a Closing Price on the
                                 effective date of such Reorganization
                                 Event equal to the product of (a) the
                                      Non-Stock Exchange Property Value, (b) the
                                     Exchange Ratio in effect for The Williams
                              Companies Stock on the Trading Day
                                      immediately prior to the effective date of
                             such Reorganization Event and (c)
      0.3333333.

                             Following the allocation of any Extraordinary
                               Dividend to Reference Basket Stocks pursuant to
                             paragraph 4 above or any Reorganization Event
                         described in this paragraph 5, the amount
                              payable upon exchange at maturity with respect
                             to the $20.80 principal amount of each SPARQS
   will be the sum of:

                             (x) if applicable, The Williams Companies
                               Stock at the Exchange Ratio then in
       effect; and

                               (y) if applicable, for each New Stock, such
                                     New Stock at the New Stock Exchange Ratio
                                  then in effect for such New Stock; and

PS-22 

424B3
23rd Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 23rd
                                (z) if applicable, for each Reference Basket
                                     Stock, such Reference Basket Stock at the
                                      Basket Stock Exchange Ratio then in effect
                            for such Reference Basket Stock.

                           In each case, the applicable Exchange Ratio
                          (including for this purpose, any New Stock
                              Exchange Ratio or Basket Stock Exchange Ratio)
                              will be determined by the Calculation Agent on
                            the third Trading Day prior to the scheduled
Maturity Date.  

                              For purposes of paragraph 5 above, in the case
                            of a consummated tender or exchange offer or
                            going-private transaction involving Exchange
                                Property of a particular type, Exchange Property
                                shall be deemed to include the amount of cash or
                                other property paid by the offeror in the tender
                               or exchange offer with respect to such Exchange
                              Property (in an amount determined on the basis
                         of the rate of exchange in such tender or
                                exchange offer or going-private transaction). In
                            the event of a tender or exchange offer or a
                         going-private transaction with respect to
                               Exchange Property in which an offeree may elect
                           to receive cash or other property, Exchange
                                Property shall be deemed to include the kind and
                             amount of cash and other property received by
                   offerees who elect to receive cash.

                              Following the occurrence of any Reorganization
                             Event referred to in paragraphs 4 or 5 above,
                                (i) references to "The Williams Companies Stock"
                          under "--No Fractional Shares," "--Closing
                               Price" and "--Market Disruption Event" shall be
                        deemed to also refer to any New Stock or
                          Reference Basket Stock, and (ii) all other
                             references in this pricing supplement to "The
                            Williams Companies Stock" shall be deemed to
                             refer to the Exchange Property into which the
                      SPARQS are thereafter exchangeable and
                          references to a "share" or "shares" of The
                           Williams Companies Stock shall be deemed to
                             refer to the applicable unit or units of such
                             Exchange Property, including any New Stock or
                          Reference Basket Stock, unless the context
                          otherwise requires. The New Stock Exchange
                        Ratio(s) or Basket Stock Exchange Ratios
                       resulting from any Reorganization Event
                         described in paragraph 5 above or similar
                           adjustment under paragraph 4 above shall be
                       subject to the adjustments set forth in
              paragraphs 1 through 5 hereof.

                                If a Reference Basket Event occurs, we shall, or
                             shall cause the Calculation Agent to, provide
                             written notice to the Trustee at its New York
                       office, on which notice the Trustee may
                               conclusively rely, and to DTC of the occurrence
                               of such Reference Basket Event and of the three
                               Reference Basket Stocks selected as promptly as
                        possible and in no event later than five
                             Business Days after the date of the Reference
Basket Event.   

                              No adjustment to any Exchange Ratio (including
                              for this purpose, any New Stock Exchange Ratio
                                or Basket Stock Exchange Ratio) will be required
                                unless such adjustment would require a change of
                           at least 0.1% in the Exchange Ratio then in
                                effect. The Exchange Ratio resulting from any of
                               the adjustments specified above will be rounded
                                to the nearest one hundred-thousandth, with five
one-            

PS-23 

424B3
24th Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 24th
                             millionths rounded upward. Adjustments to the
                               Exchange Ratios will be made up to the close of
                              business on the third Trading Day prior to the
        scheduled Maturity Date.

                              No adjustments to the Exchange Ratio or method
                         of calculating the Exchange Ratio will be
                              required other than those specified above. The
                            adjustments specified above do not cover all
                             events that could affect the Closing Price of
                                The Williams Companies Stock, including, without
                              limitation, a partial tender or exchange offer
                 for The Williams Companies Stock.

                     The Calculation Agent shall be solely
                     responsible for the determination and
                              calculation of any adjustments to the Exchange
                             Ratio, any New Stock Exchange Ratio or Basket
                             Stock Exchange Ratio or method of calculating
                              the Exchange Property Value and of any related
                               determinations and calculations with respect to
                               any distributions of stock, other securities or
                            other property or assets (including cash) in
                                connection with any corporate event described in
                     paragraphs 1 through 5 above, and its
                            determinations and calculations with respect
                             thereto shall be conclusive in the absence of
manifest error. 

                              The Calculation Agent will provide information
                               as to any adjustments to the Exchange Ratio, or
                               to the method of calculating the amount payable
                            upon exchange at maturity of the SPARQS made
                           pursuant to paragraph 5 above, upon written
                      request by any investor in the SPARQS.

Market Disruption Event.......  Market Disruption Event means, with respect to  
             The Williams Companies Stock:

                           (i) a suspension, absence or material
                           limitation of trading of The Williams
                                   Companies Stock on the primary market for The
                                Williams Companies Stock for more than two
                                  hours of trading or during the one-half hour
                                 period preceding the close of the principal
                          trading session in such market; or a
                                 breakdown or failure in the price and trade
                                 reporting systems of the primary market for
                                 The Williams Companies Stock as a result of
                               which the reported trading prices for The
                              Williams Companies Stock during the last
                              one-half hour preceding the close of the
                                  principal trading session in such market are
                               materially inaccurate; or the suspension,
                                  absence or material limitation of trading on
                               the primary market for trading in options
                                 contracts related to The Williams Companies
                                   Stock, if available, during the one-half hour
                                 period preceding the close of the principal
                                  trading session in the applicable market, in
                                each case as determined by the Calculation
                       Agent in its sole discretion; and

                                   (ii) a determination by the Calculation Agent
                           in its sole discretion that any event
                              described in clause (i) above materially
                                   interfered with our ability or the ability of
                                   any of our affiliates to unwind or adjust all
                             or a material portion of the hedge with
            respect to the SPARQS.

PS-24 

424B3
25th Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 25th
                            For purposes of determining whether a Market
                               Disruption Event has occurred: (1) a limitation
                              on the hours or number of days of trading will
                              not constitute a Market Disruption Event if it
                               results from an announced change in the regular
                              business hours of the relevant exchange, (2) a
                              decision to permanently discontinue trading in
                      the relevant options contract will not
                         constitute a Market Disruption Event, (3)
                             limitations pursuant to NYSE Rule 80A (or any
                        applicable rule or regulation enacted or
                  promulgated by the NYSE, any other
                              self-regulatory organization or the Securities
                             and Exchange Commission (the "Commission") of
                               scope similar to NYSE Rule 80A as determined by
                        the Calculation Agent) on trading during
                                significant market fluctuations shall constitute
                               a suspension, absence or material limitation of
                               trading, (4) a suspension of trading in options
                                contracts on The Williams Companies Stock by the
                         primary securities market trading in such
                               options, if available, by reason of (x) a price
                              change exceeding limits set by such securities
                              exchange or market, (y) an imbalance of orders
                                relating to such contracts or (z) a disparity in
                             bid and ask quotes relating to such contracts
                        will constitute a suspension, absence or
                         material limitation of trading in options
                           contracts related to The Williams Companies
                               Stock and (5) a suspension, absence or material
                               limitation of trading on the primary securities
                                market on which options contracts related to The
                            Williams Companies Stock are traded will not
                               include any time when such securities market is
                        itself closed for trading under ordinary
circumstances.  

Alternate Exchange                                                              
Calculation in Case of an                                                   
 Event of Default............  In case an event of default with respect to the
                             SPARQS shall have occurred and be continuing,
                              the amount declared due and payable per SPARQS
                              upon any acceleration of the SPARQS (an "Event
                                of Default Acceleration") shall be determined by
                               the Calculation Agent and shall be an amount in
                              cash equal to the lesser of (i) the product of
                               (x) the Closing Price of The Williams Companies
                       Stock (and/or the value of any Exchange
                             Property) as of the date of such acceleration
                                and (y) the then current Exchange Ratio and (ii)
                               the Call Price calculated as though the date of
                                acceleration were the Call Date (but in no event
                           less than the Call Price for the first Call
                           Date), in each case plus accrued but unpaid
                     interest to but excluding the date of
                             acceleration; provided that if we have called
                                the SPARQS in accordance with the Morgan Stanley
                               Call Right, the amount declared due and payable
                                upon any such acceleration shall be an amount in
                                cash for each SPARQS equal to the Call Price for
                        the Call Date specified in our notice of
                           mandatory exchange, plus accrued but unpaid
                     interest to but excluding the date of
acceleration.   

The Williams Companies Stock;                                                   
  Public Information.........  The Williams Companies is a natural gas company
                        that primarily finds, produces, gathers,
                         processes and transports natural gas, and
                                manages a wholesale power business. The Williams
                                Companies Stock is registered under the Exchange
                               Act. Companies with securities registered under
                     the Exchange Act are required to file
                        periodically certain financial and other
        information specified by

PS-25 

424B3
26th Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 26th
                                the Commission. Information provided to or filed
                               with the Commission can be inspected and copied
                                at the public reference facilities maintained by
                                the Commission at Room 1580, 100 F Street, N.E.,
                          Washington, D.C. 20549, and copies of such
                        material can be obtained from the Public
                          Reference Section of the Commission, 100 F
                        Street, N.E., Washington, D.C. 20549, at
                          prescribed rates. In addition, information
                        provided to or filed with the Commission
                                electronically can be accessed through a website
                                maintained by the Commission. The address of the
                           Commission's website is http://www.sec.gov.
                         Information provided to or filed with the
                                Commission by The Williams Companies pursuant to
                               the Exchange Act can be located by reference to
                              Commission file number 001-04174. In addition,
                                information regarding The Williams Companies may
                             be obtained from other sources including, but
                         not limited to, press releases, newspaper
                        articles and other publicly disseminated
                                documents. We make no representation or warranty
                          as to the accuracy or completeness of such
information.    

                           This pricing supplement relates only to the
                                SPARQS offered hereby and does not relate to The
                               Williams Companies Stock or other securities of
                           The Williams Companies. We have derived all
                                disclosures contained in this pricing supplement
                         regarding The Williams Companies from the
                             publicly available documents described in the
                           preceding paragraph. In connection with the
                                offering of the SPARQS, neither we nor the Agent
                           has participated in the preparation of such
                                documents or made any due diligence inquiry with
                             respect to The Williams Companies. Neither we
                                nor the Agent makes any representation that such
                         publicly available documents or any other
                            publicly available information regarding The
                           Williams Companies is accurate or complete.
                              Furthermore, we cannot give any assurance that
                             all events occurring prior to the date hereof
                                (including events that would affect the accuracy
                         or completeness of the publicly available
                               documents described in the preceding paragraph)
                          that would affect the trading price of The
                           Williams Companies Stock (and therefore the
                            price of The Williams Companies Stock at the
                             time we priced the SPARQS) have been publicly
                            disclosed. Subsequent disclosure of any such
                         events or the disclosure of or failure to
                              disclose material future events concerning The
                         Williams Companies could affect the value
                               received at maturity with respect to the SPARQS
                               and therefore the trading prices of the SPARQS.

                              Neither we nor any of our affiliates makes any
                              representation to you as to the performance of
             The Williams Companies Stock.

                              We and/or our affiliates may presently or from
                        time to time engage in business with The
                             Williams Companies, including extending loans
                        to, or making equity investments in, The
                        Williams Companies or providing advisory
                           services to The Williams Companies, such as
                                merger and acquisition advisory services. In the
                      course of such business, we and/or our
affiliates      

PS-26 

424B3
27th Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 27th
                               may acquire non-public information with respect
                             to The Williams Companies, and neither we nor
                                any of our affiliates undertakes to disclose any
                            such information to you. In addition, one or
                           more of our affiliates may publish research
                               reports with respect to The Williams Companies,
                             and the reports may or may not recommend that
                            investors buy or hold The Williams Companies
                          Stock. The statements in the preceding two
                               sentences are not intended to affect the rights
                               of investors in the SPARQS under the securities
                               laws. As a prospective purchaser of SPARQS, you
                                should undertake an independent investigation of
                             The Williams Companies as in your judgment is
                             appropriate to make an informed decision with
                        respect to an investment in The Williams
Companies Stock.

Historical Information........  The following table sets forth the published    
                           high and low Closing Prices of The Williams
                                Companies Stock during 2002, 2003, 2004 and 2005
                               through July 22, 2005. The Closing Price of The
                             Williams Companies Stock on July 22, 2005 was
                                $20.80. We obtained the Closing Prices and other
                          information below from Bloomberg Financial
                              Markets, without independent verification. You
                            should not take the historical prices of The
                            Williams Companies Stock as an indication of
                             future performance. The price of The Williams
                                Companies Stock may decrease so that at maturity
                          you will receive an amount of The Williams
                             Companies Stock worth less than the principal
                            amount of the SPARQS. We cannot give you any
                        assurance that the price of The Williams
                        Companies Stock will increase so that at
                          maturity you will receive an amount of The
                            Williams Companies Stock worth more than the
                             principal amount of the SPARQS. To the extent
                               that the Closing Price at maturity of shares of
                            The Williams Companies Stock at the Exchange
                                Ratio is less than the Issue Price of the SPARQS
                             and the shortfall is not offset by the coupon
                               paid on the SPARQS, you will lose money on your
investment.     

                                                    High     Low  Dividend
                                                    ----     ---  --------
 (CUSIP 969457100)
2002            
                          First Quarter........ $25.97  $14.53  $.20
                          Second Quarter.......  24.17   5.47    .20
                          Third Quarter........  6.32    0.88    .01
                          Fourth Quarter.......  3.06    1.35    .01
2003            
                          First Quarter........  4.74    2.60    .01
                          Second Quarter.......  8.77    4.87    .01
                          Third Quarter........  9.42    6.20    .01
                          Fourth Quarter.......  10.62   8.94    .01
2004            
                          First Quarter........  11.30   8.75    .01
                          Second Quarter.......  12.23   9.89    .01
                          Third Quarter........  12.51   11.45   .01
                          Fourth Quarter.......  17.10   12.35   .05
2005            
                          First Quarter........  19.29   15.29   .05
                          Second Quarter.......  19.21   16.29   .05
Third Quarter   
(through  
                       July 22, 2005)....  20.80   19.16

PS-27 

424B3
28th Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 28th
                             We make no representation as to the amount of
                              dividends, if any, that The Williams Companies
                           will pay in the future. In any event, as an
                                investor in the SPARQS, you will not be entitled
                         to receive dividends, if any, that may be
                        payable on The Williams Companies Stock.

Use of Proceeds and Hedging...  The net proceeds we receive from the sale of the
                         SPARQS will be used for general corporate
                               purposes and, in part, by us in connection with
                                hedging our obligations under the SPARQS through
                             one or more of our subsidiaries. The original
                              issue price of the SPARQS includes the Agent's
                               Commissions (as shown on the cover page of this
                            pricing supplement) paid with respect to the
                              SPARQS and the cost of hedging our obligations
                              under the SPARQS. The cost of hedging includes
                          the projected profit that our subsidiaries
                               expect to realize in consideration for assuming
                          the risks inherent in managing the hedging
                           transactions. Since hedging our obligations
                            entails risk and may be influenced by market
                               forces beyond our or our subsidiaries' control,
                                such hedging may result in a profit that is more
                          or less than initially projected, or could
                               result in a loss. See also "Use of Proceeds" in
            the accompanying prospectus.

                           On the date of this pricing supplement, we,
                              through our subsidiaries or others, hedged our
                           anticipated exposure in connection with the
                          SPARQS by taking positions in The Williams
                               Companies Stock and in options contracts on The
                        Williams Companies Stock listed on major
                                securities markets. Such purchase activity could
                           potentially have increased the price of The
                                Williams Companies Stock, and, accordingly, have
                            increased the issue price of the SPARQS and,
                          therefore, the price at which The Williams
                           Companies Stock must close before you would
                             receive at maturity an amount of The Williams
                             Companies Stock worth as much as or more than
                                the principal amount of the SPARQS. In addition,
                          through our subsidiaries, we are likely to
                                modify our hedge position throughout the life of
                        the SPARQS by purchasing and selling The
                              Williams Companies Stock, options contracts on
                            The Williams Companies Stock listed on major
                            securities markets or positions in any other
                               available securities or instruments that we may
                           wish to use in connection with such hedging
                             activities. We cannot give any assurance that
                                our hedging activities will not affect the price
                               of The Williams Companies Stock and, therefore,
                               adversely affect the value of the SPARQS or the
                                payment you will receive at maturity or upon any
           acceleration of the SPARQS.

Supplemental Information                                                        
Concerning Plan of                                                          
Distribution................  Under the terms and subject to the conditions 
                            contained in the U.S. distribution agreement
                              referred to in the prospectus supplement under
                            "Plan of Distribution," the Agent, acting as
                            principal for its own account, has agreed to
                         purchase, and we have agreed to sell, the
                           principal amount of SPARQS set forth on the
                           cover of this pricing supplement. The Agent
                               proposes initially to offer the SPARQS directly
                              to the public at the public offering price set
                       forth on the cover page of this pricing
supplement plus 

PS-28 

424B3
29th Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 29th
                           accrued interest, if any, from the Original
                                Issue Date. The Agent may allow a concession not
                               in excess of $.338 per SPARQS to other dealers.
                             After the initial offering of the SPARQS, the
                           Agent may vary the offering price and other
                selling terms from time to time.

                               We expect to deliver the SPARQS against payment
                                therefor in New York, New York on July 29, 2005,
                         which is the fifth scheduled Business Day
                             following the date of this pricing supplement
                            and of the pricing of the SPARQS. Under Rule
                         15c6-1 of the Exchange Act, trades in the
                          secondary market generally are required to
                         settle in three Business Days, unless the
                         parties to any such trade expressly agree
                              otherwise. Accordingly, purchasers who wish to
                               trade SPARQS on the date of pricing or the next
                            succeeding Business Day will be required, by
                            virtue of the fact that the SPARQS initially
                           will settle in five Business Days (T+5), to
                              specify alternative settlement arrangements to
            prevent a failed settlement.

                          In order to facilitate the offering of the
                            SPARQS, the Agent may engage in transactions
                                that stabilize, maintain or otherwise affect the
                             price of the SPARQS or The Williams Companies
                            Stock. Specifically, the Agent may sell more
                          SPARQS than it is obligated to purchase in
                              connection with the offering, creating a naked
                        short position in the SPARQS for its own
                           account. The Agent must close out any naked
                              short position by purchasing the SPARQS in the
                           open market. A naked short position is more
                              likely to be created if the Agent is concerned
                                that there may be downward pressure on the price
                              of the SPARQS in the open market after pricing
                         that could adversely affect investors who
                                purchase in the offering. As an additional means
                               of facilitating the offering, the Agent may bid
                         for, and purchase, SPARQS or The Williams
                               Companies Stock in the open market to stabilize
                                the price of the SPARQS. Any of these activities
                             may raise or maintain the market price of the
                         SPARQS above independent market levels or
                               prevent or retard a decline in the market price
                           of the SPARQS. The Agent is not required to
                              engage in these activities, and may end any of
                             these activities at any time. An affiliate of
                                the Agent has entered into a hedging transaction
                               in connection with this offering of the SPARQS.
                          See "--Use of Proceeds and Hedging" above.

ERISA Matters for Pension Plans                                                 
 and Insurance Companies....  Each fiduciary of a pension, profit-sharing or
                          other employee benefit plan subject to the
                                Employee Retirement Income Security Act of 1974,
                                as amended ("ERISA"), (a "Plan") should consider
                               the fiduciary standards of ERISA in the context
                             of the Plan's particular circumstances before
                        authorizing an investment in the SPARQS.
                               Accordingly, among other factors, the fiduciary
                            should consider whether the investment would
                        satisfy the prudence and diversification
                             requirements of ERISA and would be consistent
                                with the documents and instruments governing the
Plan.           

                               In addition, we and certain of our subsidiaries
                             and affiliates, including MS & Co. and Morgan
         Stanley DW Inc. (formerly

PS-29 

424B3
30th Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 30th
                            Dean Witter Reynolds Inc.) ("MSDWI"), may be
                                each considered a "party in interest" within the
                            meaning of ERISA, or a "disqualified person"
                               within the meaning of the Internal Revenue Code
                              of 1986, as amended (the "Code"), with respect
                         to many Plans, as well as many individual
                         retirement accounts and Keogh plans (also
                            "Plans"). Prohibited transactions within the
                                meaning of ERISA or the Code would likely arise,
                             for example, if the SPARQS are acquired by or
                               with the assets of a Plan with respect to which
                               MS & Co., MSDWI or any of their affiliates is a
                            service provider or other party in interest,
                             unless the SPARQS are acquired pursuant to an
                           exemption from the "prohibited transaction"
                      rules. A violation of these prohibited
                               transaction rules could result in an excise tax
                               or other liabilities under ERISA and/or Section
                         4975 of the Code for such persons, unless
                      exemptive relief is available under an
                      applicable statutory or administrative
exemption.      

                            The U.S. Department of Labor has issued five
                       prohibited transaction class exemptions
                               ("PTCEs") that may provide exemptive relief for
                          direct or indirect prohibited transactions
                             resulting from the purchase or holding of the
                             SPARQS. Those class exemptions are PTCE 96-23
                                (for certain transactions determined by in-house
                        asset managers), PTCE 95-60 (for certain
                                transactions involving insurance company general
                               accounts), PTCE 91-38 (for certain transactions
                            involving bank collective investment funds),
                             PTCE 90-1 (for certain transactions involving
                             insurance company separate accounts) and PTCE
                             84-14 (for certain transactions determined by
                      independent qualified asset managers).

                                Because we may be considered a party in interest
                              with respect to many Plans, the SPARQS may not
                              be purchased, held or disposed of by any Plan,
                                any entity whose underlying assets include "plan
                             assets" by reason of any Plan's investment in
                                the entity (a "Plan Asset Entity") or any person
                                investing "plan assets" of any Plan, unless such
                                purchase, holding or disposition is eligible for
                            exemptive relief, including relief available
                              under PTCE 96-23, 95-60, 91-38, 90-1, or 84-14
                           or such purchase, holding or disposition is
                        otherwise not prohibited. Any purchaser,
                               including any fiduciary purchasing on behalf of
                               a Plan, transferee or holder of the SPARQS will
                               be deemed to have represented, in its corporate
                               and its fiduciary capacity, by its purchase and
                               holding of the SPARQS that either (a) it is not
                        a Plan or a Plan Asset Entity and is not
                               purchasing such securities on behalf of or with
                               "plan assets" of any Plan or with any assets of
                                a governmental or church plan that is subject to
                       any federal, state or local law that is
                          substantially similar to the provisions of
                                Section 406 of ERISA or Section 4975 of the Code
                                or (b) its purchase, holding and disposition are
                               eligible for exemptive relief or such purchase,
                             holding and disposition are not prohibited by
                            ERISA or Section 4975 of the Code (or in the
                          case of a governmental or church plan, any
                             substantially similar federal, state or local
law).           

PS-30 

424B3
31st Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 31st
                                Under ERISA, assets of a Plan may include assets
                           held in the general account of an insurance
                               company which has issued an insurance policy to
                             such plan or assets of an entity in which the
                         Plan has invested. Accordingly, insurance
                               company general accounts that include assets of
                            a Plan must ensure that one of the foregoing
                              exemptions is available. Due to the complexity
                            of these rules and the penalties that may be
                           imposed upon persons involved in non-exempt
                           prohibited transactions, it is particularly
                           important that fiduciaries or other persons
                              considering purchasing the SPARQS on behalf of
                              or with "plan assets" of any Plan consult with
                           their counsel regarding the availability of
                          exemptive relief under PTCEs 96-23, 95-60,
     91-38, 90-1 or 84-14.

                              In addition to considering the consequences of
                          holding the SPARQS, employee benefit plans
                              subject to ERISA or insurance companies deemed
                           to be investing ERISA plan assets (or other
                               governmental or church plans subject to similar
                               regulations, as described above) purchasing the
                        SPARQS should also consider the possible
                             implications of owning The Williams Companies
                              Stock upon exchange of the SPARQS at maturity.
                       Purchasers of the SPARQS have exclusive
                                responsibility for ensuring that their purchase,
                            holding and disposition of the SPARQS do not
                           violate the prohibited transaction rules of
                            ERISA or the Code or any similar regulations
                              applicable to governmental or church plans, as
described above.

United States                                                                   
 Federal Income Taxation.....  The following summary is based on the advice of
                              Davis Polk & Wardwell, our special tax counsel
                               ("Tax Counsel"), and is a general discussion of
                               the principal potential U.S. federal income tax
                               consequences to initial investors in the SPARQS
                               that purchase the SPARQS at the Issue Price and
                           that will hold the SPARQS as capital assets
                               within the meaning of Section 1221 of the Code.
                  This summary is based on the Code,
                       administrative pronouncements, judicial
                              decisions and currently effective and proposed
                             Treasury regulations, changes to any of which
                      subsequent to the date of this pricing
                          supplement may affect the tax consequences
                               described herein. This summary does not address
                                all aspects of U.S. federal income taxation that
                           may be relevant to a particular investor in
                                light of the investor's individual circumstances
                           or to certain types of investors subject to
                               special treatment under the U.S. federal income
                               tax laws (e.g., certain financial institutions,
                             tax-exempt organizations, dealers and certain
                              traders in options or securities, partnerships
                                or other entities classified as partnerships, or
                                persons who hold a SPARQS as a part of a hedging
                          transaction, straddle, conversion or other
                                integrated transaction). Additionally, except as
                               pertains to the withholding tax described below
                             under "--Non-U.S. Holders," the effect of the
                              U.S. federal tax laws, including the effect of
                       the U.S. federal estate tax laws, on an
                              investment in the SPARQS by non-U.S. investors
                              is not discussed. As the law applicable to the
                                U.S. federal income taxation of instruments such
                           as the SPARQS is technical and complex, the
                              discussion below necessarily represents only a
                            general summary. Moreover, the effect of any
                              applicable state, local or foreign tax laws is
not discussed.  

PS-31 

424B3
32nd Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 32nd
General         

                               Pursuant to the terms of the SPARQS and subject
                         to the discussion below under "--Non-U.S.
                             Holders," we and every investor in the SPARQS
                          agree (in the absence of an administrative
                       determination or judicial ruling to the
                              contrary) to characterize a SPARQS for all tax
                               purposes as a unit consisting of the following:
                          (i) a terminable contract (the "Terminable
                                Forward Contract") that (a) requires an investor
                               in a SPARQS (subject to the Morgan Stanley Call
                          Right) to purchase, and us to sell, for an
                             amount equal to the Issue Price (the "Forward
                        Price"), The Williams Companies Stock at
                                maturity and (b) allows us, upon exercise of the
                           Morgan Stanley Call Right, to terminate the
                              Terminable Forward Contract by returning to an
                           investor the Deposit (as defined below) and
                                paying to an investor an amount of cash equal to
                             the difference between the Call Price and the
                              Deposit; and (ii) a deposit with us of a fixed
                            amount of cash, equal to the Issue Price, to
                                secure the investor's obligation to purchase The
                               Williams Companies Stock (the "Deposit"), which
                             Deposit bears a quarterly compounded yield of
                            4.17% per annum, which yield is based on our
                               cost of borrowing. Under this characterization,
                            less than the full quarterly payments on the
                               SPARQS will be attributable to the yield on the
                       Deposit. Accordingly, the excess of the
                         quarterly payments on the SPARQS over the
                             portion of those payments attributable to the
                            yield on the Deposit will represent payments
                             attributable to the investor's entry into the
                          Terminable Forward Contract (the "Contract
                                Fees"). We will allocate 100% of the Issue Price
                            of the SPARQS to the Deposit and none to the
                              Terminable Forward Contract. Our allocation of
                               the Issue Price will be binding on investors in
                         the SPARQS, unless an investor timely and
                        explicitly discloses to the IRS that its
                                allocation is different from ours. The treatment
                                of the SPARQS described above and our allocation
                           are not, however, binding on the IRS or the
                                courts. No statutory, judicial or administrative
                authority directly addresses the
                             characterization of the SPARQS or instruments
                             similar to the SPARQS for U.S. federal income
                              tax purposes, and no ruling is being requested
                               from the IRS with respect to the SPARQS. Due to
                                the absence of authorities that directly address
                               instruments that are similar to the SPARQS, Tax
                                Counsel is unable to render an opinion as to the
                               proper U.S. federal income tax characterization
                              of the SPARQS. Significant aspects of the U.S.
                                federal income tax consequences of an investment
                             in the SPARQS are uncertain, and no assurance
                            can be given that the IRS or the courts will
                         agree with the characterization described
                             herein. Accordingly, you are urged to consult
                               your own tax advisor regarding the U.S. federal
                               income tax consequences of an investment in the
                               SPARQS (including alternative characterizations
                          of the SPARQS) and with respect to any tax
                          consequences arising under the laws of any
                            state, local or foreign taxing jurisdiction.
                      Unless otherwise stated, the following
                            discussion is based on the treatment and the
           allocation described above.

PS-32 

424B3
33rd Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 33rd
U.S. Holders    

                               As used herein, the term "U.S. Holder" means an
                           owner of a SPARQS that is, for U.S. federal
                              income tax purposes, (i) a citizen or resident
                                of the United States, (ii) a corporation created
                                or organized under the laws of the United States
                                or any political subdivision thereof or (iii) an
                              estate or trust the income of which is subject
                             to U.S. federal income taxation regardless of
its source.     

           Tax Treatment of the SPARQS

                               Assuming the characterization of the SPARQS and
                              the allocation of the Issue Price as set forth
                              above, Tax Counsel believes that the following
                           U.S. federal income tax consequences should
result.         

                               Quarterly Payments on the SPARQS. To the extent
                         attributable to the yield on the Deposit,
                               quarterly payments on the SPARQS will generally
                              be taxable to a U.S. Holder as ordinary income
                             at the time accrued or received in accordance
                               with the U.S. Holder's method of accounting for
                              U.S. federal income tax purposes. As discussed
                                above, any excess of the quarterly payments over
                                the portion thereof attributable to the yield on
                             the Deposit will be treated as Contract Fees.
                              Although the U.S. federal income tax treatment
                                of Contract Fees is uncertain, we intend to take
                          the position, and the following discussion
                               assumes, that any Contract Fees with respect to
                              the SPARQS constitute taxable income to a U.S.
                         Holder at the time accrued or received in
                           accordance with the U.S. Holder's method of
                                accounting for U.S. federal income tax purposes.

                               Tax Basis. Based on our determination set forth
                         above, the U.S. Holder's tax basis in the
                             Terminable Forward Contract will be zero, and
                               the U.S. Holder's tax basis in the Deposit will
           be 100% of the Issue Price.

                              Settlement of the Terminable Forward Contract.
                       Upon maturity of the Terminable Forward
                              Contract, a U.S. Holder would, pursuant to the
                              Terminable Forward Contract, be deemed to have
                                applied the Forward Price toward the purchase of
                          The Williams Companies Stock, and the U.S.
                                Holder would not recognize any gain or loss with
                           respect to any The Williams Companies Stock
                                received. With respect to any cash received upon
                              maturity (other than in respect of any accrued
                               Contract Fees or accrued but unpaid interest on
                             the Deposit, which will be taxed as described
                        above under "--Quarterly Payments on the
                               SPARQS"), a U.S. Holder would recognize gain or
                              loss. The amount of such gain or loss would be
                           the extent to which the amount of such cash
                             received differs from the pro rata portion of
                          the Forward Price allocable to the cash as
                              described in the following paragraph. Any such
                               gain or loss would generally be capital gain or
         loss, as the case may be.

                                With respect to any The Williams Companies Stock
                             received upon maturity, the U.S. Holder would
                          have an adjusted tax basis in The Williams
                                Companies Stock equal to the pro rata portion of

PS-33 

424B3
34th Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 34th
                      the Forward Price allocable to it. The
                           allocation of the Forward Price between the
                                right to receive cash and The Williams Companies
                               Stock should be based on the amount of the cash
                          received (excluding cash in respect of any
                               accrued interest on the Deposit and any accrued
                           Contract Fees) and the relative fair market
                               value of The Williams Companies Stock received,
                               as of the Maturity Date. The holding period for
                               any The Williams Companies Stock received would
                          start on the day after the maturity of the
                            SPARQS. Although the matter is not free from
                               doubt, the occurrence of a Reorganization Event
                            will not cause a taxable event to occur with
                           respect to the Terminable Forward Contract.

                          Price Event Acceleration. Although the tax
                              consequences of a Price Event Acceleration are
                           uncertain, we intend to treat a Price Event
                              Acceleration as (i) the repayment by us of the
                              Deposit for a price equal to the Forward Price
                            plus the present value of the portion of the
                                remaining scheduled payments on the SPARQS (from
                               and including the date of acceleration) that is
                            attributable to interest on the Deposit, and
                             (ii) the settlement of the Terminable Forward
                                Contract through the delivery by the U.S. Holder
                              to us of the Forward Price in exchange for (a)
                              shares of The Williams Companies Stock and (b)
                              cash equal to the present value of the portion
                          of the remaining scheduled payments on the
                      SPARQS (from and including the date of
                              acceleration) that is attributable to Contract
                               Fees. We will also pay cash representing unpaid
                                interest on the Deposit and unpaid Contract Fees
                            that accrued up to but excluding the date of
acceleration.   

                                Assuming the characterization of the Price Event
                           Acceleration described above, a U.S. Holder
                              would, with respect to the price paid by us to
                            repay the Deposit, recognize capital gain or
                                loss equal to the difference between such amount
                                and the U.S. Holder's basis in the Deposit which
                               difference, in the case of an initial investor,
                          would be equal to the present value of the
                              portion of remaining scheduled payments on the
                                SPARQS attributable to the unaccrued interest on
                             the Deposit. In general, the tax treatment of
                        the settlement of the Terminable Forward
                              Contract upon a Price Event Acceleration would
                    be the same as described above under
                       "--Settlement of the Terminable Forward
                             Contract." However, the tax treatment of cash
                             received with respect to the present value of
                               the portion of the remaining scheduled payments
                              on the SPARQS that is attributable to Contract
                               Fees is uncertain. Such amount could be treated
                            as an adjustment to the Forward Price, which
                               would reduce the basis a U.S. Holder would have
                               in The Williams Companies Stock received, or as
                            additional cash proceeds with respect to the
                           Forward Contract, which would be treated as
                          described above under "--Settlement of the
                              Terminable Forward Contract." U.S. Holders are
                       urged to consult their own tax advisors
                               regarding the U.S. federal income tax treatment
                               of cash received with respect to the Terminable
                   Forward Contract upon a Price Event
Acceleration.   

PS-34 

424B3
35th Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 35th
                         Any cash received with respect to accrued
                                interest on the Deposit and any accrued Contract
                     Fees will be taxed as described under
                           "--Quarterly Payments on the SPARQS" above.

                         Sale, Exchange or Early Retirement of the
                           SPARQS. Upon a sale or exchange of a SPARQS
                             prior to the maturity of the SPARQS, upon the
                        retirement of a SPARQS prior to maturity
                            pursuant to the Morgan Stanley Call Right or
                          upon the occurrence of an Event of Default
                           Acceleration, a U.S. Holder would recognize
                            taxable gain or loss equal to the difference
                         between the amount realized on such sale,
                                exchange or retirement and the U.S. Holder's tax
                         basis in the SPARQS so sold, exchanged or
                              retired. Any such gain or loss would generally
                            be capital gain or loss, as the case may be.
                                Such U.S. Holder's tax basis in the SPARQS would
                              generally equal the U.S. Holder's tax basis in
                           the Deposit. For these purposes, the amount
                    realized does not include any amount
                           attributable to accrued but unpaid interest
                                payments on the Deposit, which would be taxed as
                            described under "--Quarterly Payments on the
                          SPARQS" above. It is uncertain whether the
                                amount realized includes any amount attributable
                         to accrued but unpaid Contract Fees. U.S.
                             Holders should consult their own tax advisors
                             regarding the treatment of accrued but unpaid
                        Contract Fees upon the sale, exchange or
       retirement of a SPARQS.

                         Possible Alternative Tax Treatments of an
        Investment in the SPARQS

                               Due to the absence of authorities that directly
                          address the proper characterization of the
                              SPARQS, no assurance can be given that the IRS
                             will accept, or that a court will uphold, the
                            characterization and tax treatment described
                           above. In particular, the IRS could seek to
                                analyze the U.S. federal income tax consequences
                             of owning a SPARQS under Treasury regulations
                             governing contingent payment debt instruments
                       (the "Contingent Payment Regulations").

                                If the IRS were successful in asserting that the
                             Contingent Payment Regulations applied to the
                          SPARQS, the timing and character of income
                              thereon would be significantly affected. Among
                                other things, a U.S. Holder would be required to
                        accrue interest income as original issue
                      discount, subject to adjustments, at a
                         "comparable yield" on the Issue Price. In
                              addition, a U.S. Holder would recognize income
                              upon maturity of the SPARQS to the extent that
                             the value of The Williams Companies Stock and
                            cash (if any) received exceeded the adjusted
                                issue price. Furthermore, any gain realized with
                                respect to the SPARQS would generally be treated
   as ordinary income.

                             Even if the Contingent Payment Regulations do
                               not apply to the SPARQS, other alternative U.S.
                       federal income tax characterizations or
                           treatments of the SPARQS are also possible,
                               which if applied could significantly affect the
                               timing and character of the income or loss with
                          respect to the SPARQS. It is possible, for
                          example, that a SPARQS could be treated as
                           constituting an "open transaction" with the
result that the 

PS-35 

424B3
36th Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 36th
                             quarterly payments on the SPARQS might not be
                          accounted for separately as giving rise to
                               income to U.S. Holders until the sale, exchange
                              or retirement of the SPARQS. Other alternative
                    characterizations are also possible.
                                Accordingly, prospective purchasers are urged to
                            consult their own tax advisors regarding the
                          U.S. federal income tax consequences of an
         investment in the SPARQS.

                            Backup Withholding and Information Reporting

                              Backup withholding may apply in respect of the
                               amounts paid to a U.S. Holder, unless such U.S.
                                Holder provides proof of an applicable exemption
                               or a correct taxpayer identification number, or
                               otherwise complies with applicable requirements
                            of the backup withholding rules. The amounts
                               withheld under the backup withholding rules are
                             not an additional tax and may be refunded, or
                               credited against the U.S. Holder's U.S. federal
                                income tax liability, provided that the required
                       information is furnished to the IRS. In
                              addition, a U.S. Holder may also be subject to
                               information reporting in respect of the amounts
                               paid to the U.S. Holder, unless the U.S. Holder
                              provides proof of an applicable exemption from
                the information reporting rules.

Non-U.S. Holders

                             This section only applies to you if you are a
                         Non-U.S. Holder. As used herein, the term
                               "Non-U.S. Holder" means a beneficial owner of a
                          SPARQS that is for U.S. federal income tax
purposes:       

                        o  a nonresident alien individual;

                  o  a foreign corporation; or

                   o  a foreign trust or estate.

                                Notwithstanding the treatment of the SPARQS as a
                                unit consisting of a Terminable Forward Contract
                             and a Deposit, significant aspects of the tax
                      treatment of the SPARQS are uncertain.
                          Accordingly, any quarterly payments on the
                               SPARQS made to a Non-U.S. Holder generally will
                          be withheld upon at a rate of 30%, or at a
                              reduced rate specified by an applicable income
                             tax treaty under an "other income" or similar
                              provision. In order to claim an exemption from
                            or a reduction in the 30% withholding tax, a
                            Non-U.S. Holder of a SPARQS must comply with
                               certification requirements to establish that it
                             is not a United States person and is eligible
                       for a reduction of or an exemption from
                              withholding under an applicable tax treaty. If
                           you are a Non-U.S. Holder, you are urged to
                              consult your own tax advisor regarding the tax
                      treatment of the SPARQS, including the
                        possibility of obtaining a refund of any
                     withholding tax and the certification
             requirements described above.

PS-36 

424B3
37th Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 37th
                                                                         Annex A

Hypothetical Call Price Calculations

The following tables set forth sample calculations of the Call Price for        
hypothetical Call Dates of February 1, 2006, March 29, 2006 and August 1, 2006  
(the scheduled Maturity Date) based on the following terms:                     

o    Original Issue Date: July 29, 2005                               
 o    Interest Payment Dates: November 1, 2005, February 1, 2006, May 1,
2006 and the Maturity Date                                  
    o    Yield to Call: 17% per annum (computed on the basis of a 360-day year
of twelve 30-day months)                                    
o    Issue Price: $20.80 per SPARQS                                   
o    Interest Rate: 7% per annum                                      

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 (i.e., the Call Price and all of the interest payments  
on each SPARQS), discounted to the Original Issue Date at the applicable        
Discount Factor, equals the Issue Price. The Discount Factor is based on the    
Yield to Call rate of 17% per annum and the number of years (or fraction of a   
year) from the Original Issue Date to and including the applicable payment date 
and is represented by the following formula:                                    

1                           
Discount Factor = -------, where x is the number of years from the    
1.17(x)                           
Original Issue Date to and including the applicable payment date.     

The Call Price in each of the hypothetical examples shown below is determined as
follows:                                                                        

   o    The known cash flows on the SPARQS (i.e., the interest payments) are
       discounted to their present value on the Original Issue Date at the
          applicable Discount Factor. The 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
Date.                                                       

       o    For example, the present value of all of the interest payments
          for the hypothetical Call Date of February 1, 2006 is $.6937
($.3575+ $.3362).                                 

     o    Since the present value of all payments on the SPARQS to and including
          the Call Date (i.e., the Call Price and all of the interest payment on
         each SPARQS) must equal the Issue Price, we can determine the present
    value of the applicable Call Price by subtracting the sum of the
 present values of the interest payments from the Issue Price.

         o    For example, for the hypothetical Call Date of February 1, 2006,
         the present value of the Call Price is $20.1063 ($20.8000 -
$.6937).                                          

  o    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, equals the present value of the Call
Price.                                                      

     o    For the hypothetical Call Date of February 1, 2006, the Call
              Price is therefore $21.7674, which is the amount that if paid on
             February 1, 2006 has a present value on the Original Issue Date
   of $20.1063, based on the applicable Discount Factor.

 o o o

The Call Prices calculated in the following tables are based upon the terms set 
forth above and the three sample Call Dates. The actual amount you will receive 
if we call the SPARQS will depend upon the actual Call Date.                    

424B3
38th Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 38th
                                                        [Enlarge/Download Table]
                                                     Call Date of February 1, 2006                                                  
                                                     -----------------------------                                                  

                                                                                                                           Present  
                                                                                                                          Value at  
                                                                                                                          Original  
                                                                                                                         Issue Date 
                                          Accrued but                                                                      of Cash  
                                            Unpaid                                              Years from    Discount   Received on
                       Issue    Interest   Interest                 Total Cash     Days from     Original    Factor at  Payment Date
                       Price    Payments  Received on  Call Price  Received on  Original Issue  Issue Date    Yield to   at Yield to
    Payment Date       Paid     Received   Call Date   Received(1) Payment Date     Date(2)    (Days(2)/360)  Call(3)       Call    
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                    
July 29, 2005         (20.80)    --         --            --         --                0           .00000     100.000%     --       

November 1, 2005       --       $.3721      --            --        $.3721            92           .25556      96.067%    $.3575    

Call Date                                                                                                                           
  (February 1, 2006)   --        --        $.3640         --        $.3640           182           .50556      92.369%    $.3362    

Call Date                                                                                                                           
  (February 1, 2006)   --        --         --          $21.7674    $21.7674         182           .50556      92.369%    $20.1063  

Total amount received on the Call Date: $22.1314                                                               Total:     $20.8000  

Total amount received over the term of the SPARQS: $22.5035                                                                         

---------------------------------------                                         
(1)  The Call Price of $21.7674 is the dollar amount that has a present value of
 $20.1063, which has been discounted to the Original Issue Date from the
   Call Date at the Yield to Call rate of 17% 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 Issue Price of $20.80.              

(2)  Based upon a 360-day year of twelve 30-day months.                         

1                           
(3)  Discount Factor = -------, where x is Years from Original Issue Date       
                    1.17(x)  to and including the applicable payment date.

A-2 

424B3
39th Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 39th
                                                        [Enlarge/Download Table]
                                                      Call Date of March 29, 2006                                                   
                                                     -----------------------------                                                  

                                                                                                                           Present  
                                                                                                                          Value at  
                                                                                                                          Original  
                                                                                                                         Issue Date 
                                          Accrued but                                                                      of Cash  
                                            Unpaid                                              Years from    Discount   Received on
                       Issue    Interest   Interest                 Total Cash     Days from     Original    Factor at  Payment Date
                       Price    Payments  Received on  Call Price  Received on  Original Issue  Issue Date    Yield to   at Yield to
    Payment Date       Paid     Received   Call Date   Received(1) Payment Date     Date(2)    (Days(2)/360)  Call(3)       Call    
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                    
July 29, 2005         (20.80)    --         --            --         --                0           .00000     100.000%     --       

November 1, 2005       --       $.3721      --            --        $.3721            92           .25556      96.067%    $.3575    

Call Date                                                                                                                           
  (March 29, 2006)     --        --       $.2346          --        $.2346           240           .66667      90.062%    $.2113    

Call Date                                                                                                                           
  (March 29, 2006)     --        --         --         $22.0903     $22.0903         240           .66667      90.062%    $19.8950  

Total amount received on the Call Date: $22.3249                                                               Total:     $20.8000  

Total amount received over the term of the SPARQS: $23.0610                                                                         

---------------------------------------                                         
(1)  The Call Price of $22.0903 is the dollar amount that has a present value of
 $19.8950, which has been discounted to the Original Issue Date from the
   Call Date at the Yield to Call rate of 17% 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 Issue Price of $20.80.              

(2)  Based upon a 360-day year of twelve 30-day months.                         

1                           
(3)  Discount Factor = -------, where x is Years from Original Issue Date       
                    1.17(x)  to and including the applicable payment date.

A-3 

424B3
Last Page of 40
TOC
1st
Previous
Next
↓Bottom
Just 40th
                                                        [Enlarge/Download Table]
                                                Call Date of August 1, 2006 (Maturity Date)                                         
                                                -------------------------------------------                                         

                                                                                                                           Present  
                                                                                                                          Value at  
                                                                                                                          Original  
                                                                                                                         Issue Date 
                                          Accrued but                                                                      of Cash  
                                            Unpaid                                              Years from    Discount   Received on
                       Issue    Interest   Interest                 Total Cash     Days from     Original    Factor at  Payment Date
                       Price    Payments  Received on  Call Price  Received on  Original Issue  Issue Date    Yield to   at Yield to
    Payment Date       Paid     Received   Call Date   Received(1) Payment Date     Date(2)    (Days(2)/360)  Call(3)       Call    
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                    
July 29, 2005         (20.80)    --         --            --         --                0           .00000     100.000%     --       

November 1, 2005       --       $.3721      --            --        $.3721            92           .25556      96.067%    $.3575    

February 1, 2006       --       $.3640      --            --        $.3640           182           .50556      92.369%    $.3362    

May 1, 2006            --       $.3640      --            --        $.3640           272           .75556      88.814%    $.3233    

Call Date                                                                                                                           
  (August 1, 2006)     --         --      $.3640          --        $.3640           362           1.00556     85.396%    $.3108    

Call Date                                                                                                                           
  (August 1, 2006)     --         --        --         $22.8022    $22.8022          362           1.00556     85.396%    $19.4722  

Total amount received on the Call Date: $23.1662                                                               Total:     $20.8000  

Total amount received over the term of the SPARQS: $24.2663                                                                         

---------------------------------------                                         

(1)  The Call Price of $22.8022 is the dollar amount that has a present value of
    $19.4722 has been discounted to the Original Issue Date from the Call Date
   at the Yield to Call rate of 17% 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 Issue Price of $20.80.                     

(2)  Based upon a 360-day year of twelve 30-day months.                         

1                           
(3)  Discount Factor = -------, where x is Years from Original Issue Date       
                    1.17(x)  to and including the applicable payment date.

A-4 

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘424B3’ Filing		Date		First		Last			Other Filings
		8/1/06		1		40			424B2
		7/21/06		4		13			4,  424B2,  FWP
		5/1/06		3		40			FWP
		3/29/06		37		39			FWP
		2/1/06		1		40			4,  FWP
		11/1/05		1		40			424B3,  8-K
		7/29/05		12		40			424B3
Filed on:		7/27/05							424B3
		7/22/05		1		27			424B3,  8-A12B
		11/10/04		1		6			8-K,  S-3/A,  SC 13G/A
									List all Filings