MORGAN STANLEY — Capital/Financing Update 2010

Oct 27, 2010

November 2010 Filed pursuant to Rule 433 dated October 26, 2010 relating to Preliminary Pricing Supplement No. 564 dated October 26, 2010 to Registration Statement No. 333-156423

STRUCTURED INVESTMENTS

Opportunities in U.S. Equities

Jump Securities Based on the Value of the Philadelphia Oil Service Sector SM Index due December 23, 2011

The Jump Securities offer the opportunity for investors to earn a return based on the performance of the Philadelphia Oil Service Sector SM Index. Unlike ordinary debt securities, the securities do not pay interest and do not guarantee the return of any of the principal at maturity. Instead, at maturity, you will receive a positive return on the securities equal to 16% to 19%, which we refer to as the upside payment, if the closing value of the underlying index on the valuation date is at all above the initial index value. If, on the other hand, the closing value of the underlying index on the valuation date is at or below the initial index value, you will receive for each $10 stated principal amount of securities that you hold a payment that is equal to or less than the stated principal amount of $10 by an amount that is proportionate to any percentage decrease in the final index value from the initial index value. This amount may be significantly less than the stated principal amount of the securities and may be zero. The securities are senior unsecured obligations of Morgan Stanley, and all payments on the securities are subject to the credit risk of Morgan Stanley.

SUMMARY TERMS — Issuer:	Morgan Stanley
Underlying index:	Philadelphia Oil Service Sector SM Index
Aggregate principal amount:	$
Stated principal amount:	$10 per security
Issue price:	$10 per security (see “Commissions and Issue Price” below)
Pricing date:	November 23, 2010
Original issue date:	November 29, 2010 (3 business days after the pricing date)
Maturity date:	December 23, 2011
Payment at maturity:	· If the final index value is greater than the initial index value: $10 + the upside payment · If the final index value is less than or equal to the initial index value:
	$10 x the index performance factor This amount will be less than or equal to the stated principal amount of $10. There is no minimum payment at maturity.
Upside payment:	$1.60 to $1.90 per security (16% to 19% of the stated principal amount). The actual upside payment will be determined on the pricing date. Accordingly, even if the final index value is significantly greater than the initial index value, your payment at maturity will not exceed $11.60 to $11.90 per security.
Index performance factor:	final index value / initial index value
Valuation date:	December 20, 2011, subject to adjustment for non-index business days and certain market disruption events
Initial index value:	The closing value of the underlying index on the pricing date
Final index value:	The closing value of the underlying index on the valuation date
Listing:	The securities will not be listed on any securities exchange.
CUSIP:	61759G463
ISIN:	US61759G4635
Agent:	Morgan Stanley & Co. Incorporated (“MS & Co.”) , a wholly-owned subsidiary of Morgan Stanley. See “Supplemental information regarding plan of distribution; conflicts of Interest.”
Calculation agent:	MS & Co.
Commissions and Issue Price:	Price to Public (1)	Agent’s Commissions (1)(2)	Proceeds to Issuer
Per security	$10.00	$0.20	$9.80
Total	$	$	$

(1) The actual price to public and agent’s commissions for a particular investor may be reduced for volume purchase discounts depending on the aggregate amount of securities purchased by that investor. The lowest price payable by an investor is $9.925 per security. Please see “Syndicate Information” on page 7 for further details.

(2) Selected dealers, including Morgan Stanley Smith Barney LLC (an affiliate of the agent), and their financial advisors will collectively receive from the Agent, MS & Co., a fixed sales commission of $0.20 for each security they sell. See “Supplemental information regarding plan of distribution; conflicts of interest.” For additional information, see “Description of Securities—Supplemental Information Concerning Plan of Distribution; Conflicts of Interest” in the accompanying preliminary pricing supplement and “Plan of Distribution” in the accompanying prospectus supplement.

You should read this document together with the preliminary pricing supplement describing the offering and the related prospectus supplement and prospectus, each of which can be accessed via the hyperlinks below, before you decide to invest.

EFPlaceholder Preliminary Pricing Supplement No. 564 dated October 26, 2010

EFPlaceholder Prospectus Supplement dated December 23, 2008

EFPlaceholder Prospectus dated December 23, 2008

The securities are not bank deposits and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations of, or guaranteed by, a bank.

The issuer has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents the issuer has filed with the SEC for more complete information about the issuer and this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at . www.sec.gov. Alternatively, the issuer, any underwriter or any dealer participating in this offering will arrange to send you the prospectus if you request it by calling toll-free 1-800-584-6837.

FWP: MSPRB1208006

Jump Securities Based on the Value of the Philadelphia Oil Service Sector SM Index due December 23, 2011

Investment Overview

The Jump Securities Based on the Value of the Philadelphia Oil Service Sector SM Index due December 23, 2011 (the “securities”) can be used:

§ As an alternative to direct exposure to the underlying index that provides a fixed positive return if the underlying index has appreciated at all on the valuation date.

§ To enhance returns and potentially outperform the underlying index in a moderately bullish scenario.

The securities are exposed on a 1:1 basis to the negative performance of the underlying index. Accordingly, 100% of your principal is at risk.

Maturity:	13 months
Upside payment:	$1.60 to $1.90 per security (16% to 19% of the stated principal amount). The actual upside payment will be determined on the pricing date.

Philadelphia Oil Service Sector SM Index Overview

The Philadelphia Oil Service Sector SM Index is a price-weighted index composed of fifteen companies that provide oil drilling and production services, oil field equipment, support services and geophysical/reservoir services and was set to an initial value of 75 on December 31, 1996. The Philadelphia Oil Service Sector SM Index was developed by the predecessor to NASDAQ OMX PHLX and is calculated, maintained and published by NASDAQ OMX PHLX. For additional information, please see “Information about the Underlying Index” on page 13.

Information as of market close on October 21, 2010:

Bloomberg Ticker Symbol:	OSX
Current Index Value:	202.59
52 Weeks Ago:	207.83
52 Week High (on 4/23/2010):	228.22
52 Week Low (on 6/1/2010):	159.12

The following graph illustrates the historical closing values of the underlying index from January 1, 2005 through October 21, 2010. We obtained the information below from Bloomberg Financial Markets, without independent verification. The historical performance of the underlying index cannot be taken as an indication of its future performance.

Philadelphia Oil Service Sector SM Index Historical Performance Daily Closing Values January 1, 2005 to October 21, 2010

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Jump Securities Based on the Value of the Philadelphia Oil Service Sector SM Index due December 23, 2011

Key Investment Rationale

Investors will receive a fixed positive return on the securities if the index has appreciated at all on the valuation date.

Scenario 1

The final index value is greater than the initial index value. In this scenario, each security redeems for $11.60 to $11.90 per security (116% to 119% of the stated principal amount), as determined on the pricing date. Accordingly, even if the final index value is significantly greater than the initial index value, your payment at maturity will not exceed $11.60 to $11.90 per security, and your return may be less than if you invested in the underlying index directly.

Scenario 2

The final index value is less than or equal to the initial index value. In this scenario, each security redeems for less than the stated principal amount of $10 by an amount proportionate to the decrease in the value of the underlying index from the initial index value. There is no minimum payment at maturity.

Summary of Selected Key Risks (see page 10)

§ No guaranteed return of principal.

§ No interest payments.

§ Appreciation potential is fixed and limited.

§ The securities are subject to the credit risk of Morgan Stanley, and any actual or anticipated changes to its credit ratings or credit spreads may adversely affect the market value of the securities.

§ The market price of the securities may be influenced by many unpredictable factors, including the value and volatility of the underlying index and the component stocks of the underlying index.

§ The securities will not be listed on any securities exchange and secondary trading may be limited.

§ There are risks associated with investments in securities with concentration solely in the oil services sector.

§ Hedging and trading activity by our subsidiaries could potentially adversely affect the value of the securities.

§ The inclusion of commissions and projected profit from hedging in the original issue price is likely to adversely affect secondary market prices.

§ The calculation agent, which is a subsidiary of the issuer, will make determinations with respect to the securities.

§ Investing in the securities is not equivalent to investing in the underlying index or the stocks composing the underlying index.

§ Adjustments to the underlying index by the index publisher could adversely affect the value of the securities.

§ The U.S. federal income tax consequences of an investment in the securities are uncertain.

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Fact Sheet

The securities offered are senior unsecured obligations of Morgan Stanley, will pay no interest, do not guarantee any return of principal at maturity and have the terms described in the accompanying preliminary pricing supplement, the prospectus supplement and the prospectus. At maturity, if the final index value is greater than the initial index value, an investor will receive for each $10 stated principal amount of securities that the investor holds the $10 stated principal amount and a fixed return equal to the upside payment. However, if the final index value is less than or equal to the initial index value, the payment at maturity will be less than the stated principal amount of $10 by an amount that is proportionate to the percentage decrease of the final index value from the initial index value. The securities are senior notes issued as part of Morgan Stanley’s Series F Global Medium-Term Notes program. All payments on the securities are subject to the credit risk of Morgan Stanley.

Expected Key Dates — Pricing date:	Original issue date (settlement date):	Maturity date:
November 23, 2010	November 29, 2010 (3 business days after the pricing date)	December 23, 2011, subject to postponement due to non-index business days and certain market disruption events

Key Terms
Issuer:	Morgan Stanley
Underlying index:	Philadelphia Oil Service Sector SM Index
Underlying index publisher:	The NASDAQ OMX Group, Inc.
Aggregate principal amount:	$
Issue price:	$10 per security
Stated principal amount:	$10 per security (see “Syndicate Information” on page 7)
Denominations:	$10 per security and integral multiples thereof
Interest:	None
Payment at maturity:	· If the final index value is greater than the initial index value: $10 + the upside payment · If the final index value is less than or equal to the initial index value: $10 x the index performance factor This amount will be less than or equal to the stated principal amount of $10. There is no minimum payment at maturity.
	Please see “How the Jump Securities Work” on page 8.
Upside payment:	$1.60 to $1.90 per security (16% to 19% of the stated principal amount). The actual upside payment will be determined on the pricing date. Accordingly, even if the final index value is significantly greater than the initial index value, your payment at maturity will not exceed $11.60 to $11.90 per security.
Index performance factor:	final index value / initial index value
Valuation date:	December 20, 2011, subject to adjustment for non-index business days and certain market disruption events
Initial index value:	The closing value of the underlying index on the pricing date
Final index value:	The closing value of the underlying index on the valuation date
Postponement of maturity date:	If the scheduled valuation date is a non-index business day or if a market disruption event occurs on that day so that the valuation date as postponed falls less than two business days prior to the scheduled maturity date, the maturity date of the securities will be postponed to the second business day following that valuation date as postponed.
Risk factors:	Please see “Risk Factors” beginning on page 10.

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General Information
Listing:	The securities will not be listed on any securities exchange.
CUSIP:	61759G463
ISIN:	US61759G4635
Minimum ticketing size:	100 securities
Tax considerations:	You should note that the discussion under “United States Federal Taxation” in the accompanying prospectus supplement does not apply to the securities offered under the accompanying preliminary pricing supplement and is superseded by the following discussion. Although the issuer believes that, under current law, each security should be treated as a single financial contract that is an “open transaction” for U.S. federal income tax purposes, there is uncertainty regarding the U.S. federal income tax consequences of an investment in a security.
	Assuming this treatment of the securities is respected, the following U.S. federal income tax consequences should result based on current law:
	§ a U.S. Holder should not be required to recognize taxable income over the term of the securities prior to maturity, other than pursuant to a sale or exchange, and
	§ upon sale, exchange or settlement of the securities at maturity, a U.S. Holder should recognize capital gain or loss equal to the difference between the amount realized and the U.S. Holder’s tax basis in the securities. Such gain or loss should be long-term capital gain or loss if the investor has held the securities for more than one year at the time of sale, exchange or settlement, and short-term capital gain or loss otherwise.
	Please read the discussion under “Risk Factors” in this document and the discussion under “United States Federal Taxation” in the accompanying preliminary pricing supplement concerning the U.S. federal income tax consequences of an investment in the securities. On December 7, 2007, the Treasury Department and the Internal Revenue Service (the “IRS”) released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments. The notice focuses in particular on whether to require holders of these instruments to accrue income over the term of their investment. It also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments; whether short-term instruments should be subject to any such accrual regime; the relevance of factors such as the exchange-traded status of the instruments and the nature of the underlying property to which the instruments are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors should be subject to withholding tax; whether these instruments are or should be subject to the “constructive ownership” regime, which very generally can operate to recharacterize certain long-term capital gain as ordinary income and impose an interest charge; and appropriate transition rules and effective dates. While it is not clear whether instruments such as the securities would be viewed as similar to the prepaid forward contracts described in the notice, any Treasury regulations or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment in the securities, possibly with retroactive effect. Both U.S. and non-U.S. investors considering an investment in the securities should read the discussion under “Risk Factors” in this document and the discussion under “United States Federal Taxation” in the accompanying preliminary pricing supplement and consult their tax advisers regarding all aspects of the U.S. federal income tax consequences of an investment in the securities, including possible alternative treatments, the issues presented by the aforementioned notice and any tax consequences arising under the laws of any state, local or foreign taxing jurisdiction.
Trustee:	The Bank of New York Mellon (as successor trustee to JPMorgan Chase Bank, N.A.)
Calculation agent:	MS & Co.
Use of proceeds and hedging:	The net proceeds we receive from the sale of the securities will be used for general corporate purposes and, in part, in connection with hedging our obligations under the securities through one or more of our subsidiaries.
	On or prior to the pricing date, we, through our subsidiaries or others, expect to hedge our anticipated exposure in connection with the securities by taking positions in the stocks constituting the underlying index, in futures and/or options contracts on the underlying index or

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its component stocks listed on major securities markets, or positions in any other available securities or instruments. Such purchase activity could increase the value of the underlying index on the pricing date, and therefore could increase the value at which the underlying index must close on the valuation date before you would receive at maturity a payment that exceeds the stated principal amount of the securities. For further information on our use of proceeds and hedging, see “Use of Proceeds and Hedging” in the accompanying preliminary pricing supplement.

Benefit plan investor considerations:

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 securities. 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., may each be 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”). ERISA Section 406 and Code Section 4975 generally prohibit transactions between Plans and parties in interest or disqualified persons. Prohibited transactions within the meaning of ERISA or the Code would likely arise, for example, if the securities are acquired by or with the assets of a Plan with respect to which MS & Co. or any of its affiliates is a service provider or other party in interest, unless the securities 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 securities. 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 professional asset managers). In addition, ERISA Section 408(b)(17) and Code Section 4975(d)(20) may provide an exemption for the purchase and sale of securities and the related lending transactions, provided that neither the issuer of the securities nor any of its affiliates has or exercises any discretionary authority or control or renders any investment advice with respect to the assets of the Plan involved in the transaction and provided further that the Plan pays no more, and receives no less, than “adequate consideration” in connection with the transaction (the so-called “service provider” exemption). There can be no assurance that any of these class or statutory exemptions will be available with respect to transactions involving the securities. Because we may be considered a party in interest with respect to many Plans, the securities 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 PTCEs 96-23, 95-60, 91-38, 90-1, 84-14 or the service provider exemption 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 securities will be deemed to have represented, in its corporate and its fiduciary capacity, by its purchase and holding of the securities 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, non-U.S. or church plan that is subject to any federal, state, local or non-U.S. law that is substantially similar to the provisions of Section 406 of ERISA or Section 4975 of the Code (“Similar Law”) 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 any Similar Law.

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	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 securities on behalf of or with “plan assets” of any Plan consult with their counsel regarding the availability of exemptive relief. Each purchaser and holder of the securities has exclusive responsibility for ensuring that its purchase, holding and disposition of the securities do not violate the prohibited transaction rules of ERISA or the Code or any Similar Law. The sale of any securities to any Plan or plan subject to Similar Law is in no respect a representation by us or any of our affiliates or representatives that such an investment meets all relevant legal requirements with respect to investments by plans generally or any particular plan, or that such an investment is appropriate for plans generally or any particular plan. However, individual retirement accounts, individual retirement annuities and Keogh plans, as well as employee benefit plans that permit participants to direct the investment of their accounts, will not be permitted to purchase or hold the securities if the account, plan or annuity is for the benefit of an employee of Citigroup Global Markets Inc., Morgan Stanley or Morgan Stanley Smith Barney LLC (“MSSB”) or a family member and the employee receives any compensation (such as, for example, an addition to bonus) based on the purchase of securities by the account, plan or annuity.
Additional considerations:	Client accounts over which Citigroup Inc., Morgan Stanley, MSSB or any of their respective subsidiaries have investment discretion are not permitted to purchase the securities, either directly or indirectly.
Supplemental information regarding plan of distribution; conflicts of interest:	The agent may distribute the securities through MSSB, as selected dealer, or other dealers, which may include Morgan Stanley & Co. International plc (“MSIP”) and Bank Morgan Stanley AG. MSSB, MSIP and Bank Morgan Stanley AG are affiliates of Morgan Stanley. Selected dealers, including MSSB, and their financial advisors will collectively receive from the Agent, Morgan Stanley & Co. Incorporated, a fixed sales commission of $0.20 for each security they sell. MS & Co. is our wholly-owned subsidiary. MS & Co. will conduct this offering in compliance with the requirements of NASD Rule 2720 of the Financial Industry Regulatory Authority, Inc., which is commonly referred to as FINRA, regarding a FINRA member firm’s distribution of the securities of an affiliate and related conflicts of interest. MS & Co. or any of our other affiliates may not make sales in this offering to any discretionary account. See “Description of Securities—Supplemental Information Concerning Plan of Distribution; Conflicts of Interest” and “—Use of Proceeds and Hedging” in the accompanying preliminary pricing supplement.

Contact: Morgan Stanley Smith Barney clients may contact their local Morgan Stanley Smith Barney branch office or our principal executive offices at 1585 Broadway, New York, New York 10036 (telephone number (866) 477-4776). All other clients may contact their local brokerage representative. Third-party distributors may contact Morgan Stanley Structured Investment Sales at (800) 233-1087.

Syndicate Information — Issue price of the securities	Selling concession	Principal amount of securities for any single investor
$10.00	$0.20	<$1MM
$9.9625	$0.1625	≥$1MM and <$3MM
$9.9438	$0.1438	≥$3MM and <$5MM
$9.925	$0.125	> $5MM

The agent may reclaim selling concessions allowed to dealers in connection with the offering, if, within 30 days of the offering, the agent repurchases the ELKS distributed by such dealers.

This offering summary represents a summary of the terms and conditions of the securities. We encourage you to read the accompanying preliminary pricing supplement, prospectus supplement and prospectus related to this offering, which can be accessed via the hyperlinks on the front page of this document.

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How the Jump Securities Work

Payoff Diagram

The payoff diagram below illustrates the payment at maturity on the securities for a range of hypothetical percentage changes in the underlying index. The graph is based on the following terms:

Stated principal amount:	$10 per security
Hypothetical upside payment:	$1.75 per security (17.5% of the stated principal amount)
Hypothetical payment at maturity:	$11.75 per security
Minimum payment at maturity:	None

Jump Securities Payoff Diagram

How it works

§ Where the final index value is greater than the initial index value, the payment at maturity on the securities reflected in the graph above is greater than the $10 stated principal amount per security, but in all cases is equal to and will not exceed the $10 stated principal amount plus the hypothetical upside payment of $1.75 per security. In the payoff diagram above, an investor will receive the payment at maturity of $11.75 per security at any final index value greater than the initial index value.

§ Where the final index value is less than or equal to the initial index value, the payment at maturity will be less than the stated principal amount of $10 by an amount that is proportionate to the percentage decrease in the final index value from the initial index value. For example, if the underlying index has decreased by 25%, the payment at maturity will be $7.50 per security (75% of the stated principal amount). There is no minimum payment at maturity on the securities.

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Payment at Maturity

At maturity, investors will receive for each $10 stated principal amount of securities that they hold an amount in cash based upon the closing value of the underlying index on the valuation date, determined as follows:

If the final index value is greater than the initial index value:

$10 + Upside Payment

The upside payment will be $1.60 to $1.90 per security, to be determined on the pricing date.

If the final index value is less than or equal to the initial index value :

$10 × Index Performance Factor

Pri ncipal		Index Performance Factor
$10	×	final index value initial index value

Because the index performance factor will be less than or equal to 1.0, this payment will be less than or equal to $10.

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Risk Factors

The following is a non-exhaustive list of certain key risk factors for investors in the securities. For further discussion of these and other risks, you should read the section entitled “Risk Factors” beginning on page PS-7 of the accompanying preliminary pricing supplement. We also urge you to consult with your investment, legal, tax, accounting and other advisers before you invest in the securities.

§ The securities do not pay interest or guarantee return of any of your investment. The terms of the securities differ from those of ordinary debt securities in that the securities do not pay interest or guarantee the return of any of the stated principal amount at maturity. If the final index value is less than the initial index value, the payout at maturity will be an amount in cash that is less than the $10 stated principal amount of each security by an amount proportionate to the decrease in the value of the underlying index. There is no minimum payment at maturity on the securities, and, accordingly, you could lose your entire investment. See “How the Jump Securities Work” on page 8.

§ Appreciation potential is fixed and limited. Where the final index value is greater than the initial index value, the appreciation potential of the securities is limited to the fixed upside payment of $1.60 to $1.90 per security (16% to 19% of the stated principal amount), to be determined on the pricing date, even if the final index value is significantly greater than the initial index value. See “How the Jump Securities Work” on page 8.

§ The securities are subject to the credit risk of Morgan Stanley, and any actual or anticipated changes to its credit ratings or credit spreads may adversely affect the market value of the securities. You are dependent on Morgan Stanley’s ability to pay all amounts due on the securities at maturity and therefore you are subject to the credit risk of Morgan Stanley. If Morgan Stanley defaults on its obligations under the securities, your investment would be at risk and you could lose some or all of your investment. As a result, the market value of the securities prior to maturity will be affected by changes in the market’s view of Morgan Stanley’s creditworthiness. Any actual or anticipated decline in Morgan Stanley’s credit ratings or increase in the credit spreads charged by the market for taking Morgan Stanley credit risk is likely to adversely affect the market value of the securities.

§ Market price of the securities will be influenced by many unpredictable factors. Several factors will influence the value of the securities in the secondary market and the price at which MS & Co. may be willing to purchase or sell the securities in the secondary market, including:

o the value, volatility and dividend yield of the underlying index,

o interest rate levels in the United States,

o geopolitical conditions and economic, financial, regulatory, political, judicial or other events,

o time remaining to maturity,

o the composition of the underlying index and changes in the constituent stocks of the underlying index, and

o any actual or anticipated changes in our credit ratings or credit spreads.

You may receive less, and possibly significantly less, than the stated principal amount per security if you try to sell your securities prior to maturity. The underlying index may be, and has recently been, volatile, and we can give you no assurance that the volatility will lessen. See “Historical Information” on page 13.

§ The securities will not be listed and secondary trading may be limited. The securities will not be listed on any securities exchange. Therefore, there may be little or no secondary market for the securities. MS & Co. may, but is not obligated to, make a market in the securities. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the securities easily. Because we do not expect that other broker-dealers will participate significantly in the secondary market for the securities, the price at which you may be able to trade your securities is likely to depend on the price, if any, at which MS & Co. is willing to transact. If, at any time, MS & Co. were not to make a market in the securities, it is likely that there would be no secondary market for the securities. Accordingly, you should be willing to hold your securities to maturity.

§ An investment in securities linked to the oil services sector is highly risky. All of the companies included in the Philadelphia Oil Service Sector Index operate in the oil service sector. The Philadelphia Oil Service Sector

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Index is subject to increased volatility as it tracks solely the oil service industry and is highly susceptible to adverse economic market, political or regulatory occurrences affecting that industry. The oil services sector is significantly affected by changes in general economic or business conditions, including most significantly by the supply and demand for oil. Prices and trends in the oil services sector are also affected by the supply and demand for rigs, the age and maintenance costs of rigs, governmental regulations concerning deepwater drilling and oil exploration generally, the prevalence of renewable energy and any governmental regulations affecting renewable energy, as well as terrorism and political turbulence in oil rich regions and industrial accidents. For example, on April 20, 2010, a fire and explosion occurred onboard the semisubmersible drilling rig Deepwater Horizon, owned by Transocean Ltd. and under contract to a subsidiary of BP plc, leading to a massive oil spill in the Gulf of Mexico. Transocean Ltd. is one of the largest components of the index, with a current weighting of over 10% in the index. The economic impact of this incident on Transocean Ltd. and on the sector as a whole is likely to be significantly adverse. In response to this incident, the U.S. government implemented a six-month moratorium on certain deepwater drilling activities and adopted new governmental safety and environmental requirements applicable to both deepwater and shallow water operations. While the moratorium has recently been lifted, the new safety and environmental guidelines and regulations for drilling in the U.S. Gulf of Mexico that the U.S. government has already implemented, and any further new guidelines or regulations or any other steps that the U.S. government or any other governments may implement, could disrupt or delay operations, increase the cost of operations, reduce the area of operations for drilling rigs or impose increased liability on operations. These developments could adversely affect the value of several, or all, of the component securities of the underlying index and, in turn, the value of the underlying index and of the securities.

§ Hedging and trading activity by our subsidiaries could potentially adversely affect the value of the securities. One or more of our subsidiaries expect to carry out hedging activities related to the securities (and to other instruments linked to the underlying index or its component stocks), including trading in the stocks that constitute the underlying index as well as in other instruments related to the underlying index. Some of our subsidiaries also trade the stocks that constitute the underlying index and other financial instruments related to the underlying index on a regular basis as part of their general broker-dealer and other businesses. Any of these hedging or trading activities on or prior to the pricing date could increase the initial index value and, therefore, could increase the value at which the underlying index must close on the valuation date before an investor receives a payment at maturity that exceeds the stated principal amount of the securities. Additionally, such hedging or trading activities during the term of the securities, including on the valuation date, could adversely affect the value of the underlying index on the valuation date and, accordingly, the amount of cash, if any, you will receive at maturity.

§ The inclusion of commissions and projected profit from hedging in the original issue price is likely to adversely affect secondary market prices. Assuming no change in market conditions or any other relevant factors, the price, if any, at which MS & Co. is willing to purchase the securities at any time in secondary market transactions will likely be significantly lower than the original issue price, since secondary market prices are likely to exclude commissions paid with respect to the securities and the cost of hedging our obligations under the securities that are included in the original issue price. 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. These secondary market prices are also likely to be reduced by the costs of unwinding the related hedging transactions. Our subsidiaries may realize a profit from the expected hedging activity even if investors do not receive a favorable investment return under the terms of the securities or in any secondary market transaction. In addition, any secondary market 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.

§ The calculation agent, which is a subsidiary of the issuer, will make determinations with respect to the securities. As calculation agent, MS & Co. will determine the initial index value and the final index value, and calculate the amount of cash, if any, you will receive at maturity. Any of these determinations made by MS & Co. in its capacity as calculation agent, including with respect to the occurrence or non-occurrence of market disruption events and the selection of a successor index or calculation of the final index value in the event of a market disruption event or discontinuance of the underlying index, may adversely affect the payout to you at maturity.

§ Investing in the securities is not equivalent to investing in the underlying index. Investing in the securities is not equivalent to investing in the underlying index or its component stocks. Investors in the securities will not have voting rights or rights to receive dividends or other distributions or any other rights with respect to stocks that constitute the underlying index.

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§ Adjustments to the underlying index could adversely affect the value of the securities. The publisher of the underlying index may add, delete or substitute the stocks underlying the index or make other methodological changes that could change the value of the underlying index. Any of these actions could adversely affect the value of the securities. The publisher of the underlying index may also discontinue or suspend calculation or publication of the underlying index at any time. In these circumstances, MS & Co., as the calculation agent, will have the sole discretion to substitute a successor index that is comparable to the discontinued underlying index. MS & Co. could have an economic interest that is different than that of investors in the securities insofar as, for example, MS & Co. is not precluded from considering indices that are calculated and published by MS & Co. or any of its affiliates. If MS & Co. determines that there is no appropriate successor index, the payout on the securities at maturity will be an amount based on the closing prices on the valuation date of the stocks underlying the index at the time of such discontinuance, without rebalancing or substitution, computed by MS & Co. as calculation agent in accordance with the formula for calculating the underlying index last in effect prior to such discontinuance.

§ The U.S. federal income tax consequences of an investment in the securities are uncertain. Please read the discussion under “Fact Sheet ― General Information ― Tax considerations” in this document and the discussio n under “United States Federal Taxation” in the accompanying preliminary pricing supplement (together the “Tax Disclosure Sections”) concerning the U.S. federal income tax consequences of an investment in the securities. If the IRS were successful in asserting an alternative treatment for the securities, the timing and character of income on the securities might differ significantly from the tax treatment described in the Tax Disclosure Sections. For instance, U.S. investors could be required to accrue original issue discount on the securities every year at a “comparable yield” determined at the time of issuance and recognize all income and gain in respect of the securities as ordinary income. The issuer does not plan to request a ruling from the IRS regarding the tax treatment of the securities, and the IRS or a court may not agree with the tax treatment described in the Tax Disclosure Sec tions. On December 7, 2007, the Treasury Department and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments. The notice focuses in particular on whether to require holders of these instruments to accrue income over the term of their investment. It also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments; whether short-term instruments should be subject to any such accrual regime; the relevance of factors such as the exchange-traded status of the instruments and the nature of the underlying property to which the instruments are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors should be subject to withholding tax; whether these instruments are or should be subject to the “constructive ownership” regime, which very generally can operate to recharacterize certain long-term capital gain as ordinary income and impose an interest charge; and appropriate transition rules and effective dates. While it is not clear whether instruments such as the securities would be viewed as similar to the prepaid forward contracts described in the notice, any Treasury regulations or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment in the securities, possibly with retroactive effect. Both U.S. and Non-U.S. Holders should consult their tax advisers regarding the U.S. federal income tax consequences of an investment in the securities, including possible alternative treatments, the issues presented by this notice and any tax consequences arising under the laws of any state, local or foreign taxing jurisdiction.

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Information about the Underlying Index

The Philadelphia Oil Service Sector SM Index. The Philadelphia Oil Service Sector SM Index is a price-weighted index composed of fifteen companies that provide oil drilling and production services, oil field equipment, support services and geophysical/reservoir services. The Philadelphia Oil Service Sector SM Index was set to an initial value of 75 on December 31, 1996. The Philadelphia Oil Service Sector SM Index was developed by the predecessor to NASDAQ OMX PHLX and is calculated, maintained and published by NASDAQ OMX PHLX. See “Description of Securities—The Index” in the accompanying preliminary pricing supplement for more information.

License Agreement between The NASDAQ OMX Group, Inc. and MS & Co. “Nasdaq ® ,” “OMX ® ,” “Philadelphia Oil Service Sector SM ” and “OSX SM ” are registered trademarks or service marks of The NASDAQ OMX Group, Inc. (which with its affiliates is referred to as the “Corporations”) and have been licensed for use by Morgan Stanley & Co. Incorporated and its affiliates. See “Description of Securities—License Agreement between NASDAQ OMX and MS & Co.” in the accompanying preliminary pricing supplement for more information.

Historical Information

The following table sets forth the published high and low closing values, as well as end-of-quarter closing values, of the underlying index for each quarter in the period from January 1, 2005 through October 21, 2010. The closing value of the underlying index on October 21, 2010 was 202.59. The underlying index experiences periods of high volatility, and you should not take the historical values of the underlying index as an indication of future performance. No assurance can be given as to the level of the underlying index on the valuation date.

We obtained the information in the tables and graph below from Bloomberg Financial Markets, without independent verification.

Philadelphia Oil Service Sector SM Index	High	Low	Period End
2005
First Quarter	145.26	118.26	139.31
Second Quarter	149.12	124.96	146.15
Third Quarter	178.64	146.51	175.93
Fourth Quarter	190.92	153.45	182.14
2006
First Quarter	223.54	189.35	208.35
Second Quarter	235.34	185.81	210.38
Third Quarter	213.40	175.79	186.10
Fourth Quarter	215.69	173.36	199.90
2007
First Quarter	217.31	180.30	214.63
Second Quarter	271.58	218.82	263.48
Third Quarter	300.77	243.03	295.08
Fourth Quarter	310.76	271.30	301.61
2008
First Quarter	312.20	248.85	281.28
Second Quarter	359.61	286.42	354.15
Third Quarter	356.76	224.59	236.42
Fourth Quarter	226.10	104.14	121.39
2009
First Quarter	142.18	108.44	123.97
Second Quarter	188.72	125.41	159.66
Third Quarter	198.29	145.64	192.56
Fourth Quarter	211.25	181.07	194.92
2010
First Quarter	216.61	187.98	205.97
Second Quarter	228.22	159.12	164.13
Third Quarter	199.07	165.02	197.55
Fourth Quarter (through October 21, 2010)	209.18	194.29	202.59

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