MORGAN STANLEY — Interim / Quarterly Report 2010

Aug 31, 2010

Registered Number: 34161590 Registered Office: Locatellikade 1 Parnassustoren 1076 AZ Amsterdam The Netherlands

MORGAN STANLEY B.V.

Interim financial repor^t

30 June 2010

For identification purpose only.

CONTENTS

	P ag e
ri In te t r t m m an ag em en ep or	1
R ib ili ty st at t es po ns em en	4
C de ed f eh si in st at t o on ns em en co m pr en ve co m e	5
C de ed of ch in ui st at t ty on ns em en an ge s eq	6
C de ed of fi ia l si tio st at t on ns em en na nc po n	7
C de ed f c h fl st at t o on ns em en as ow s	8
th nd d fin ci al N ot to st at ts es e co en se an em en	9
de nd ie In th be of M St le B .V t r rt to pe en ev w re po e m em rs or ga n an y	24

For identification purpose only, Goes tog 1hwjreview dated IJ

INTERIM MANAGEMENT REPORT

The Directors presen^t their interim managemen^t report, responsibility statement and the condensed financial statements of Morgan Stanley B.V. (the "Company") for the six months ended 30 June 2010.

As disclosed in the Company's annual financial statements, the Company has changed its annual accounting reference date from ³⁰ November to ³¹ December to align with the changed year end of its ultimate paren^t undertaking, Morgan Stanley. Accordingly, these condensed fmancial statements are for the six months ended 30 June 2010. With the exception of the comparatives for the condensed statement of financial position and related notes, which are as at 31 December 2009, the comparative figures reflected within the condensed financial statements are for the six months ended ³¹ May 2009 which is considered comparable for the purposes of International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union ("EU").

RESULTS AND DIViDENDS

The profit for the period, after tax, was €818,000 (2009: €1,011,000).

During the period no dividends were paid or proposed (2009: €nil).

PRINCIPAL ACTIVITY

The Company's ultimate paren^t undertaking and controlling entity is Morgan Stanley, which, together with the Company and Morgan Stanley's other subsidiary undertakings, form the "Morgan Stanley Group".

The principal activity of the Company is the issuance of financial instruments and the hedging of the obligations arising pursuan^t to such issuances.

Future outlook

There have not been any significant changes in the Company's principal activity in the period under review and no significant change in the Company's principal activity is expected.

BUSINESS REVIEW

The modest economic recovery initiated in 2009 continues to be evident in the wider economy, although the Company continues to be impacted by challenging market conditions. These conditions presen^t difficulties and uncertainty for the business outlook which may adversely impact the financial performance of the Company in the future. The condensed statement of comprehensive income for the period is set out on page 5. The profit for the current period decreased by €193,000, 19% from the prior period. This was primarily driven by ^a reduction in interest income, which was partially offset by an increase in fees received due to an increased level of issuances.

The condensed statement of financial position is presented on page 7. Due to increased issuances during the period total assets at the end of the period were €4,459,917,000 an increase of 54% from 31 December 2009.

Risk Management

Risk is an inherent par^t of the Company's business activity and is managed within the context of the broader Morgan Stanley Group's business activities. The Morgan Stanley Group seeks to identify, assess, monitor and manage each of the various types of risk involved in its activities on ^{a g}lobal basis, in accordance with defined policies and procedures and in consideration of the individual legal entities.

For identification purpose only.

INTERIM MANAGEMENT REPORT

BUSINESS REVIEW (CONTINUED)

Risk Management (continued)

Market risk

Market risk refers to the risk that ^a change in the level of one or more market prices, rates, indices, implied volatilities (the price volatility of the underlying instruments imputed from option prices), correlations or other market factors, such as liquidity, will result in losses for ^a position or portfolio.

The Morgan Stanley Group manages the market risk associated with its trading activities in consideration of each individual legal entity, but on ^a global basis, at both ^a trading division and an individual product level.

Credit Risk

Credit risk refers to the risk of loss arising from borrower or counterparty default when ^a borrower, counterparty or obligor does not meet its financial obligations.

The Morgan Stanley Group manages credit risk exposure in consideration of each individual legal entity, but on ^a global basis, by ensuring transparency of material credit risks, ensuring compliance with established limits, approving material extensions of credit, escalating risk concentrations to appropriate senior managemen^t and mitigating credit risk through the use of collateral and other arrangements.

Liquidity andfunding risk

Liquidity and funding risk refers to the risk that the Company will be unable to meet its funding obligations in ^a timely manner. Liquidity risk stems from the potential risk that the Company will be unable to obtain necessary funding through borrowing money at favourable interest rates or maturity terms, or selling assets in ^a timely manner and at ^a reasonable price.

The Morgan Stanley Group's senior managemen^t establishes the overall liquidity and capital policies of the Morgan Stanley Group. The Morgan Stanley Group's liquidity and funding risk managemen^t policies are designed to mitigate the potential risk that the Morgan Stanley Group and the Company may be unable to access adequate financing to service its financial obligations without material franchise or business impact. The key objectives of the liquidity and funding risk managemen^t framework are to suppor^t the successful execution of the Morgan Stanley Group's and the Company's business strategies while ensuring sufficient liquidity through the business cycle and during periods of stressed market conditions. The Morgan Stanley Group has established regional committees to oversee the activities of its subsidiaries from ^a regional perspective.

This liquidity and funding risk managemen^t framework continues to provide sufficient liquidity to the Morgan Stanley Group and to the Company, and the Company's capital and liquidity position is satisfactory.

Going Concern

Taking all of the above factors into consideration, the Directors have no reason to believe that the Company will not have access to adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the interim managemen^t repor^t and condensed financial statements.

DIRECTORS

The following changes have occurred to the composition of the Board of Directors since 31 December 2009:

ah el J. Y . B ur	i ed l (r 2 Ju 20 10 ) es gn y
ks P. W B an	(a oi ed l 20 10 ) 7 Ju nt pp y
R .H .L de G ot ro	(a oi ed 1 Ju l 20 10 ) nt pp y
H .K .A L ee	(a oi ed l 20 10 ) 7 Ju nt pp y
de R P. J. G eu s	(a oi ed 1 Ju l 20 10 ) nt pp y

For identification purpose on'y. Goes together with revi repor^t dated 44.A1JG!OIO

INTERIM MANAGEMENT REPORT

EVENTS AFTER THE REPORTING PERIOD

There have been no significant events since the reporting date.

AUDIT COMMITTEE

The Company qualifies as an organisation of public interest pursuan^t Dutch and EU law. The Morgan Stanley Group has an audit committee that complies with international corporate governance rules. The Company has therefore taken the exemption for groups and has not installed an audit committee.

Approved by the Board and signed on its behalf on

Directors

fo rd A .S C .J ra w	P. W ks B an	R .H .L de G ot ro	H . H er nn an n	H .K .A L ee
P. J. G de R eu s	A So la J. n	T M F M an ag em en	t B .V

For identification purpose only. Goes together with reviereport dated ..31.AUG.2U1

RESPONSIBILITY STATEMENT

The Directors, the names of whom are set out below, confirm that to the best of their knowledge:

• (a) the condensed set of financial statements have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union ("EU") and Title 9 of Book 2 of the Netherlands Civil Code on the basis of the Company's international connections and gives ^a true and fair view of the assets, liabilities, financial position and result of the Company; and
• (b) the interim managemen^t repor^t includes ^a fair review of the important events that have occurred during the period and the impact on the condensed financial statements and provides ^a description of the principal risks and uncertainties that the Company faces for the remaining six months of the financial year.

Approved by the Board and signed on its behalf on

Directors

A .J .S C fo rd ra w	B ks P. W an	G R .H .L de ot ro	H H er rm an n	H .K .A L ee
G de P. J. R	l.A So la
eu s	n	T M F M t B an ag em en	.V

For identification purpose only. Goes together with revi repor^t dated "31AIJG"2&1&

CONDENSED STATEMENT OF COMPREHENSIVE INCOME Six months ended 30 June 2010

	Si th x m on s de d en 30 20 10 Ju ne € 00 0 (u ud it ed ) na	Si th x m on s de d en 31 M 20 09 ay €' OO O (u ud ite d) na
in fin ci al in cl si fi ed he ld fo ad in N et st ts tr ga s on an ru m en as as r g	18 41 1 6,	81 ,7 71
fin ci al in N (lo ) de si ed fa ir lu et st ts at at on an ru m en ss es gn va e th h of it lo ro ug pr or ss	(1 86 ,4 11 )	(8 1, 78 3)
In in te st re co m e	33 9	79 1
In te st re ex pe ns e	(1 27 )	(1 44 )
O th in er co m e	88 5	72 2
B E F O R E IN C O M E P R O F IT T A X	1, 09 7	1, 35 7
In ta ex pe ns e co m e x	(2 79 )	(3 46 )
O A O A C O SI P R F IT N D T T L M PR E H E N V E IN C O M E F O R T H E P E R IO D	81 8	1,0 11

All operations were continuing in the current and prior period.

The notes on pages 9 to 23 form an integral par^t of the condensed financial statements.

For identification purpose on'y. Goes together with review repor^t dated ..3.1.AJJ.2aIa..

CONDENSED STATEMENT OF CHANGES IN EQUITY Six months ended 30 June 2010

	Sh pi l ta ar e ca €' OO O	R ai d et ne in ea rn gs €' OO O	T al ot €' OO O
1 be 20 08 (a ud ite d) A D t ec em r Pr of it d l eh si in to ta an co m pr en ve co m e	15 ,0 18	9, 99 8	25 ,0 16
fo th ri od r e pe	-	1, 01 1	1,0 11
B al 31 M 20 09 at an ce ay (u ud it ed ) na	15 ,0 18	11 ,0 09	26 ,0 27
B al 1 Ja 20 10 at an ce nu ar y (a ud ite d) Pr of it d l eh si in to ta an co m pr en ve co m e	15 ,0 18	11 ,5 37	26 ,5 55
fo th ri od r e pe	-	81 8	81 8
al B 30 20 10 Ju at an ce ne (u ud it ed ) na	15 ,0 18	12 ,3 55	27 ,3 73

The notes on pages 9 to 23 form an integral par^t of the condensed financial statements.

For identification purpose only.

CONDENSED STATEMENT OF FINANCIAL POSITION As at 30 June 2010

		30 Ju ne 20 10 € 00 0	be 31 D ec em r 20 09 €' OO O
A SS E T S	N ot es	(u ud it ed ) na	(a ud ite d)
iv ab le L d oa ns an re ce s:
C h ba nk at as		21	6, 59 6
de iv ab le T ra re ce s		13 ,5 30	10 ,6 59
O th iv ab le er re ce s		27 ,4 97	33 ,9 60
		41 ,0 48	51 ,2 15
Fi ia l cl si fi ed he ld fo ad in ts tr na nc as se as as r g	2		30 58 ,9
lu Fi ia l de si ed fa ir th h of it lo ts at at na nc as se gn va e ro ug pr or ss	3	4, 4 18 ,6 76	2, 81 8, 9 67
C nt ta ur re x		19 3	-
T O T A L A SS S E T		4, 45 9, 91 7	2, 90 0, 85 2
L IA B IL IT IE S A N D E Q U IT Y Fi ia l lia bi lit ie tis ed at st na nc s am or co :
B k dr af t an ov er		12	-
T de bl pa ya es ra		60 ,7 88	18 ,3 00
O th bl er pa ya es		23 1	,5 65 12
		61 ,0 31	30 ,8 65
Fi ia l lia bi lit ie cl si fi ed he ld fo ad in tr s as r g na nc as	2	13 2, 15 8	-
Fi ia l lia bi lit ie de si ed fa ir lu th h of it lo at at na nc s gn va e ro ug pr or ss	3	4, 23 35 5 9,	2, 84 3, 27 8
C nt ta ur re x		-	15 4
T O T A L L IA B IL IT IE S		4, 43 2, 54 4	2, 87 4, 29 7
E Q U IT Y
Sh pi l ta ar e ca		15 ,0 18	15 ,0 18
ai d in R et ne ea rn gs		12 ,3 55	11 ,5 37
O A T T L E Q U IT Y		27 ,3 73	26 ,5 55
T O T A L L IA B IL IT IE S A N D E Q U IT Y		4, 45 9, 91 7	2, 90 0, 85 2

The notes on pages 9 to 23 form an integral par^t of the condensed financial statements.

For identification purpose only.

CONDENSED STATEMENT OF CASH FLOWS Six months ended 30 June 2010

	Si th x m on s de d en 30 Ju ne 20 10 €' OO O (u ud it ed ) na	Si th m on s x de d en 31 M ay 20 09 €' OO O (u ud ite d) na
O P E R A T IN G A C T IV IT IE S
of it fo th ri od Pr r e pe	81 8	1,0 11
A d ju fo st ts r: m en bl In ta pa ya e co m e x	(3 47 )	34 7
of it be fo ch in in d lia bi lit ie Pr at ts re an ge s op er g as se an s	47 1	1, 35 8
C ha in in at ts ng e op er g as se D in lo d iv ab le ec re as e an s an re ce s in fin ci al	3, 59 2	10 ,2 15
(in D / ) cl si fi ed he ld ts ec re as e cr ea se an as se as as fo ad in tr r g In in fin ci al de si ed fa ir lu ts at at cr ea se an as se	30 ,9 58	(1 07 ,4 86 )
gn va e th h of it lo ro ug pr or ss	(1 ,5 ) 99 ,9 97	(6 3, 64 6)
	(1 ,5 65 ,4 47 )	(1 60 ,9 17 )
C ha in in lia bi lit ie at ng e op er g s In in fin ci al lia bi lit ie tis ed at st cr ea se an s am or co (d in fin ci al In / e) lia bi lit ie cl si fi ed cr ea se ec re as an s as as he ld fo ad in tr r g in fin ci al lia bi lit ie de si ed fa ir lu In at at cr ea se an s gn va e th h of it lo ro ug pr or ss	30 ,1 54 13 2, 15 8 1, 39 07 6, 7 1, 55 8, 38 9	12 ,1 03 (1 19 ,6 72 ) 32 9, 20 6 22 1, 63 7
N E T C A SH FL O W S (U SE D IN ) O I F R M O PE R A T IN G A C T IV IT IE S	(6 ,5 87 )	62 ,0 78
N E T (D E C R E A SE ) I I N C R E A SE IN C A SH A N ]) C A SH E Q U IV A L E N T S	(6 ,5 87 )	62 ,0 78
C A SH A 1D C A SH E Q U IV A L E N T S A T T H E B E G IN M N G O F T H E PE R IO D	59 6, 6	1, 25 9
C A SH A C A SH Q A S N D E U IV L E N T A T T H E E N D O F T H E PE R IO D	9	63 ,3 37

The notes on pages 9 to 23 form an integral par^t of the condensed financial statements.

For dentificatiofl purpose only. Goes to report

NOTES TO THE CONDENSED FINANCIAL STATEMENTS Six months ended 30 June 2010

BASIS OF PREPARATION

i. Accounting policies

The Company prepares its annual financial statements in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union ("EU"). These condensed financial statements have been prepared in accordance with International Accounting Standards ("lAS") 34 'interim Financial Reporting' ("lAS 34"), as adopted by the EU.

As disclosed in the Company's annual financial statements, the Company has changed its annual accounting reference date from 30 November to 31 December to align with the changed year end of its ultimate paren^t undertaking, Morgan Stanley. Accordingly, these condensed financial statements are for the six months ended 30 June 2010. With the exception of the comparatives for the condensed statement of financial position, which are as at 31 December 2009, the comparative figures reflected within the condensed financial statements are for the six months ended 31 May 2009, which is considered comparable for the purposes of lAS 34.

In preparing these condensed financial statements, the Company has applied consistently the accounting policies and methods of computation used in the Company's annual financial statements for the 13 month period ended 31 December 2009.

During the period the Company made improvements to the fair value pricing methodology of certain of its financial instruments measured at fair value. These improvements have resulted in ^a better estimate of the exit price of certain financial liabilities designated at fair value, and their related hedges, where the holder has the right to pu^t the instrument back to the Company. This change has no impact on the net assets of the Company but has resulted in an increase in the fair value estimate recognised on the condensed statement of financial position in respec^t of financial liabilities designated at fair value and of the related hedges, as disclosed in Note 3. Prior period comparatives have not been restated.

New standards and interpretations adopted during the period

The following standards and interpretations relevant to the Company's operations were adopted during the period. Except where otherwise stated, the standards and interpretations did not have ^a material impact on the Company's condensed financial statements.

As par^t of the April 2009 Annual Improvements to IFRS, the International Accounting Standards Board ("IASB") made amendments to the following standards that are relevant to the Company's operations: IFRS 8 'Operating Segments', lAS 1 'Presentation ofFinancial Statements', lAS 7 'Statement of Cash Flows', lAS 18 'Revenue' and lAS 39 'Financial Instruments: Recognition and Measurement'. (for application in accounting periods beginning on or after ¹ January 2010). These Annual Improvements were endorsed by the EU in March 2010.

New standards and interpretations not ye^t adopted

At the date of authorisation of these financial statements, the following standards and interpretations relevant to the Company's operations were in issue by the IASB but not ye^t mandatory. The Company does not expec^t that the adoption of the following standards and interpretations will have ^a material impact on the Company's financial statements.

JERS 9 'Financial instruments' was issued by the IASB in November 2009 for retrospective application in accounting periods beginning on or after 1 January 2013. Although there are expected to be significant changes to the presentation of financial instruments by the Company, there is not expected to be ^a significant impact on net assets.

For identification purpose only. E;oes toetherv, revielreport dated. ,.jAV.'L4!j

NOTES TO THE CONDENSED FINANCIAL STATEMENTS Six months ended 30 June 2010

1. BASIS OF PREPARATION (CONTINUED)

lAS 24 'Related party disclosures' was revised by the IASB in November 2009 for retrospective application in annual periods beginning on or after 1 January 2011. The revised standard was endorsed by the EU in July 2010.

As par^t of the May 2010 Improvements to IFRSs, the IASB made amendments to the following standards that are relevant to the Company's operations: IFRS 7 'Financial instruments: disclosures' and lAS 1 'Presentation ofFinancial Statements' (for application in accounting periods beginning on or after 1 January 2011).

ii. Use of estimates and sources of uncertainty

The preparation of financial information requires the Company to make estimates and assumptions regarding the valuation of certain financial instruments and other matters that affect the condensed financial statements and related disclosures. The Company believes that the estimates utilised in preparing these condensed financial statements are reasonable, relevant and reliable. Actual results could differ from these estimates.

2. FINANCIAL ASSETS AND FINANCIAL LIABILITIES CLASSIFIED AS HELD FOR TRADING

Financial assets and financial liabilities classified as held for trading are summarised in the table below:

	30 Ju ne	20 10 31 D		be 20 09 ec em r
	A et ss s €' OO O	ia bi lit ie L s €' OO O	A et ss s €' OO O	L ia bi lit ie s €' OO O
D iv iv at er es	-	13 2, 15 8	30 ,9 58	-

3. FINANCIAL ASSETS AND FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial instruments designated at fair value through profit or loss consist primarily of the following financial assets and financial liabilities:

Issued structured notes - These instruments contain an embedded derivative which significantly modifies the cash flows of the issuance. The return on the instrument is linked to an underlying that is not clearly and closely related to the debt host including, but not limited to, equity, credit or commodity-linked notes. The instruments are designated at fair value as the risks to which the Company is ^a contractual party are risk managed on ^a fair value basis as par^t of the Company's trading portfolio and the risk is reported to key managemen^t personnel on this basis.

Prepaid equity securities contracts -These contracts involve derivatives for which an initial paymen^t is paid at inception. These contracts, along with the loans designated at fair value and the derivative contracts classified as held for trading, are par^t of the hedging strategy for the obligations arising pursuan^t to the issuance of the structured notes. The contracts are designated at fair value as the risks to which the Company is ^a contractual party are managed on ^a fair value basis as par^t of the Company's trading portfolio and the risk is reported to key managemen^t personnel on this basis.

Designated loans -These are loans to other Morgan Stanley Group companies that, along with the prepaid equity securities contracts and the derivative contracts classified as held for trading, are par^t of the hedging strategy for the obligations arising pursuan^t to the issuance of the structured notes. These loans are designated at fair value as the risks to which the Company is ^a contractual party are managed on ^a fair value basis as par^t of the Company's trading portfolio and the risk is reported to key managemen^t personnel on this basis.

For identification purpose on'y. Goes dated . ..

NOTES TO THE CONDENSED FINANCIAL STATEMENTS Six months ended 30 June 2010

3. FINANCIAL ASSETS AND FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)

	Ju 30 ne	20 10	31 be 20 09 D ec em r
	A et ss s € '0 00	L ia bi lit ie s €' OO O	A et ss s €' OO O	ia bi lit ie L s €' OO O
ed ed Is st ct te su ru ur no s	-	4, 23 9, 35 5		2, 84 3, 27 8
ai d Pr ui ri tie ty nt ct ep eq se cu s co ra s	1, 47 5, 70 8		70 8, 04 6	-
D i ed lo at es gn an s	2, 94 2, 96 8	-	2, 11 0, 63 3	-
	4, 41 8, 67 6	4, 23 35 5 9,	2, 81 8, 67 9	2, 84 3, 27 8

The change in fair value of issued structured notes recognised through the condensed statement of comprehensive income attributable to own credit risk is ^a loss of €34,492,000 (31 May 2009: loss of €52,707,000) and cumulatively is ^a gain of €29,792,000 (31 December 2009: gain of €64,284,000). This change is determined as the amount of change in fair value that is not attributable to changes in market conditions that give rise to market risk.

The change in fair value of prepaid equity securities contracts and designated loans recognised through the condensed statement of comprehensive income attributable to changes in credit risk is ^a gain of €31,330,000 (31 May 2009: gain of €75,931,000) and cumulatively is ^a loss of €33,656,000 (31 December 2009: loss of €64,986,000).

The change in fair value attributable to credit risk for the period is offset by ^a net gain of €3,162,000 (31 May 2009: loss of €23,224,000), and cumulatively is ^a gain of €3,864,000 (31 December 2009: gain of €702,000), in changes in the fair value of financial instruments classified as held for trading attributable to credit risk.

The carrying amount of financial liabilities designated at fair value was €15,283,000 lower than the contractual amount due at maturity (31 December 2009: €37,825,000).

4. SEGMENT REPORTING

Segment information is presented in respec^t of the Company's business and geographical segments. The business segments and geographical segments are based on the Company's managemen^t and internal reporting structure. Transactions between business segments are on normal commercial terms and conditions.

Business segmen^t

Morgan Stanley structures its business segments primarily based upon the nature of the financial products and services provided to customers and Morgan Stanley's internal managemen^t structure. The Company's own business segments are consistent with those of Morgan Stanley.

The Company has one reportable business segment, Institutional Securities, which provides financial services to financial institutions. Its business includes the issuance of financial instruments and the hedging of the obligations arising pursuan^t to such issuances.

Geographical segments

The Company operates in three geographic regions as listed below:

• •Europe, Middle East and Africa ("EMEA")
• Americas
• •Asia

The following table presents selected condensed statement of comprehensive income and condensed statement of financial position information of the Company's operations by geographic area. The external revenues net of interest / profit before income tax and total assets disclosed in the following table reflect the regional view of the Company's operations, on ^a managed basis. The basis for attributing external revenues (net of interest expense) and total assets is determined by trading desk location.

For identification purpose only. Goes togete dated

NOTES TO THE CONDENSED FINANCIAL STATEMENTS Six months ended 30 June 2010

4. SEGMENT REPORTING (CONTINUED)

hi l G eo gr ap ca ts se gm en	E M	E A		A ic m er as		A si a		al T ot
	30 Ju ne 20 10 €' OO O	31 M ay 20 09 €' OO O	30 Ju ne 20 10 €' OO O	31 M ay 20 09 €' OO O	30 Ju ne 20 10 €' OO O	31 M ay 20 09 €' OO O	30 Ju ne 20 10 €' OO O	31 M ay 20 09 €' OO O
l E xt er na of t re ve nu es ne in /P fi te st t re ro be fo in re co m e	92 5	1, 15 0	35	-	13 7	20 7	1, 09 7	1, 35 7
ta x	E M	E A	A m er	ic as	A si	a	T ot	al
	30 Ju ne 20 10 €' OO O	31 D ec 20 09 €' OO O	30 Ju ne 20 10 €' OO O	31 D ec 20 09 €' OO O	30 Ju ne 20 10 €' OO O	31 D ec 20 09 €' OO O	30 Ju ne 20 10 €' OO O	31 D ec 20 09 €' OO O
T al ot ts as se	3, 44 60 0 6,	2, 27 2, 29 4	32 6, 09 5	11 4, 64 8	68 7, 22 2	51 3, 91 0	4, 45 91 9, 7	2, 90 0, 85 2

5. FINANCIAL RISK MANAGEMENT

Risk Management Procedures

Risk is an inherent par^t of both Morgan Stanley's and the Company's business activity and is manage^d by the Company within the context of the broader Morgan Stanley Group. The Morgan Stanley Group seeks to identify, assess, monitor and manage each of the various types of risk involved in its business activities in accordance with defined policies and procedures. The Company's own risk managemen^t policies and procedures are consistent with those of the Morgan Stanley Group.

The principal activity of the Company continues to be the issuance of structured notes and the economic hedging of the obligations arising pursuan^t to such issuances. It is the policy and objective of the Company not to be exposed to market risk. On issuance of each financial instrument, the Company enters into economic hedges of its obligations by purchasing financial instruments from other Morgan Stanley Group companies.

Significant risks faced by the Company resulting from its issuing activities are set out below.

Credit risk

Credit risk refers to the risk of loss arising from borrower or counterparty default.

The Morgan Stanley Group manages credit risk exposure on ^a global basis, but in consideration of each individual legal entity, including the Company. The credit risk managemen^t policies and procedures of the Morgan Stanley Group include ensuring transparency of material credit risks, ensuring compliance with established limits, approving material extensions of credit, and escalating risk concentrations to appropriate senior management. Credit risk managemen^t policies and procedures for the Company are consistent with those of the Morgan Stanley Group and include escalation to appropriate key managemen^t personnel of the Company.

The maximum exposure to credit risk of the Company as at 30 June 2010 is the carrying amount of the financial assets held in the condensed statement of financial position without taking account of any collateral held or any other credit enhancement.

The Company enters into the majority of its financial asset transactions with other Morgan Stanley Group companies, where both the Company and the Morgan Stanley Group companies are wholly owned subsidiaries of the same ultimate paren^t entity, Morgan Stanley. As ^a result of the implicit suppor^t that would be provided by Morgan Stanley the Company is considered exposed to the credit risk of Morgan Stanley.

For dentification purpose only. Goes together wjlJi review/port dated tAUiJ

NOTES TO THE CONDENSED FINANCIAL STATEMENTS Six months ended 30 June 2010

5. FINANCIAL RISK MANAGEMENT (CONTINUED)

Liquidity risk

Liquidity risk is the risk that the entity may encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset.

The Morgan Stanley Group's senior managemen^t establishes the overall liquidity and funding policies of the Morgan Stanley Group and the liquidity risk managemen^t policies and procedures conducted within the Company are consistent with those of the Morgan Stanley Group. The Morgan Stanley Group's liquidity and funding risk managemen^t policies are designed to mitigate the potential risk that entities within the Morgan Stanley Group, including the Company, may be unable to access adequate financing to service their financial liabilities when they become payable without material, adverse franchise or business impact. The key objective of the liquidity and funding risk managemen^t framework is to suppor^t the successful execution of both the Company's and the Morgan Stanley Group's business strategies while ensuring ongoing and sufficient liquidity through the business cycle and during periods of stressed market conditions.

The Company hedges all of its financial liabilities with financial assets entered into with other Morgan Stanley Group companies, where both the Company and other Morgan Stanley Group companies are wholly owned subsidiaries of the same group paren^t company, Morgan Stanley. Further, the maturity profile of the financial assets matches the maturity profile of the financial liabilities.

Liquidity managemen^t policies

The principal elements of the Morgan Stanley Group's liquidity managemen^t framework, which includes consideration of the liquidity risk for each individual legal entity, are the Contingency Funding Plan ("CFP") and liquidity reserves. Comprehensive financing guidelines (secured funding, long-term funding strategy, surplus capacity, diversification and staggered maturities) suppor^t the Morgan Stanley Group target liquidity profile.

Contingency Funding Plan -CFP is the Morgan Stanley Group's primary liquidity risk managemen^t tool. The CFP models ^a potential, prolonged liquidity contraction over ^a one-year time period and sets forth ^a course of action to effectively manage ^a liquidity event. The CFP and liquidity risk exposures are evaluated on an on-going basis and reported to the Firm Risk Committee, Asset/Liability Management Committee, and other appropriate risk committees including the European Financial Risk Committee.

CFP is produced on ^a Morgan Stanley Group as well as major group and subsidiary level to capture specific cash requirements and cash availability at various legal entities. The CFP assumes that Morgan Stanley does not have access to cash that may be held at certain subsidiaries due to regulatory, legal or tax constraints. Since the Company hedges the liquidity risk of its financial liabilities with financial assets that match the maturity profile of the financial liabilities, the Company is not considered ^a major subsidiary for the purposes of liquidity risk. However, the Company would have access to the cash or liquidity reserves held by Morgan Stanley in the unlikely event it was unable to access adequate financing to service its financial liabilities when they become payable.

The Morgan Stanley Group's CFP model incorporates scenarios with ^a wide range of potential cash outflows during ^a liquidity stress event, including, but not limited to, the following: (i) repaymen^t of all unsecured debt maturing within one year and no incremental unsecured debt issuance; (ii) maturity roll-off of outstanding letters of credit with no further issuance and replacement of cash collateral; (iii) return of unsecured securities borrowed and any cash raised against these securities; (iv) additional collateral that would be required by counterparties in the event of ^a three-notch long-term credit ratings downgrade; (v) higher haircuts on or lower availability of secured funding; (vi) client cash withdrawals; (vii) drawdowns on unfunded commitments provided to third parties; and (viii) discretionary unsecured debt buybacks.

Liquidity Reserves -The Morgan Stanley Group seeks to maintain target liquidity reserves that are sized to cover daily funding needs and meet strategic liquidity targets as outlined in CFP. These liquidity reserves are held in the form of cash deposits and pools of central bank eligible unencumbered securities. The Morgan Stanley liquidity reserve is managed ^globally and consists of overnight cash deposits and unencumbered U.S. and European governmen^t bonds, agencies and agency pass throughs. The Morgan Stanley Group believes that diversifying the form in which its liquidity reserves are maintained (cash and securities) enhances its ability to quickly and efficiently source funding in ^a stressed environment. The Morgan Stanley Group's funding requirements and target liquidity reserves may vary based on changes to the level and composition of its statement of financial position,

timing of specific transactions, client financing activity, market conditions anii easonal factors. For centification purpose on y. Goes together with review epor^t dated 2J.AU.21O

NOTES TO THE CONDENSED FINANCIAL STATEMENTS Six months ended 30 June 2010

5. FINANCIAL RISK MANAGEMENT (CONTINUED)

Funding managemen^t policies

The Morgan Stanley Group's funding managemen^t policies are designed to provide for financings that are executed in ^a manner that reduces the risk of disruption to the Morgan Stanley Group's and the Company's operations. The Morgan Stanley Group pursues ^a strategy of diversification of secured and unsecured funding sources (by product, by investor and by region) and attempts to ensure that the tenor of the Morgan Stanley Group's, and the Company's, liabilities equals or exceeds the expected holding period of the assets being financed. Maturities of financings are designed to manage exposure to refinancing risk in any one period.

The Morgan Stanley Group funds its statement of financial position on ^a global basis through diverse sources, which includes consideration of the funding risk of each legal entity. These sources may include the Morgan Stanley Group's equity capital, long-term debt, repurchase agreements, securities lending, deposits, commercial paper, letters of credit and lines of credit. The Morgan Stanley Group has active financing programs for both standard and structured products in the U.S., European and Asian markets, targeting global investors and currencies such as U.S. dollar, Euro, British pound, Australian dollar and Japanese Yen.

In managing both the Company's and the Morgan Stanley Group's funding risk the composition and size of the entire statement of financial position, not just financial liabilities, is monitored and evaluated. ^A substantial portion of the Morgan Stanley Group's total assets consist of highly liquid marketable securities and short-term receivables arising from its Institutional Securities sales and trading activities. The liquid nature of these assets provides the Company and the Morgan Stanley Group with flexibility in financing and managing its business.

Maturity analysis

In the following maturity analysis of financial assets and financial liabilities, derivative contracts, financial assets designated at fair value through profit or loss and financial liabilities designated at fair value through profit or loss are disclosed according to their earliest contractual maturity; all such amounts are presented at their fair value, consistent with how these financial instruments are managed. All other amounts represen^t the undiscounted cash flows receivable and payable by the Company arising from its financial assets and financial liabilities to earliest contractual maturities as at 30 June 2010. Receipt of financial assets and repayments of financial liabilities that are subject to immediate notice are treated as if notice were given immediately and are classified as on demand. This presentation is considered by the Company to appropriately reflect the liquidity risk arising from these financial assets and financial liabilities, presented in ^a way that is consistent with how the liquidity risk on these financial assets and financial liabilities is managed by the Company.

O de d n m an	Le th ss an on e ye ar	E al to qu or th m or e an bu t on e ye ar le th ss an tw o ye ar s	al E to qu or th tw m or e an o t l bu ye ar s es s th fiv an e ye ar s	E al to qu or th m or e an fiv e ye ar s	l To ta
		€' OO O	€' OO O	€' OO O	€' OO O
21	-	-	-	-	21
,5 13 30		-	-	-	13 ,5 30
27 ,4 97	-	-	-	-	27 ,4 97
43 0 77 6,	29 6, 80 3	65 ,0 86	31 6, 90 8	20 ,4 81	1, 47 5, 70 8
2, 27 4, 86 7	40 ,1 67	40 5, 38 7	11 3, 78 7	10 8, 76 0	2, 94 2, 96 8
3, 09 2, 34 5	33 6, 97 0	47 0, 47 3	43 0, 69 5	12 24 1 9,	4, 45 72 4 9,
	€' OO O	€' OO O

or dentificatiOfl purpose only. {3fiS toeMJfi1V1 dated

NOTES TO THE CONDENSED FINANCIAL STATEMENTS Six months ended 30 June 2010

5. FINANCIAL RISK MANAGEMENT (CONTINUED)

Maturity analysis (continued)

30 Ju 20 10 ne	O de d n m an €' OO O	Le th ss an on e ye ar €' OO O	E al to qu or th m or e an bu t on e ye ar le th ss an tw o ye ar s '0 0 0	E al to qu or th tw m or e an o bu t l ye ar s es s th fiv an e ye ar s €' OO O	al E to qu or th m or e an fiv e ye ar s €' OO O	To l ta €' OO O
in ci al F lia bi lit ie an s Fi ia l lia bi lit ie tis ed at am or na nc s st co :
k dr af B t an ov er	12	-	-	-	-	12
de bl T ra pa ya es	60 ,7 88	-	-	-	-	60 88 ,7
th bl O er pa ya es cl si fi ed Fi ia l he ld ts na nc as as as se fo ad in tr r g:	23 1	-	-	-	-	23 1
D iv iv at er es lia bi lit ie de si ed Fi ia l at at na nc s gn fa ir lu th h of it lo va e ro ug pr or ss :	74 27 ,7	11 5	38 ,5 40	14 ,7 31	4, 04 5	13 2, 15 8
ed Is ed st ct te no s su ru ur	2, 92 9, 40 7	33 6, 85 5	43 1, 93 3	4 15 ,9 64	12 5, 19 6	4, 23 9, 35 5
T al fi ia l lia bi lit ie ot na nc s	3, 06 5, 16 5	33 6, 97 0	47 0, 47 3	43 0, 69 5	12 9, 24 1	4, 43 2, 54 4

31 D be r 2 00 9 ec em			E al to qu or th m or e an bu t on e ye ar	al E to qu or th tw m or e an o	E al to qu or
	O de d n m an	Le th ss an on e ye ar	le th ss an tw o ye ar s	bu t l ye ar s es s fiv th an e ye ar s	th m or e an fiv e ye ar s	l To ta
	€' OO O	€' OO O	€' OO O	€' OO O	€' OO O	€' OO O
in ci al F ts an as se
L d iv ab le re ce s: oa ns an
C h ba nk at as	59 6, 6	-	-	-	-	59 6, 6
de iv ab le T ra re ce s	10 ,6 59	-	-	-	-	10 ,6 59
O th iv ab le re ce s er	33 ,9 60	-	-	-	-	33 ,9 60
cl si fi ed Fi ia l he ld fo ts as as na nc as se r ad in tr g:
D iv iv at er es	27 ,8 14	50 0	44 1	2, 18 8	15	30 ,9 58
Fi ia l lia bi lit ie de si ed fa ir at at gn na nc s lu of it lo th h va e ro ug pr or ss :
ai d ui ri tie Pr ty ep eq se cu s nt ct co ra s	33 1, 72 6	16 4, 58 0	88 ,1 38	40 ,5 27	83 ,0 75	70 8, 04 6
i ed lo D at es gn an s	1, 44 6, 51 3	27 8, 25 0	11 3, 66 6	23 5, 11 4	37 ,0 90	2, 11 0, 63 3
al fi ia l T ot ts na nc as se	1, 85 7, 26 8	44 3, 33 0	20 2, 24 5	27 7, 82 9	12 0, 18 0	2, 90 0, 85 2

For identification purpose only.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS Six months ended 30 June 2010

5. FINANCIAL RISK MANAGEMENT (CONTINUED)

Maturity analysis (continued)

31 be D 20 09 ec em r	O de d n m an €' OO O	Le th ss an on e ye ar 'O O O	al E to or qu th m or e an on e bu t ye ar th le ss an tw o ye ar s €' OO O	al E to qu or th tw m or e an o bu t l ye ar s es s th fiv an e ye ar s € O O 0	al E to qu or th m or e an fiv e ye ar s €' OO O	To l ta €' OO O
in ci al lia bi lit ie F an s Fi ia l lia bi lit ie tis ed at na nc s am or st co :
de bl T ra pa ya es	18 ,3 00				-	18 ,3 00
O th bl er pa ya es Fi ia l lia bi lit ie de si ed at at na nc s gn fa ir lu th h of it lo va e ro ug pr or ss :	12 ,5 65				-	12 ,5 65
Is ed ed st ct te su ru ur no s	1, 79 9, 69 4	44 3, 33 0	20 2, 24 5	27 82 7, 9	12 0, 18 0	2, 84 3, 27 8
al fm ci al lia bi lit ie T ot an s	1, 83 0, 55 9	44 3, 33 0	20 2, 24 5	27 7, 82 9	12 0, 18 0	2, 87 4, 14 3

Market Risk

Market risk refers to the risk that ^a change in the level of one or more market prices, rates, indices, implied volatilities (the price volatility of the underlying instrument imputed from option prices), correlations or other market factors, such as liquidity, will result in losses for ^a position or portfolio.

Sound market risk managemen^t is an integral par^t of the Company's and the Morgan Stanley Group's culture. The Company is responsible for ensuring that market risk exposures are well-managed and prudent and more broadly for ensuring transparency of material market risks, monitoring compliance with established limits and escalating risk concentrations to appropriate senior management.

The Company is managed within the Morgan Stanley Group's ^global framework. The market risk managemen^t policies and procedures of the Company are consistent with those of the Morgan Stanley Group, including reporting of material risks identified to appropriate key managemen^t personnel of the Company.

The issued structured notes expose the Company to the risk of changes in market prices of the underlying securities, interest rate risk and, where denominated in currencies other than Euros, the risk of changes in rates of exchange between the Euro and the other relevant currencies. The Company uses the risk-mirroring contracts that it purchases from other Morgan Stanley Group companies to hedge the price, interest rate, foreign currency and other market risks associated with the issuance of the structured notes, consistent with the Company's risk managemen^t strategy. As such, the Company is not exposed to any market risk on these financial instruments.

For identification purpose only. 7..rr

NOTES TO THE CONDENSED FINANCIAL STATEMENTS Six months ended 30 June 2010

6. FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE

a. Fair value hierarchy disclosure

Financial instruments recognised at fair value are broken down for disclosure purposes into ^a three level fair value hierarchy based on the observability of inputs as follows:

• Quoted prices (unadjusted) in an active market for identical assets or liabilities (Level 1) Valuations based on quoted prices in active markets for identical assets or liabilities that the Morgan Stanley Group has the ability to access. Valuation adjustments and block discounts are not applied to Level ^I instruments. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail ^a significant degree ofjudgement.
• Valuation techniques using observable inputs (Level 2) Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
• Valuation techniques with significant unobservable inputs (Level 3) Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The Company's valuation approach and fair value hierarchy categorisation for certain significant classes of financial instruments recognised at fair value are as follows:

Derivatives

Over-the-counter ("OTC") derivative contracts include forward, swap and option contracts related to equity prices, interest rates or foreign currencies.

Depending on the product and the terms of the transaction, the fair value of OTC derivative products can be either observed or modelled using ^a series of techniques, and model inputs from comparable benchmarks, including closed-form analytic formulas such as the Black-Scholes option pricing model, and simulation models or ^a combination thereof. Many pricing models do not entail material subjectivity because the methodologies employed do not necessitate significant judgement, and the pricing inputs are observed from actively quoted markets. In the case of more established derivative products, the pricing models used by the Company are widely accepted by the financial services industry. OTC derivative products valued by the Company using pricing models are generally categorised in Level ² of the fair value hierarchy. In instances where significant inputs are unobservable, they are categorised as Level 3 of the fair value hierarchy.

Designated loans

The fair value of loans to other Morgan Stanley Group companies is estimated based on the presen^t value of the expected future cash flows using its best estimate of interest rate ^yield curves. Designated loans are generally categorised in Level 2 of the fair value hierarchy.

Issued structured notes and prepaid equity securities contracts

The Company issues structured notes and purchases prepaid equity securities contracts that have coupons or repaymen^t terms linked to the performance of debt or equity securities or currencies. Fair value of structured notes and prepaid equity securities contracts is estimated using valuation models described above for the derivative and debt features of the notes. These models incorporate observable inputs referencing identical or comparable securities, including prices that the notes are linked to, interest rate ^yield curves, option volatility and currency rates. The impact of own credit spreads is also included based on observed secondary bond market spreads. Structured notes and prepaid equity securities contracts are generally categorised in Level 2 of the fair value hierarchy. In instances where significant inputs are unobservable, they are categorised as Level 3 of the fair value hierarchy.

For identification purpose only. Goes together with reviw repor^t dated ..34.A1JG.21ft .

NOTES TO THE CONDENSED FINANCIAL STATEMENTS Six months ended 30 June 2010

6. FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (CONTINUED)

Fair value control processes

The Company employs control processes to validate the fair value of its financial instruments, including those derived from pricing models. These control processes are designed to assure that the values used for financial reporting are based on observable inputs wherever possible. In the event that observable inputs are not available, the control processes are designed to assure that the valuation approac^h utilised is appropriate and consistently applied and that the assumptions are reasonable. These control processes include reviews of the pricing model's theoretical soundness and appropriateness by Morgan Stanley Group personne^l with relevant expertise who are independent from the trading desks.

Additionally, groups independent from the trading divisions within the financial control, market risk and credit risk managemen^t departments participate in the review and validation of the fair values generated from pricing models, as appropriate. Where ^a pricing model is used to determine fair value, recently comparable transactions and other observable market data are considered for purposes of validating assumptions underlying the model.

Financial assets andfinancial liabilities recognised atfair value

The Company's financial assets and financial liabilities recognised at fair value have been broken down into ^a three level hierarchy based on the observability of inputs. The following tables presen^t the carrying value of the Company's financial assets and liabilities across the fair value hierarchy:

30 June 2010

	Q d te uo ic in pr es tiv ac e ke t m ar el (L 1) ev €' OO O	al ti V ua on ch ni te qu es in us g ob ab le se rv in ts pu (L el 2) ev €' OO O	V al ti ua on ch ni te qu es ith w si if ic t gn an no n ob ab le se rv in ts pu (L el 3) ev €' OO O	T al ot € ,0 00
Fi ia l de si ed fa ir lu ts at at na nc gn as se va e th h of it lo ro ug pr or ss :
ri tie Pr ai d ui ty nt ct ep eq se cu s co ra s i ed D lo at es gn an s		1, 39 8, 81 0 2, 94 2, 96 8	76 ,8 98 -	1, 47 5, 70 8 2, 94 2, 96 8
al fi ia l he ld fa ir lu T ts ot at na nc as se va e	-	4, 34 1, 8 77	76 ,8 98	4, 41 8, 67 6
Fi ia l cl si fi ed he ld lia bi lit ie fo ad in tr na nc s as as r g: D iv iv at er es Fi ia l lia bi lit ie de si ed lu fa ir at at na nc s gn va e	-	11 5, 80 8	16 ,3 50	13 2, 15 8
th h of it lo ss : ro ug pr or
Is ed ed st ct te su ru ur no s	-	3, 99 6, 02 5	24 3, 33 0	4, 23 9, 35 5
al fi ia l lia bi lit ie fa ir lu T at ot na nc s va e	-	4, 11 1, 83 3	25 9, 68 0	4, 37 1, 51 3

rep0 Goes 18

NOTES TO THE CONDENSED FINANCIAL STATEMENTS Six months ended 30 June 2010

6. FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (CONTINUED)

Financial assets andfinancial liabilities recognised atfair value (continued)

31 December 2009

	Q d te uo ic in pr es tiv ac e ke t m ar (L el 1) ev €' OO O	V al ti ua on ch ni te qu es in us g ob ab le se rv in ts pu (L el 2) ev €' OO O	V al ti ua on ch ni te qu es ith w si if ic t gn an no n ob ab le se rv in ts pu (L el 3) ev €' OO O	T al ot €' OO O
Fi ia l he ld fo ad in ts tr na nc as se r g: D iv iv at er es		29 ,5 52	1, 40 6	30 ,9 58
Fi ia l lu de si ed fa ir ts at at na nc as se gn va e th h of it lo ro ug pr or ss :
Pr ai d ui ri tie ty nt ct ep eq se cu s co ra s		63 5, 55 8	72 ,4 88	70 8, 04 6
D i ed lo at es gn an s		2, 11 0, 63 3		2, 11 0, 63 3
al fi ia l he ld fa ir lu T ot ts at na nc as se va e		2, 77 5, 74 3	73 ,8 94	2, 84 9, 63 7
Fi ia l lia bi lit ie de si ed lu fa ir at at na nc s gn va e th h of it lo ro ug pr or ss :
Is ed ed st ct te su ru ur no s	-	2, 73 1, 20 8	11 2, 07 0	2, 84 3, 27 8
T al fi ia l lia bi lit ie fa ir lu ot at na nc s va e	-	2, 73 1, 20 8	11 2, 07 0	2, 84 3, 27 8

or identification purpose only. [

NOTES TO THE CONDENSED FINANCIAL STATEMENTS Six months ended 30 June 2010

6. FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (CONTINUED)

b. Changes in Level 3 assets and liabilities at fair value

The following table presents the changes in the fair value of the Company's Level 3 financial assets and financial liabilities for the period ended 30 June 2010:

30 Ju 20 10 ne	la Ba at nc e 1 J an ua ry 20 10 €' OO O	To l g ain sl ta (lo s) sse ise d re co gn of it in pr or lo ss €' OO O	€' OO O	€' OO O	— €' OO O	E €' OO O	N et fe tra ns rs in d/ an or f to ou Le l 3 (1 ) ve €' OO O	Ba la at nc e 20 10 30 Ju ne €' OO O	lis ed U nr ea in sl( lo ) f ga ss es or lev el 3 I l iab ili tie ts as se s di tst ou an ng at as 30 20 10 Ju (2) ne €0 00
Fi ia l ts na nc as se de sig d fa ir te at na of it lu th h pr va e ro ug lo or ss : Pr ai d ui ty ep eq rit ie nt ct se cu s co ra s	72 ,4 88	4, 02 9	39 ,5 96		-	(1 5, 96 9)	(2 3, 24 6)	76 ,8 98	4, 13 5
Fi ia l l ia bi lit ie na nc s cl sif ie d he ld fo as as r di tra ng : N de riv iv et at e (3 ) nt ct co ra s	1,4 06	(1 ,2 99 )	-	-	-	(1 8, 27 1)	1,8 14	(1 6, 35 0)	(1 ,1 39 )
Fi ia l l ia bi lit ie na nc s de sig d fa ir te at na lu th h of it va e ro ug pr lo or ss : Is ed d str tu su uc re te no s	(1 12 ,0 70 )	1,9 98		-	(1 48 ,4 81 )	26 ,2 33	(1 1,0 10 )	(2 43 ,3 30 )	1,4 17
	(3 8, 17 6)	4, 72 8	39 ,5 96	-	(1 48 ,4 81 )	(8 ,0 07 )	(3 2, 44 2)	(1 82 82 ) ,7	4, 41 3

(1) For financial assets and fmancial liabilities that were transferred into and out of Level 3 during the period, gains or (losses) are presented as if the assets or liabilities had been transferred into or Out of Level 3 as at the beginning of the period.

(2) Amounts represen^t unrealized gains or (losses) for the period ended 30 June 2010 related to assets and liabilities still outstanding at 30 June 2010.

(3) Net derivative contracts represen^t financial assets classified as held for trading — derivative contracts net of financial liabilities classified as held for trading — derivative contracts.

During the period ended 30 June 2010, the Company reclassified approximately €25,890,000 of financial liabilities from Level 2 to Level 3. The reclassifications were due to either ^a reduction in the volume of recently executed transactions and market price quotations for these instruments, or ^a lack of available broker quotes, such that certain unobservable inputs became significant to the fair value measurement.

During the period ended 30 June 2010, the Company reclassified approximately €23,246,000 of financial assets and €16,694,000 of financial liabilities from Level 3 to Level 2. The reclassifications were due to an increase in market price quotations for these or comparable instruments such that significant inputs for the fair value measurement became observable.

ntflcatiofl purpose on'y.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS Six months ended 30 June 2010

6. FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (CONTINUED)

b. Changes in Level 3 assets and liabilities at fair value (continued)

31 be D 20 09 ec em r									U lis ed nr ea in sl( lo ) f ga ss es or lev el 3
	la Ba at nc e 1 D be ec em r 20 08	l g ai / To ta ns (lo s) sse ise d in re co gn of it lo pr or ss	rl a		a? a a	a? a?	N et fe tra ns rs in d! an or f t o ou Le l 3 (1 ) ve	Ba la at nc e 31 D be ec em r 20 09	I l iab ili tie ts as se s di tst ou an ng at as 31 D be r 2 00 9 ec em (2 )
	€ ,0 00	€' OO O	€' OO O	€' OO O	€' OO O	cl €' OO O	€' OO O	€' OO O	€0 00
Fi ia l ts na nc as se cl sif ie d he ld fo as as r di tra ng : de riv iv N et at e (3 ) nt ct co ra s		(6 28 ) ,7				13 ,5 96	(5 ,4 62 )	1,4 06	(6 ,7 28 )
Fi ia l a et na nc ss s de sig d fa ir te at na lu th h of it va e ro ug pr lo or ss : Pr ai d ui ty ep eq rit ie se cu s nt ct co ra s Fi ia l l ia bi lit ie na nc s de sig d fa ir te at na lu th h va e ro ug of it lo pr or ss :	-	(6 7, 82 9)	56 ,0 12	-	-	(1 5, 84 4)	10 0, 14 9	72 ,4 88	(6 82 9) 7,
Is ed d str tu su uc re te no s	(9 ,5 71 )	72 78 ,6	-	(8 -	0, 90 3)	20 ,0 10	(1 14 ,2 84 )	(1 12 ,0 70 )	72 ,6 78
al fin ci al T ot an he ld fa ir ts at as se lu va e	(9 ,5 71 )	(1 ,8 ) 79	56 ,0 12	(8 -	0, 90 3)	17 62 ,7	59 (1 9, 7)	(3 8, 17 6)	(1 ,8 79 )

(1) For financial assets and financial liabilities that were transferred into and out of Level ³ during the period, gains or (losses) are presented as if the assets or liabilities had been transferred into or Out of Level 3 as at the beginning of the period.

(2) Amounts represen^t unrealized gains or (losses) for the period ended ³¹ December ²⁰¹⁰ related to assets and liabilities still outstanding at ³⁰ June 2010.

(3) Net derivative contracts represen^t financial assets classified as held for trading — derivative contracts net of financial liabilities classified as held for trading — derivative contracts.

During the period ended 31 December 2009, the Company reclassified approximately €94,687,000 of financial assets, and €114,284,000 of financial liabilities from Level 2 to Level 3. The reclassifications were due to either ^a reduction in the volume of recently executed transactions and market price quotations for these instruments, or ^a lack of available broker quotes, such that certain unobservable inputs became significant to the fair value measurement.

c. Significant transfers between Level 1 and Level 2 of the fair value hierarchy

There were no significant transfers between Level ^I and Level 2 of the fair value hierarchy during the period.

For identification purpose only. Goes together with revieweport 3iAtJO!1O IT

NOTES TO THE CONDENSED FINANCIAL STATEMENTS Six months ended 30 June 2010

6. FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (CONTINUED)

d. Sensitivity of fair values to changing significant assumptions to reasonably possible alternatives

All financial instruments are valued in accordance with the techniques outlined in the fair value hierarchy disclosure above. Some of these techniques, including those used to value instruments categorised in Level 3 of the fair value hierarchy, are dependent on unobservable parameters and the fair value for these financial instruments has been determined using parameters appropriate for the valuation methodology based on prevailing market evidence. It is recognised that the unobservable parameters could have ^a range of reasonably possible alternative values.

In estimating the change in fair value, the unobservable parameters were varied to the extremes of the ranges of reasonably possible alternatives using statistical techniques, such as dispersion in comparable observable external inputs for similar asset classes, historic data or judgment if ^a statistical technique is not appropriate. Where ^a financial instrument has more than one unobservable parameter, the sensitivity analysis reflects the greatest increase or decrease to fair value by varying the assumptions individually. It is unlikely that all unobservable parameters would concurrently be at the extreme range of possible alternative assumptions and therefore the sensitivity shown below is likely to be greater than the actual uncertainty relating to the financial instruments.

The following table presents the sensitivity of the fair value of Level 3 financial assets and financial liabilities as at year end to reasonably possible alternative assumptions.

		ff of ab l E t ec re as on y ib le al iv te at po ss rn e io pt as su m ns
30 20 10 Ju ne	F ai lu r va e €' OO O	In in cr ea se fa ir lu va e €' OO O	D in ec re as e fa ir lu va e €' OO O
Fi ia l de si ed lu fa ir th h of it lo ts at at na nc as se gn va e ro ug pr or ss : -P id ui ri tie ty nt ct re pa eq se cu s co ra s	76 ,8 98	9, 32 3	(1 1, 11 2)
Fi ia l lia bi lit ie cl si fi ed he ld fo ad in tr na nc s r g: as as
de ri tiv s( -N 1) nt ct et va es co ra
-E it qu y	16 ,3 50	4, 18 8	(2 ,8 17 )
Fi ia l lia bi lit ie de si ed fa ir lu th h of it lo at at na nc s va e gn ro ug pr or ss :
- I d ed st ct te ss ue ru ur no s	24 3, 33 0	13 ,5 11	(1 3, 92 9)

		ab l E ff of t ec re as on y ib le al iv te at rn e po ss io pt as su m ns
31 be 20 09 D ec em r	ai F lu r va e €' OO O	In in cr ea se fa ir lu va e €' OO O	D in ec re as e fa ir lu va e €' OO O
Fi ia l cl si fi ed he ld fo ad in ts tr na nc as se as as r g:
de ri tiv -N s' et nt ct va es co ra
-C di t re	1, 15 0	1,7 00	(9 00 )
-E it qu y	25 6	30 0	(2 00 )
Fi ia l de si ed fa ir lu th h of it lo ts at at na nc as se gn va e ro ug pr or ss :
id -P ui ri tie nt ct ty re pa eq se cu s co ra s	72 ,4 88		(4 00 )
Fi ia l lia bi lit ie de si ed fa ir lu th h of it lo at at na nc s gn va e ro ug pr or ss :
ed I d st ct te ss ue ru ur no s -	11 2, 07 0	2, 00 0	(1 ,5 00 )
(1 ) Ne t d iv ati t F in cia l a cla ssi fie d he ld fo di nt cts ts r t er ve co ra re pr es en an sse as ra ng — he ld fo ad in de riv iv rtr at tra ct g— ec on s.	de riv ati nt cts ve co ra id tI F en or G to g o e s d d te a	of li Fi ial et na nc fi C io p at n _ i th th w e e r	al jj i lç l c as r 1 U ' ' i rt re p o r e e v

NOTES TO THE CONDENSED FINANCIAL STATEMENTS Six months ended 30 June 2010

These condensed financial statements were approved by the Board and authorised for issue on Signed on behalf of the Board Directors

A .S C fo rd .J ra w	P. W . B ks an	R .H .L de G ot ro	H H er rm an n	.A H .K L ee

P.J.G. de Reus J.A. Solan TMF Management B.V.

^F .enLh,cat1ofl purpose only

INDEPENDENT REVIEW REPORT TO THE MEMBERS OF MORGAN STANLEY B.V.

For identification purpose only. Goes together with review repo dated 3.UJJ6.2a1L...

1043 OP Amsterdam P.O.Box 58110 1040 HC Amsterdam Netherlands

Tel: +31 (0)88 288 2888 Fax: +31 (0)88 288 9739 www.deloitte.nl

To the shareholders of Morgan Stanley B.V. Amsterdam

Date Reference

August 31, 2010 3 100054184/0P9979/ak

Review repor^t

Introduction

We have reviewed the accompanying (condensed) company interim financial information for the six month period ended June 30, 2010, of Morgan Stanley B.V., Amsterdam, which comprises the condensed statement of comprehensive income for the ⁶ months' period ended June 30, 2010, the condensed statement of changes in equity, the condensed statement of financial position as per June 30, 2010 and the condensed statement of cash flows. Management is responsible for the preparation and presentation of this (condensed) company interim financial information in accordance with lAS 34, 'Interim Financial Reporting' as adopted by the European Union. Our responsibility is to express ^a conclusion on this interim financial information based on our review.

Scope

We conducted our review in accordance with Dutch law including standard 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". ^A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. ^A review is substantially less in scope than an audit conducted in accordance with auditing standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

2 August 31, 2010 31000541 8410P9979/ak

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying (condensed) company interim financial information as at June 30, 2010 is not prepared, in all material respects, in accordance with lAS 34, 'Interim Financial Reporting', as adopted by the European Union.

Deloitte Accountants B.V.

W.H.E. van Ommeren