MORGAN STANLEY — Capital/Financing Update 2010

Jan 27, 2010

CALCULATION OF REGISTRATION FEE

| Title
of Each Class of Securities Offered | Maximum
Aggregate Offering Price | Amount
of Registration Fee |
| --- | --- | --- |
| Jump
Securities due 2011 | $15,949,620 | $1,137.21 |

PROSPECTUS Dated December 23, 2008 PROSPECTUS SUPPLEMENT Dated December 23, 2008 Pricing Supplement No. 267 to Registration Statement No. 333-156423 Dated January 25, 2010 Rule 424(b)(2)

$15,949,620

GLOBAL MEDIUM-TERM NOTES, SERIES F

Senior Notes

Jump Securities Based on the Price of the

iShares ® MSCI Brazil Index Fund due February 24, 2011

Unlike ordinary debt securities, the Jump Securities Based on the Price of the iShares ® MSCI Brazil Index Fund due February 24, 2011, which we refer to as the securities, do not pay interest and do not guarantee any return of principal at maturity. Instead, at maturity you will receive for each $10 stated principal amount of securities that you hold, an amount in cash that will vary depending upon the closing price of the iShares ® MSCI Brazil Index Fund, which we refer to as the shares, on the valuation date, and which may be significantly less than the stated principal amount of the securities and could be zero. If the final share price increases from the initial share price, you will receive the fixed upside payment described below. The securities are senior unsecured obligations of Morgan Stanley, and all payments on the securities are subject to the credit risk of Morgan Stanley.

• The stated principal amount and original issue price of each security is $10.

• We will not pay interest on the securities.

• At maturity, you will receive for each $10 stated principal amount of securities that you hold, an amount in cash equal to:

º $10 plus the upside payment if the final share price is greater than the initial share price, or

º $10 times the share performance factor if the final share price is less than or equal to the initial share price. This amount will be less than or equal to the stated principal amount of $10 and could be zero. There is no minimum payment on the securities at maturity.

Please see the graph of “Hypothetical Payouts on the Securities at Maturity” on PS-7.

• The upside payment will be equal to $2.60 per security (26% of the stated principal amount). Accordingly, even if the final share price is significantly greater than the initial share price, your payment at maturity will not exceed $12.60 per security.

• The share performance factor will be a fraction equal to the final share price divided by the initial share price.

• The initial share price is $67.90, which is the closing price of one share of the shares on the day we priced the securities for initial sale to the public, which we refer to as the pricing date.

• The final share price will equal the closing price of one share of the shares on the valuation date times the adjustment factor on such date. The adjustment factor will initially be set at 1.0 and may be adjusted to reflect certain corporate events relating to the shares.

• The valuation date will be February 18, 2011, subject to postponement for non-trading days or certain market disruption events.

• Investing in the securities is not equivalent to investing in the shares or the stocks composing the MSCI Brazil Index.

• The securities will not be listed on any securities exchange.

• The CUSIP number for the securities is 617484662. The ISIN number for the securities is US6174846625.

You should read the more detailed description of the securities in this pricing supplement. In particular, you should review and understand the descriptions in “Summary of Pricing Supplement” and “Description of Securities.”

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

The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this pricing supplement is truthful or complete. Any representation to the contrary is a criminal offense.

PRICE $10 PER SECURITY

| | Price
to Public (1) | Agent’s Commissions (1)(2) | Proceeds
to Issuer |
| --- | --- | --- | --- |
| Per
security | $10 | $0.20 | $9.80 |
| Total | $15,949,620 | $318,992.40 | $15,630,627.60 |

(1) The securities will be issued at $10 per security and the agent’s commissions will be $0.20 per security; provided that the price to public and the agent's commissions for the purchase by any single investor of greater than or equal to $1,000,000 and less than $3,000,000 principal amount of securities will be $9.9625 per security and $0.1625 per security, respectively; for the purchase by any single investor of greater than or equal to $3,000,000 and less than $5,000,000 principal amount of securities will be $9.9438 per security and $0.1438 per security, respectively; and for the purchase by any single investor of $5,000,000 or more principal amount of securities will be $9.925 per security and $0.125 per security, respectively.

(2) Selected dealers, including Morgan Stanley Smith Barney LLC (an affiliate of the Agent), 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. See “Supplemental Information Concerning Plan of Distribution; Conflicts of Interest.” For additional information see “Plan of Distribution” in the accompanying prospectus supplement.

The agent for this offering, Morgan Stanley & Co. Incorporated, is our wholly owned subsidiary. See “Supplemental Information Concerning Plan of Distribution; Conflicts of Interest.”

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.

MORGAN STANLEY

For a description of certain restrictions on offers, sales and deliveries of the securities and on the distribution of this pricing supplement and the accompanying prospectus supplement and prospectus relating to the securities, see the section of this pricing supplement called “Description of Securities–Supplemental Information Concerning Plan of Distribution; Conflicts of Interest.”

No action has been or will be taken by us, the agent or any dealer that would permit a public offering of the securities or possession or distribution of this pricing supplement or the accompanying prospectus supplement or prospectus in any jurisdiction, other than the United States, where action for that purpose is required. Neither this pricing supplement nor the accompanying prospectus supplement and prospectus may be used for the purpose of an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation.

The securities have not been and will not be registered with the Comissão de Valores Mobiliários (The Brazilian Securities Commission). The securities may not be offered or sold in the Federative Republic of Brazil except in circumstances which do not constitute a public offering or distribution under Brazilian laws and regulations.

The securities have not been registered with the Superintendencia de Valores y Seguros in Chile and may not be offered or sold publicly in Chile. No offer, sales or deliveries of the securities or distribution of this pricing supplement or the accompanying prospectus supplement or prospectus, may be made in or from Chile except in circumstances which will result in compliance with any applicable Chilean laws and regulations.

No action has been taken to permit an offering of the securities to the public in Hong Kong as the securities have not been authorized by the Securities and Futures Commission of Hong Kong and, accordingly, no advertisement, invitation or document relating to the securities, whether in Hong Kong or elsewhere, shall be issued, circulated or distributed which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong other than (i) with respect to the securities which are or are intended to be disposed of only to persons outside Hong Kong or only to professional investors within the meaning of the Securities and Futures Ordinance (Cap. 571) of Hong Kong (“SFO”) and any rules made thereunder or (ii) in circumstances that do not constitute an invitation to the public for the purposes of the SFO.

The securities have not been registered with the National Registry of Securities maintained by the Mexican National Banking and Securities Commission and may not be offered or sold publicly in Mexico. This pricing supplement and the accompanying prospectus supplement and prospectus may not be publicly distributed in Mexico.

The agent and each dealer represent and agree that they will not offer or sell the securities nor make the securities the subject of an invitation for subscription or purchase, nor will they circulate or distribute this pricing supplement or the accompanying prospectus supplement or prospectus or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the securities, whether directly or indirectly, to persons in Singapore other than:

(a) an institutional investor (as defined in section 4A of the Securities and Futures Act (Chapter 289 of Singapore (the “SFA”));

(b) an accredited investor (as defined in section 4A of the SFA), and in accordance with the conditions, specified in Section 275 of the SFA;

(c) a person who acquires the securities for an aggregate consideration of not less than Singapore dollars Two Hundred Thousand (S$200,000) (or its equivalent in a foreign currency) for each transaction, whether such amount is paid for in cash, by exchange of shares or other assets, unless otherwise permitted by law; or

(d) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

PS-2

SUMMARY OF PRICING SUPPLEMENT

The following summary describes the Jump Securities Based on the Price of the iShares ® MSCI Brazil Index Fund due February 24, 2011, which we refer to as the securities, in general terms only. You should read the summary together with the more detailed information that is contained in the rest of this pricing supplement and in the accompanying prospectus and prospectus supplement. You should carefully consider, among other things, the matters set forth in “Risk Factors.”

The securities are medium-term debt securities of Morgan Stanley. The securities have been designed for investors who are willing to forgo market floating interest rates on the securities in exchange for a payment at maturity based on the performance of the iShares ® MSCI Brazil Index Fund, which we refer to as the shares. At maturity, you will receive a positive return on the securities only if the closing price of the shares on the valuation date is greater than the initial share price. All payments on the securities are subject to the credit risk of Morgan Stanley.

“iShares ® ” is a registered trademark of BlackRock Institutional Trust Company, N.A. The iShares ® MSCI Brazil Index Fund and the MSCI Brazil Index are described under “Description of Securities––The Shares” in this pricing supplement.

| Each
security costs $10 | We,
Morgan Stanley, are offering the Jump Securities Based on the Price of the
iShares ® MSCI Brazil Index Fund due February 24, 2011, which we refer to as the
securities. The stated principal amount and issue price of each
security is $10. |
| --- | --- |
| | The
original issue price of the securities includes the agent’s commissions
paid with respect to the securities and the cost of hedging our
obligations under the securities. The cost of hedging includes
the projected profit that our subsidiaries may realize in consideration
for assuming the risks inherent in managing the hedging
transactions. The fact that the original issue price of the
securities reflects these commissions and hedging costs is expected to
adversely affect the secondary market prices of the
securities. See “Risk Factors—The inclusion of commissions and
projected profit of hedging in the original issue price is likely to
adversely affect secondary market prices” and “Description of
Securities—Use of Proceeds and Hedging.” |
| The
securities do not guarantee any repayment of principal at maturity; no
interest | Unlike
ordinary debt securities, the securities do not pay interest and do not
guarantee any return of principal at maturity. Instead, at
maturity you will receive for each $10 stated principal amount of
securities that you hold, an amount in cash that will vary depending upon
the price of the shares on the valuation date. There is no
minimum payment on the securities at maturity and, accordingly, you could
lose your entire investment. If the final share price increases
from the initial share price, you will receive the fixed upside payment
described below. |
| | The
initial share price is $67.90, which is the closing price of one share of
the shares on January 25, 2010, the day we priced the securities for
initial sale to the public, which we refer to as the pricing
date. |
| | The
final share price will be the closing price of one share of the shares on
February 18, 2011, which we refer to as the valuation date (subject to
postponement in the event of non-trading days or certain market disruption
events), times the adjustment factor on such date. The
adjustment factor will be initially set at 1.0 and is subject to change
upon certain events affecting the
shares. |

PS-3

Payment at maturity depends on the price of the shares At maturity, you will receive for each $10 stated principal amount of securities that you hold an amount in cash that will vary depending upon the price of the shares on the valuation date, equal to:

| • | $10
plus the upside payment, if the final share price is greater than the initial
share price, |
| --- | --- |
| | where, |
| | upside
payment = $2.60 per security (26% of the stated principal
amount). Accordingly, even if the final share price is
significantly greater than the initial share price, your payment at
maturity will not exceed $12.60 per security. |
| • | $10
times the share performance factor, if the final share price is less than or equal to the initial share price |
| | where, |

share performance factor = final share price initial share price

| Accordingly,
where the final share price has decreased from the initial share price,
investors will lose 1% of the stated principal amount for every 1% decline
in the shares. This amount will be less than
the stated principal amount of $10 and could be
zero. |
| --- |
| All
payments on the securities are subject to the credit risk of Morgan
Stanley. |

| | On
PS–7, we have provided a graph titled “Hypothetical Payouts on the
Securities at Maturity,” which illustrates the performance of the
securities at maturity over a range of hypothetical percentage changes in
the shares. The graph does not show every situation that can
occur. |
| --- | --- |
| | You
can review the historical prices of the shares in the section of this
pricing supplement called “Description of Securities—Historical
Information” starting on PS-32. You cannot predict the future
performance of the shares based upon their historical
performance. |
| | If
a market disruption event occurs with respect to the shares on the
valuation date or if the valuation date is not a trading day, the final
share price on the valuation date will be determined on the next trading
day on which no market disruption event occurs with respect to the shares
in accordance with “Description of Securities—Valuation
Date.” If a market disruption event occurs with respect to the
shares on the valuation date, the postponement of the valuation date for
up to five trading days could cause the maturity date of the securities to
be postponed in accordance with “Description of Securities—Maturity
Date.” |
| | Investing
in the securities is not equivalent to investing in the shares or stocks
composing the MSCI Brazil Index. |
| Your
participation in any increase in the price of the shares will be no
greater than the upside payment | The
positive return investors may realize on the securities if the final share
price is greater than the initial share price will be equal to, but no
greater than, the upside payment of $2.60 per security (26% of the stated
principal amount). Accordingly, even if the final share price
is substantially greater than the initial share price, your payment at
maturity will not exceed $12.60 per security, or 126% of the stated
principal amount. See “Hypothetical Payouts on the Securities
at Maturity” on PS–7. |

PS-4

| Investment
in the securities is a concentrated investment in the equity securities of
a single emerging markets economy | The
stocks included in the MSCI Brazil Index are limited to stocks issued by
Brazilian companies. Therefore, an investment in the securities
is a concentrated investment in the equity securities of a single emerging
markets economy. Events occurring in and around Brazil could
affect the value of the stocks included in the MSCI Brazil Index which
would affect the value of the security and the payment at
maturity. |
| --- | --- |
| Investment
in the securities involves risks associated with emerging markets equity
securities as well as exposure to the currency exchange risk of the
Brazilian real relative to the U.S. dollar | The
stocks included in the MSCI Brazil Index and that are generally tracked by
the shares have been issued by Brazilian companies, and the value of such
stocks will affect the value of your investment. Because the
price of the shares is related to the U.S. dollar value of stocks
underlying the MSCI Brazil Index, holders of the securities will be
exposed to currency exchange rate risk with respect to the Brazilian real,
and fluctuations in the exchange rate of the Brazilian real relative to
the U.S. dollar will affect the value of your investment. The
impact of the exposure to currency exchange risk will depend on the extent
to which the Brazilian real strengthens or weakens against the U.S.
dollar. |
| MS
& Co. will be the calculation agent | We
have appointed our affiliate, Morgan Stanley & Co. Incorporated, which
we refer to as MS & Co., to act as calculation agent for The Bank of
New York Mellon, a New York banking corporation (as successor trustee to
JPMorgan Chase Bank, N.A. (formerly known as JPMorgan Chase Bank)), the
trustee for our senior securities. As calculation agent, MS
& Co. has determined the initial share price and will determine the
final share price, whether a market disruption event has occurred and will
calculate the payment, if any, that you will receive at
maturity. |
| MS
& Co. will be the agent; conflicts of interest | The
agent for the offering of the securities, MS & Co., our wholly-owned
subsidiary, 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. In accordance with NASD Rule 2720, MS & Co. or
any of our other affiliates may not make sales in this offering to any
discretionary account without the prior written approval of the
customer. See “Description of Securities—Supplemental
Information Concerning Plan of Distribution; Conflicts of Interest” on
PS-36. |
| Where
you can find more information on the securities | The
securities are senior unsecured securities issued as part of our Series F
medium-term note program. You can find a general description of
our Series F medium-term note program in the accompanying prospectus
supplement dated December 23, 2008 and prospectus dated December 23,
2008. We describe the basic features of this type of security
in the section of the prospectus supplement called “Description of
Notes—Notes Linked to Commodity Prices, Single Securities, Baskets of
Securities or Indices” and in the section of the prospectus called
“Description of Debt Securities—Fixed Rate Debt
Securities.” |
| | For
a detailed description of the terms of the securities, you should read the
section of this pricing supplement called “Description of
Securities.” You should also read about some of the risks
involved in investing in securities in the section of this pricing
supplement called “Risk Factors.” The tax and accounting
treatment of investments in equity-linked securities such as the
securities may differ from that of investments in ordinary debt securities
or common stock. See the section of this pricing supplement
called “Description of Securities—United States Federal
Taxation.” We urge you to consult with your investment, legal,
tax, accounting and other advisers with regard to any proposed or actual
investment in the securities. |

PS-5

How to reach us You may contact your local Morgan Stanley Smith Barney branch office or call us at (866) 477-4776.

PS-6

HYPOTHETICAL PAYOUTS ON THE SECURITIES AT MATURITY

For each security, the following graph illustrates the payment at maturity on the securities for a range of hypothetical percentage changes in the shares. The graph is based on the following terms:

| Stated
Principal Amount per Security: | $10 |
| --- | --- |
| Upside
Payment: | $2.60
per security (26% of the stated principal
amount) |
| Payment
at Maturity: | $12.60
per security |
| Principal
Protection: | None |

• Where the final share price is greater than the initial share price, 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 upside payment of $2.60 per security. In the payoff diagram above, an investor will realize the payment at maturity of $12.60 per security at any final share price greater than the initial share price.

• Where the final share price is less than or equal to the initial share price, the payment at maturity will be less than the stated principal amount of $10 by an amount that is proportionate to the percentage decrease from the initial share price. For example, if the shares have 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.

PS-7

RISK FACTORS

The securities are not secured debt, are riskier than ordinary debt securities, do not pay any interest and do not guarantee any return of principal at maturity. Investing in the securities is not equivalent to investing in the shares or the MSCI Brazil Index. This section describes the most significant risks relating to the securities. For a complete list of risk factors, please see the accompanying prospectus supplement and the accompanying prospectus.

| The
securities do not pay interest or guarantee the return of any of your
principal | The
terms of the securities differ from those of ordinary debt securities in
that the securities do not pay interest and do not guarantee the return of
any of the stated principal amount at maturity. If the final
share price is less than the initial share price, 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
price of the shares. There is no minimum payment at maturity on the
securities, and, accordingly, you could lose your entire
investment. See “Hypothetical Payouts on the Securities at
Maturity” on PS–7. |
| --- | --- |
| Your
appreciation potential is fixed and limited | Where
the final share price is greater than the initial share price, the
appreciation potential of the securities is limited to the fixed upside
payment of $2.60 per security (26% of the stated principal amount) even if
the final share price is significantly greater than the initial share
price. See “Hypothetical Payouts on the Securities at Maturity”
on PS–7. |
| 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. |
| Market
price of the securities may be influenced by many unpredictable
factors | Several
factors, some of which beyond our control, 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. We
expect that generally the price of the shares on any day will affect the
value of the securities more than any other single
factor. However, because the payout on the securities is
not directly correlated to the price of the shares, the securities will
trade differently from the shares. Other factors that may
influence the value of the securities include: · the
trading price and volatility (frequency and magnitude of changes in value)
of the shares · dividend rates on the shares and the stocks composing the MSCI
Brazil Index, · interest and yield rates in the market, · time
remaining until the securities mature, · geopolitical conditions and economic, financial, political,
regulatory or judicial events that affect the shares or equities markets
generally and which may affect the final share price of the
shares, · the
exchange rates of the U.S. dollar relative to the currency in which the
stocks underlying the MSCI Brazil Index trade, · the
occurrence of certain events affecting the shares that may or may not
require an adjustment to the adjustment factor, and · any
actual or anticipated changes in our credit ratings or credit
spreads. |

PS-8

| | Some
or all of these factors will influence the market price of the securities
prior to maturity and 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. |
| --- | --- |
| | You
cannot predict the future performance of the shares based on their
historical performance. The price of the shares may decrease
below the initial share price so that you will receive for each security
you hold at maturity a payment that is less than the stated principal
amount of the securities by an amount proportionate to the decline in the
price of the shares below the initial share price. There can be
no assurance that the price of the shares will have increased on the
valuation date so that you will receive at maturity an amount that is
greater than the principal amount of your investment. The
prices of the shares may be, and have recently been, extremely volatile,
and we can give you no assurance that the volatility will
lessen. See “Description of Securities—Historical
Information”. |
| 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 | Investors
are dependent on Morgan Stanley’s ability to pay all amounts due on the
securities at maturity, and, therefore investors are subject to the credit
risk of Morgan Stanley and to 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. |
| There
are risks associated with investments in securities linked to the value of
equity securities of a single emerging markets economy | The
stocks included in the MSCI Brazil Markets Index and that are generally
tracked by the shares have been issued by Brazilian
companies. Therefore, an investment in the securities is a
concentrated investment in the equity securities of a single emerging
markets economy. Investments in securities linked to the value
of equity securities issued in Brazil involve risks associated with the
securities markets in Brazil, including risks of volatility in Brazilian
markets, intervention in Brazilian markets by the government of Brazil and
cross-shareholdings in Brazilian companies. Also, there is
generally less publicly available information about Brazilian companies
than about U.S. companies that are subject to the reporting requirements
of the United States Securities and Exchange Commission, and Brazilian
companies are subject to accounting, auditing and financial reporting
standards and requirements different from those applicable to U.S.
reporting companies. The prices of securities in Brazilian
markets may be affected by political, economic, financial and social
factors in Brazil, or global regions, including changes in government,
economic and fiscal policies and currency exchange
laws. Moreover, the Brazilian economy may differ favorably or
unfavorably from the economy in the United States in such respects as
growth of gross national product, rate of inflation, capital reinvestment,
resources and self-sufficiency. In
1999, Brazil experienced a currency crisis and a significant devaluation
of its currency. If Brazil were to experience another such
significant devaluation, it would have a significant negative impact on
the Brazilian equities markets which are generally tracked by the MSCI
Brazil Index and the shares. We cannot assure you that a
currency crisis or significant devaluation will not happen in the future
to the Brazilian real, which would have significant negative effects on
the value of the security. See “—The securities are subject to
currency exchange risk” below. |

PS-9

| The
securities are subject to currency exchange rate risk | Because
the price of the shares is related to the U.S. dollar value of stocks
underlying the iShares ® MSCI Brazil Index Fund, holders of the securities will be exposed to
currency exchange rate risk with respect to the Brazilian
real. If the Brazilian real weakens relative to the U.S.
dollar, the price of the shares will be adversely affected and the payment
at maturity on the securities may be reduced. Of
particular importance to potential currency exchange risk
are: § existing and expected rates of inflation; § existing and expected interest rate levels; § the balance of payments; and § the extent of governmental surpluses or deficits in Brazil and the
United States of America. All
of these factors are in turn sensitive to the monetary, fiscal and trade
policies pursued by the governments of Brazil and the United States and
other countries important to international trade and finance. As
noted above, the currency of Brazil in 1999 suffered a currency crisis and
significant devaluation. We cannot assure you that a currency
crisis or significant devaluation will not happen in the future to the
Brazilian real, which would have significant negative effects on the value
of the securities. |
| --- | --- |
| Hedging
and trading activity by the calculation agent and its affiliates could
potentially adversely affect the value of the securities | MS
& Co. and other affiliates of ours have carried out, and will continue
to carry out, hedging activities related to the securities (and to other
instruments linked to the shares or the stocks underlying the MSCI Brazil
Index), including trading in the shares and the stocks underlying the MSCI
Brazil Index and to other instruments linked to the shares or the MSCI
Brazil Index. MS & Co. and some of our other subsidiaries
also trade the shares and other financial instruments related to the
basket components and the MSCI Brazil 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 day we priced the
securities for initial sale to the public could have increased the initial
share price and, therefore, could have increased the price at which the
shares must close on the valuation date before you receive 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
potentially affect the price of the shares 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 securities in
secondary market transactions will likely be lower than the original issue
price, since the original issue price includes, and secondary market
prices are likely to exclude, commissions paid with respect to the
securities, as well the cost of hedging the issuer’s obligations under the
securities. 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. 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. |

PS-10

| Economic
interests of the calculation agent and other affiliates of the issuer may
be adverse to investors | The
economic interests of the calculation agent and other affiliates of ours
are potentially adverse to your interests as an investor in the
securities. As
calculation agent, MS & Co. has determined the initial share price and
will determine the final share price and the share performance factor, and
will calculate the amount of cash, if any, you will receive at
maturity. 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 calculation of any
closing price in the event of a market disruption event, may affect the
payout to you at maturity. See the sections of this pricing
supplement called “Description of Securities—Market Disruption Event” and
“—Discontinuance of the Shares and/or the MSCI Brazil Index; Alteration of
Method of Calculation.” The
original issue price of the securities includes the agent’s commissions
and certain costs of hedging our obligations under the
securities. The subsidiaries through which we hedge our
obligations under the securities expect to make a profit. Since
hedging our obligations entails risk and may be influenced by market
forces beyond our or our subsidiaries’ control, such hedging may result in
a profit that is more or less than initially projected. |
| --- | --- |
| You
have no shareholder rights | Investing
in the securities is not equivalent to investing in the stocks underlying
the MSCI Brazil Index. As an investor in the securities, you
will not have voting rights or the right to receive dividends or other
distributions or any other rights with respect to the shares or the stocks
underlying the MSCI Brazil Index. In addition, you do not have
the right to exchange your securities for shares at any
time. |
| Adjustments
to the shares or the MSCI Brazil Index could adversely affect the value of
the securities | The
investment adviser to the iShares ® MSCI Brazil Index Fund, BlackRock Fund Advisors (the “Investment Adviser”)
seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the MSCI Brazil
Index. Pursuant to its investment strategy or otherwise, the
Investment Advisor may add, delete or substitute the stocks composing the
iShares ® MSCI Brazil Index Fund. Any of these actions could adversely affect the
price of the shares and, consequently, the value of the
securities. MSCI Inc. (“MSCI”) is responsible for calculating
and maintaining the MSCI Brazil Index. MSCI may add, delete or
substitute the stocks constituting the MSCI Brazil Index or make other
methodological changes that could change the value of the MSCI Brazil
Index. MSCI may discontinue or suspend calculation or
publication of the MSCI Brazil Index at any time. In these
circumstances, the calculation agent will have the sole discretion to
substitute a successor index that is comparable to the discontinued MSCI
Brazil Index and is not precluded from considering indices that are
calculated and published by the calculation agent or any of its
affiliates. |
| The
shares and the MSCI Brazil Index are different | The
performance of the shares may not exactly replicate the performance of the
MSCI Brazil Index because the iShares ® MSCI Brazil Index Fund will reflect transaction costs and fees that are
not included in the calculation of the MSCI Brazil Index. It is
also possible that the iShares ® MSCI Brazil Index Fund may not fully replicate or may in certain
circumstances diverge significantly from the performance of the MSCI
Brazil Index due to the temporary unavailability of certain securities in
the secondary market, the performance of any derivative instruments
contained in this fund, differences in trading hours between the
iShares ® MSCI Brazil Index Fund and the MSCI Brazil Index or due to other
circumstances. The Investment Adviser may invest up to 10% of
the iShares ® MSCI Brazil Index Fund’s assets in shares of other iShares ® funds that seek to track the performance of equity securities of
constituent countries of the MSCI Brazil
Index. |

PS-11

| The
adjustments to the adjustment factor for the shares the calculation agent
is required to make do not cover every corporate event that can affect the
shares | MS
& Co., as calculation agent, will adjust the adjustment factor for the
shares for certain events affecting the shares, such as stock splits and
stock dividends, and certain other corporate actions involving the fund
issuing the shares, such as mergers. However, the calculation
agent will not make an adjustment for every corporate event or every
distribution that could affect the shares. For example, the
calculation agent is not required to make any adjustments if the issuer of
the shares or anyone else makes a partial tender or partial exchange offer
for the shares. If an event occurs that does not require the
calculation agent to adjust the adjustment factor, the market price of the
securities may be materially and adversely affected. The
determination by the calculation agent to adjust, or not to adjust, an
adjustment factor may materially and adversely affect the market price of
the securities. |
| --- | --- |
| Although
the U.S. federal income tax consequences of an investment in the
securities are uncertain, each security should be treated as a single
financial contract that is an “open transaction” for U.S. federal income
tax purposes | Please
note that the discussions in this pricing supplement concerning the U.S.
federal income tax consequences of an investment in the securities
supersede the discussions contained in the accompanying prospectus
supplement. Subject to the discussion under
“ United
States Federal
Taxation” in this
pricing supplement, each security should be treated as a single financial
contract that is an “ open transaction” for U.S. federal income tax
purposes. If the Internal Revenue Service (the “IRS”)
were successful in asserting an alternative treatment for the securities,
the timing and character of income on the securities might differ
significantly. For example, under one characterization, U.S.
Holders 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. We do 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 this pricing
supplement. Please read carefully the discussion under “United
States Federal Taxation” in this 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 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 t o 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 instrument s 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 that is
subject to 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 read carefully the discussion under
“United States Federal Taxation” in this pricing supplement and consult
their tax advisers regarding all aspects of the U.S. federal tax
consequences of an investment in the securities as well as any tax
consequences arising under the laws of any state, local or foreign taxing
jurisdiction. |

PS-12

DESCRIPTION OF SECURITIES

Terms not defined herein have the meanings given to such terms in the accompanying prospectus supplement. The term “Security” refers to each $10 stated principal amount of our Jump Securities Based on the Price of the iShares ® MSCI Brazil Index Fund due February 24, 2011. In this pricing supplement, the terms “we,” “us” and “our” refer to Morgan Stanley.

| Aggregate
Principal Amount | $15,949,620 |
| --- | --- |
| Pricing
Date | January
25, 2010 |
| Original
Issue Date (Settlement Date) | January
28, 2010 (3 Business Days after the Pricing Date) |
| Maturity
Date | February
24, 2011, subject to extension if the scheduled Valuation Date is
postponed in accordance with the definition thereof. |
| | If,
due to a Market Disruption Event or otherwise, the Valuation Date is
postponed so that it falls less than two scheduled Business Days prior to
the scheduled Maturity Date, the Maturity Date will be the second
scheduled Business Day following the Valuation Date as
postponed. See “––Valuation Date” below. |
| Interest
Rate | None |
| Specified
Currency | U.S.
dollars |
| Stated
Principal Amount | $10
per Security |
| Original
Issue Price | $10
per Security |
| CUSIP
Number | 617484662 |
| ISIN
Number | US6174846625 |
| Denominations | $10
and integral multiples thereof |
| Shares | Shares
of the iShares ® MSCI Brazil Index Fund |
| Payment
at Maturity | You
will receive for each $10 Stated Principal Amount of Securities that you
hold a Payment at Maturity equal to: |

| • | $10
plus the Upside Payment, if the Final Share Price is greater than the Initial
Share Price, or |
| --- | --- |
| • | $10
times the Share Performance Factor, if the Final Share Price is less than or equal to the Initial Share Price. This payment will be less than
or equal to the $10 Stated Principal Amount and could be zero. There is no
minimum payment on the Securities at
maturity. |

We shall, or shall cause the Calculation Agent to, (i) provide written notice to the Trustee and to The Depository Trust Company, which we refer to as DTC, of the amount of cash, if any, to be delivered with respect to each Security, on or prior to 10:30 a.m. (New York City time) on the Trading Day preceding the Maturity Date (but if such Trading Day is not a Business Day, prior to the close of business on the Business Day preceding the Maturity

PS-13

Date), and (ii) deliver the aggregate cash amount, if any, due with respect to the Securities to the Trustee for delivery to DTC, as holder of the Securities, on or prior to the Maturity Date. We expect such amount of cash, if any, will be distributed to investors on the Maturity Date in accordance with the standard rules and procedures of DTC and its direct and indirect participants. See “—Book-Entry Security or Certificated Security” below, and see “Forms of Securities—The Depositary” in the accompanying prospectus.

| Upside
Payment | $2.60
per Security (26% of the Stated Principal Amount) |
| --- | --- |
| Share
Performance Factor | A
fraction, the numerator of which is the Final Share Price and the
denominator of which is the Initial Share Price, as described by the
following formula: |

Share Performance Factor = Final Share Price Initial Share Price

| Initial
Share Price | $67.90,
which is the Closing Price of one share of the Shares on the Pricing
Date. |
| --- | --- |
| Final
Share Price | The
Closing Price of one share of the Shares on the Valuation Date times the Adjustment
Factor on such date, as determined by the Calculation
Agent. |
| Closing
Price | Subject
to the provisions set out under “—Discontinuance of the Shares and/or the
MSCI Brazil Index; Alteration of Method of Calculation” below, the Closing
Price for the Shares on any Trading Day means: |
| | (a)
if the Shares are listed or admitted to trading on a national securities
exchange other than the National Association of Securities Dealers
Automated Quotation System (the “NASDAQ”), the last reported sale price,
regular way, of the principal trading session on such day on the principal
national securities exchange registered under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), on which the Shares are listed
or admitted to trading, |
| | (b)
if the Shares are a security of the NASDAQ, the official closing price
published by the NASDAQ on such day, or |
| | (c)
if the Shares are not listed or admitted to trading on any national
securities exchange but is included in the OTC Bulletin Board Service (the
“OTC Bulletin Board”) operated by the Financial Industry Regulatory
Authority, Inc., the last reported sale price of the principal trading
session on the OTC Bulletin Board on such day. |
| | If
the Shares are listed or admitted to trading on any national securities
exchange but the last reported sale price or the official closing price
published by the NASDAQ, as applicable, is not available pursuant to the
preceding sentence, then the Closing Price |

PS-14

for the Shares on any Trading Day will mean the last reported sale price of the principal trading session on the over-the-counter market as reported on the NASDAQ or the OTC Bulletin Board on such day. The term “OTC Bulletin Board Service” will include any successor service thereto. See “—Discontinuance of the Shares and/or the MSCI Brazil Index; Alteration of Method of Calculation” and “—Antidilution Adjustments” below.

| Adjustment
Factor | 1.0,
subject to adjustment in the event of certain events affecting the
Shares. See “—Antidilution Adjustments”
below. |
| --- | --- |
| Antidilution
Adjustments | If
the Shares are subject to a stock split or reverse stock split, then once
such split has become effective, the Adjustment Factor for the Shares will
be adjusted to equal the product of the prior Adjustment Factor and the
number of shares issued in such stock split or reverse stock split with
respect to one of such Shares. |
| | No
adjustment to the Adjustment Factor pursuant to the paragraph above will
be required unless such adjustment would require a change of at least 0.1%
in the amount being adjusted as then in effect. Any number so
adjusted will be rounded to the nearest one hundred-thousandth with five
one-millionths being rounded upward. |
| Valuation
Date | February
18, 2011, subject to adjustment for non-Trading Days or Market Disruption
Events as described in the following paragraph. |
| | If
the Valuation Date is not a Trading Day or if a Market Disruption Event
occurs on the Valuation Date, the Final Share Price will be determined on
the immediately succeeding Trading Day on which no Market Disruption Event
occurs; provided that the Final Share Price will not be determined on a date later than the
fifth Trading Day following the scheduled Valuation Date. If
there is a Market Disruption Event on such fifth Trading Day, the
Calculation Agent will determine the Closing Price on such date, as the
mean, as determined by the Calculation Agent, of the bid prices for the
Shares for such date obtained from as many recognized dealers in such
security, but not exceeding three, as will make such bid prices available
to the Calculation Agent. Bids of MS & Co. or any of its
affiliates may be included in the calculation of such mean, but only to
the extent that any such bid is the highest of the bids
obtained. If no bid prices are provided from any third party
dealers, the Closing Price will be determined by the Calculation Agent in
its sole and absolute discretion (acting in good faith) taking into
account any information that it deems relevant. |
| Business
Day | Any
day, other than a Saturday or Sunday, that is neither a legal holiday nor
a day on which banking institutions are authorized or required by law or
regulation to close in The City of New York. |
| Relevant
Exchange | With
respect to the Shares, the primary exchange(s) or market(s) of trading for
the Shares. With respect to each of the securities comprising
the MSCI Brazil Index, the respective primary exchange(s) or market(s) of
trading for such security. |

PS-15

Trading Day A day, as determined by the Calculation Agent, on which trading is generally conducted on the New York Stock Exchange, The NASDAQ Stock Market LLC, the Chicago Mercantile Exchange and the Chicago Board of Options Exchange and in the over-the-counter market for equity securities in the United States.

| Book
Entry Security or | |
| --- | --- |
| Certificated
Security | Book
Entry. The Securities will be issued in the form of one or more
fully registered global securities which will be deposited with, or on
behalf of, DTC and will be registered in the name of a nominee of
DTC. DTC’s nominee will be the only registered holder of the
Securities. Your beneficial interest in the Securities will be
evidenced solely by entries on the books of the Securities intermediary
acting on your behalf as a direct or indirect participant in
DTC. In this pricing supplement, all references to actions
taken by “you” or to be taken by “you” refer to actions taken or to be
taken by DTC and its participants acting on your behalf, and all
references to payments or notices to you will mean payments or notices to
DTC, as the registered holder of the Securities, for distribution to
participants in accordance with DTC’s procedures. For more
information regarding DTC and book-entry securities, please read “Forms of
Securities—The Depositary” and “Forms of Securities—Global
Securities—Registered Global Securities” in the accompanying
prospectus. |
| Senior
Security or Subordinated | |
| Security | Senior |
| Trustee | The
Bank of New York Mellon, a New York banking corporation (as successor
trustee to JPMorgan Chase Bank, N.A. (formerly known as JPMorgan Chase
Bank)) |
| Agent | Morgan
Stanley & Co. Incorporated and its successors (“MS &
Co.”) |
| Calculation
Agent | MS
& Co. |
| | All
determinations made by the Calculation Agent will be at the sole
discretion of the Calculation Agent and will, in the absence of manifest
error, be conclusive for all purposes and binding on you, the Trustee and
us. |
| | All
calculations with respect to the Payment at Maturity, if any, will be
rounded to the nearest one hundred-thousandth, with five one-millionths
rounded upward ( e.g. , .876545 would be
rounded to .87655); all dollar amounts related to determination of the
amount of cash payable per Security will be rounded to the nearest
ten-thousandth, with five one hundred-thousandths rounded upward ( e.g. , .76545 would be
rounded up to .7655); and all dollar amounts paid on the aggregate number
of Securities will be rounded to the nearest cent, with one-half cent
rounded upward. |
| | Because
the Calculation Agent is our affiliate, the economic interests of the
Calculation Agent and its affiliates may be adverse to your interests as
an investor in the Securities, including with respect to certain
determinations and judgments that the |

PS-16

Calculation Agent must make in determining the Final Share Price or whether a Market Disruption Event has occurred. See “—Discontinuance of the Shares and/or the MSCI Brazil Index; Alteration of Method of Calculation” and “—Market Disruption Event” below. MS & Co. is obligated to carry out its duties and functions as Calculation Agent in good faith and using its reasonable judgment.

| Market
Disruption Event |
| --- |
| (a)
the occurrence or existence of a suspension, absence or material
limitation of trading of the Shares on the Relevant Exchange for the
Shares for more than two hours of trading or during the one-half hour
period preceding the close of the principal trading session in such
market; or a breakdown or failure in the price and trade reporting systems
of the Relevant Exchange for the Shares as a result of which the reported
trading prices for the Shares during the last one-half hour preceding the
close of the principal trading session in such market are materially
inaccurate; or the suspension, absence or material limitation of trading
on the primary market for trading in futures or options contracts related
to the Shares, if available, during the one-half hour period preceding the
close of the principal trading session in the applicable market, in each
case as determined by the Calculation Agent in its sole discretion;
or |
| (b)
the occurrence or existence of a suspension, absence or material
limitation of trading of stocks then constituting 20 percent or more of
the value of the MSCI Brazil Index on the Relevant Exchange(s) for such
securities for more than two hours of trading or during the one-half hour
period preceding the close of the principal trading session on such
Relevant Exchange(s), in each case as determined by the Calculation Agent
in its sole discretion; or |
| (c)
the suspension, material limitation or absence of trading on any major
U.S. securities market for trading in futures or options contracts related
to the MSCI Brazil Index or the Shares for more than two hours of trading
or during the one-half hour period preceding the close of the principal
trading session on such market, in each case as determined by the
Calculation Agent in its sole discretion; and |
| (d)
a determination by the Calculation Agent in its sole discretion that any
event described in clauses (i), (ii) or (iii) above materially interfered
with our ability or the ability of any of our affiliates to unwind or
adjust all or a material portion of the hedge position with respect to the
Jump Securities Based on the Price of the iShares ® MSCI
Brazil Index Fund due February 24, 2011. |
| For
the purpose of determining whether a Market Disruption Event exists at any
time, if trading in a security included in the MSCI Brazil Index is
materially suspended or materially limited at that time, then the relevant
percentage contribution of that security to the level of the MSCI Brazil
Index shall be based on a comparison of (x) the portion of the level of
the MSCI Brazil Index attributable to that security relative to (y) the
overall level of the MSCI Brazil |

PS-17

| | Index,
in each case immediately before that suspension or
limitation. |
| --- | --- |
| | For
the purpose of determining whether a Market Disruption Event has occurred:
(1) a limitation on the hours or number of days of trading will not
constitute a Market Disruption Event if it results from an announced
change in the regular business hours of the Relevant Exchange or market,
(2) a decision to permanently discontinue trading in the relevant futures
or options contract or any exchange-traded fund, including the Shares,
will not constitute a Market Disruption Event, (3) a suspension of trading
in futures or options contracts on the MSCI Brazil Index or the Shares by
the primary securities market trading in such contracts by reason of (a) a
price change exceeding limits set by such securities exchange or market,
(b) an imbalance of orders relating to such contracts or (c) a disparity
in bid and ask quotes relating to such contracts will constitute a
suspension, absence or material limitation of trading in futures or
options contracts related to the MSCI Brazil Index or the Shares and (4) a
“suspension, absence or material limitation of trading” on any Relevant
Exchange or on the primary market on which futures or options contracts
related to the MSCI Brazil Index or the Shares are traded will not include
any time when such securities market is itself closed for trading under
ordinary circumstances. |
| Alternate
Exchange Calculation | |
| in
Case of an Event of Default | In
case an event of default with respect to the Securities shall have
occurred and be continuing, the amount declared due and payable per
Security upon any acceleration of the Securities shall be determined by
the Calculation Agent and shall be an amount in cash, if any, equal to the
Payment at Maturity calculated using the Closing Price as of the date of
such acceleration as the Final Share Price. |
| | If
the maturity of the Securities is accelerated because of an event of
default as described above, we shall, or shall cause the Calculation Agent
to, provide written notice to the Trustee at its New York office, on which
notice the Trustee may conclusively rely, and to DTC of the cash amount
due, if any, with respect to the Securities as promptly as possible and in
no event later than two Business Days after the date of
acceleration. |
| Discontinuance
of the Shares | |
| and/or
the MSCI Brazil Index; | |
| Alteration
of Method of Calculation | If
the iShares ® MSCI Brazil Index Fund is liquidated or otherwise terminated (a
“Liquidation Event”), the Closing Price of the Shares on any Trading Day
following the Liquidation Event will be determined by the Calculation
Agent and will be deemed to equal the product of (i) the closing value of
the MSCI Brazil Index (or any Successor Index, as described below) on such
Trading Day (taking into account any material changes in the method of
calculating the MSCI Brazil Index following such Liquidation Event), times (ii) a fraction,
the numerator of which is the Closing Price of the Shares and the
denominator of which is the closing value of the MSCI Brazil Index (or any
Successor Index, as |

PS-18

| described
below), each determined as of the last day prior to the occurrence of the
Liquidation Event on which a Closing Price was available. |
| --- |
| If
MSCI Inc. (“MSCI”) discontinues publication of the MSCI Brazil Index and
MSCI or another entity (including MS & Co.) publishes a successor or
substitute index that MS & Co., as the Calculation Agent, determines,
in its sole discretion, to be comparable to the discontinued MSCI Brazil
Index (such index being referred to herein as a “Successor Index”), then
the Closing Price for the Shares on any Trading Day following a
Liquidation Event will be determined by reference to the published value
of such Successor Index at the regular weekday close of trading on such
Trading Day. |
| Upon
any selection by the Calculation Agent of a Successor Index, the
Calculation Agent will cause written notice thereof to be furnished to the
Trustee, to us and to DTC, as holder of the Securities, within three
Trading Days of such selection. We expect that such notice will
be made available to you, as a beneficial owner of the Securities, in
accordance with the standard rules and procedures of DTC and its direct
and indirect participants. |
| If
MSCI discontinues publication of the MSCI Brazil Index prior to, and such
discontinuance is continuing on, the Valuation Date or the date of
acceleration, and MS & Co., as the Calculation Agent, determines, in
its sole discretion, that no Successor Index is available at such time,
then the Calculation Agent will determine the Closing Price for the Shares
for such date. Such Closing Price will be computed by the
Calculation Agent in accordance with the formula for calculating the MSCI
Brazil Index last in effect prior to such discontinuance, using the
closing price (or, if trading in the relevant securities has been
materially suspended or materially limited, its good faith estimate of the
closing price that would have prevailed but for such suspension or
limitation) at the close of the principal trading session of the Relevant
Exchange on such date of each security most recently composing the MSCI
Brazil Index without any rebalancing or substitution of such securities
following such discontinuance. Notwithstanding these
alternative arrangements, discontinuance of the publication of the MSCI
Brazil Index may adversely affect the value of the
Securities. |

PS-19

| The
iShares ® MSCI Brazil | |
| --- | --- |
| Index
Fund; Public Information | iShares,
Inc. (the “Company”) is a registered investment company that consists of
numerous separate investment portfolios, including the iShares ® MSCI Brazil Index Fund. The iShares ® MSCI Brazil Index Fund is an exchange-traded fund managed by the
Company. The Company consists of numerous separate investment
portfolios, including the iShares ® MSCI Brazil Index Fund. The iShares ® MSCI Brazil Index Fund seeks investment results that correspond generally
to the price and yield performance, before fees and expenses, of the MSCI
Brazil Index. Information provided to or filed with the
Commission by the Company pursuant to the Securities Act of 1933 and the
Investment Company Act of 1940 can be located by reference to Commission
file numbers 033-97598 and 811-09102, respectively, through the
Commission’s website at http://www.sec.gov. In addition,
information may be obtained from other sources including, but not limited
to, press releases, newspaper articles and other publicly disseminated
documents. We make no representation or warranty as to the
accuracy or completeness of such information. |
| | This
pricing supplement relates only to the Securities offered hereby and does
not relate to the Shares. We have derived all disclosures
contained in this pricing supplement regarding the Company from the
publicly available documents described in the preceding
paragraph. In connection with the offering of the Securities,
neither we nor the Agent has participated in the preparation of such
documents or made any due diligence inquiry with respect to the
Company. Neither we nor the Agent makes any representation that
such publicly available documents or any other publicly available
information regarding the Company is accurate or
complete. Furthermore, we cannot give any assurance that all
events occurring prior to the date hereof (including events that would
affect the accuracy or completeness of the publicly available documents
described in the preceding paragraph) that would affect the trading price
of the Shares (and therefore the price of the Shares at the time we priced
the Securities) have been publicly disclosed. Subsequent
disclosure of any such events or the disclosure of or failure to disclose
material future events concerning the Company could affect the value
received at maturity with respect to the Securities and therefore the
trading prices of the Securities. |
| | Neither
we nor any of our affiliates makes any representation to you as to the
performance of the Shares. |
| | We
and/or our affiliates may presently or from time to time engage in
business with the Company. In the course of such business, we
and/or our affiliates may acquire non-public information with respect to
the Company, and neither we nor any of our affiliates undertakes to
disclose any such information to you. In addition, one or more
of our affiliates may publish research reports with respect to the
Shares. The statements in the preceding two sentences are not
intended to affect the rights of investors in the Securities under the
securities laws. As a purchaser of the |

PS-20

| | Securities,
you should undertake an independent investigation of the Company as in
your judgment is appropriate to make an informed decision with respect to
an investment in the Shares. |
| --- | --- |
| | iShares ® is a registered trademark of
BlackRock Institutional Trust Company, N.A. (“BTC”). The
Securities are not sponsored, endorsed, sold, or promoted by
BTC. BTC makes no representations or warranties to the owners
of the Securities or any member of the public regarding the advisability
of investing in the Securities. BTC has no obligation or
liability in connection with the operation, marketing, trading or sale of
the Securities. |
| The
MSCI Brazil Index SM | The
MSCI Brazil Index is
calculated, published and disseminated daily by MSCI, a majority-owned
subsidiary of Morgan Stanley, through numerous data vendors, on the MSCI
website and a majority of them in real time on Bloomberg Financial Markets
and Reuters Limited. |
| | The
MSCI Brazil Index is a free float adjusted market capitalization index of
securities listed on the Sao Paulo Stock Exchange. MSCI targets an 85%
free float adjusted market representation level within each industry group
in Brazil. The security selection process within each industry
group is based on analysis of the following: i) Each company’s
business activities and the diversification that its securities would
bring to the index. ii) All other things being equal, MSCI
targets for inclusion the most sizable securities in an industry group.
Securities that do not meet the minimum size guidelines are not considered
for inclusion. iii) MSCI targets for inclusion the most liquid
securities in an industry group. MSCI does not define absolute
minimum or maximum liquidity levels for stock inclusion or exclusion from
the MSCI Brazil Index but considers each stock’s relative standing within
Brazil and between cycles. Only securities of companies with an
estimated overall or security free float greater than 15% are generally
considered for inclusion in the MSCI Brazil Index. The MSCI
Brazil Index is computed generally by multiplying the previous day’s index
level by the free float adjusted market capitalization level of each share
in the MSCI Brazil Index on the prior day divided by the free float market
capitalization level of each share in the MSCI Index on the current day.
The numerator is adjusted market capitalization, but the denominator is
unadjusted, meaning that the price adjustment factor is applied to the
numerator, but not the denominator. There are three broad
categories of MSCI Brazil Index maintenance: an annual full country index
review that reassesses the various dimensions of the equity universe in
Brazil; quarterly index reviews, aimed at promptly reflecting other
significant market events; and ongoing event-related changes, such as
mergers and acquisitions, which are generally implemented in the index
rapidly as they occur. |
| | MSCI
undertakes an index construction process, which involves: (i) defining the
Equity Universe; (ii) determining the Market Investable Equity Universe
for each market; (iii) determining market capitalization size segments for
each market; (iv) applying |

PS-21

| Index
Continuity Rules for the MSCI Standard Index; (v) creating style segments
within each size segment within each market; and (vi) classifying
securities under the Global Industry Classification Standard. |
| --- |
| Defining
the Equity Universe |
| (i)
Identifying Eligible Equity Securities: The Equity Universe initially
looks at securities listed in any of the countries in the MSCI Global
Index Series, which will be classified as either Developed Markets (“DM”)
or Emerging Markets (“EM”). All listed equity securities, or listed
securities that exhibit characteristics of equity securities, except
mutual funds, exchange-traded funds, equity derivatives, limited
partnerships, and most investment trusts, are eligible for inclusion in
the Equity Universe. Real Estate Investment Trusts (“REITs”) in some
countries and certain income trusts in Canada are also eligible for
inclusion. |
| (ii)
Country Classification of Eligible Securities: Each company and its
securities (i.e., share classes) are classified in one and only one
country, which allows for sorting of each company by its respective
country. |
| Determining
the Market Investable Equity Universes |
| A
Market Investable Equity Universe for a market is derived by applying
investability screens to individual companies and securities in the Equity
Universe that are classified in that market. A market is equivalent to a
single country, except in DM Europe, where all DM countries in Europe are
aggregated into a single market for index construction purposes.
Subsequently, individual DM Europe country indices within the MSCI Europe
Index are derived from the constituents of the MSCI Europe Index under the
Global Investable Market Indices methodology. |
| The
investability screens used to determine the Investable Equity Universe in
each market are as follows: |
| (i)
Equity Universe Minimum Size Requirement: This investability screen is
applied at the company level. In order to be included in a Market
Investable Equity Universe, a company must have the required minimum full
market capitalization. A company will meet this requirement if its
cumulative free float-adjusted market capitalization is within the top 99%
of the sorted Equity Universe. |
| (ii)
Equity Universe Minimum Float-Adjusted Market Capitalization Requirement:
This investability screen is applied at the individual security level. To
be eligible for inclusion in a Market Investable Equity Universe, a
security must have a free float-adjusted market capitalization equal to or
higher than 50% of the Equity Universe Minimum Size
Requirement. |
| (iii)
DM and EM Minimum Liquidity Requirement: This investability screen is
applied at the individual security level. To be eligible for inclusion in
a Market Investable Equity Universe, a |

PS-22

| security
must have adequate liquidity. The Annualized Traded Value Ratio (“ATVR”),
a measure that offers the advantage of screening out extreme daily trading
volumes and taking into account the free float-adjusted market
capitalization size of securities, is used to measure liquidity. In the
calculation of the ATVR, the trading volumes in depository receipts
associated with that security, such as ADRs or GDRs, are also considered.
A minimum liquidity level of 20% ATVR is required for inclusion of a
security in a Market Investable Equity Universe of a Developed Market, and
a minimum liquidity level of 15% ATVR is required for inclusion of a
security in a Market Investable Equity Universe of an Emerging
Market. |
| --- |
| (iv)
Global Minimum Foreign Inclusion Factor Requirement: This investability
screen is applied at the individual security level. To be eligible for
inclusion in a Market Investable Equity Universe, a security’s Foreign
Inclusion Factor (“FIF”) must reach a certain threshold. The FIF of a
security is defined as the proportion of shares outstanding that is
available for purchase in the public equity markets by international
investors. This proportion accounts for the available free float of and/or
the foreign ownership limits applicable to a specific security (or
company). In general, a security must have an FIF equal to or larger than
0.15 to be eligible for inclusion in a Market Investable Equity Universe.
Exceptions to this general rule are made only in the limited cases where
the exclusion of securities of a very large company would compromise the
MSCI EAFE ® Index’s ability to fully and fairly represent the characteristics of the
underlying market. |
| (v)
Minimum Length of Trading Requirement: This investability screen is
applied at the individual security level. For an initial public offering
(“IPO”) to be eligible for inclusion in a Market Investable Equity
Universe, the new issue must have started trading at least four months
before the implementation of the initial construction of the index or at
least three months before the implementation of a Semi-Annual Index
Review. This requirement is applicable to small new issues in all markets.
Large IPOs are not subject to the Minimum Length of Trading Requirement
and may be included in a Market Investable Equity Universe and the
Standard Index outside of a Quarterly or Semi-Annual Index
Review. |
| Defining
Market Capitalization Size Segments for Each Market |
| Once
a Market Investable Equity Universe is defined, it is segmented into the
following size-based indices: |

| • | Investable
Market Index (Large + Mid + Small) |
| --- | --- |
| • | Standard
Index (Large + Mid) |
| • | Large
Cap Index |
| • | Mid
Cap Index |

PS-23

• Small Cap Index

| Creating
the Size Segment Indices in each market involves the following steps: (i)
defining the Market Coverage Target Range for each size segment; (ii)
determining the Global Minimum Size Range for each size segment; (iii)
determining the Market Size-Segment Cutoffs and associated Segment Number
of Companies; (iv) assigning companies to the size segments; and (v)
applying final size-segment investability requirements and index
continuity rules. |
| --- |
| Index
Continuity Rules for the Standard Indices |
| In
order to achieve index continuity, as well as provide some basic level of
diversification within a market index, notwithstanding the effect of other
index construction rules, a minimum number of five constituents will be
maintained for a DM Standard Index and a minimum number of three
constituents will be maintained for an EM Standard Index. The
application of this requirement involves the following
steps: |
| If
after the application of the index construction methodology, a Standard
Index contains fewer than five securities in a Developed Market or three
securities in an Emerging Market, then the largest securities by free
float-adjusted market capitalization are added to the Standard Index in
order to reach five constituents in that Developed Market or three in that
Emerging Market. At subsequent Index Reviews, if the free float-adjusted
market capitalization of a non-index constituent is at least 1.50 times
the free float-adjusted market capitalization of the smallest existing
constituent after rebalancing, the larger free float-adjusted market
capitalization security replaces the smaller one. |
| Creating
Style Indices within Each Size Segment |
| All
securities in the investable equity universe are classified into Value or
Growth segments using the MSCI Global Value and Growth
methodology. |
| Classifying
Securities under the Global Industry Classification
Standard |
| All
securities in the Global Investable Equity Universe are assigned to the
industry that best describes their business activities. To this end, MSCI
has designed, in conjunction with S&P’s, the Global Industry
Classification Standard (“GICS ® ”). The
GICS entails four levels of classification: (1) sector; (2)
industry group; (3) industries; and (4) sub-industries. Under the GICS,
each company is assigned to one sub-industry according to its principal
business activity. Therefore, a company can belong to only one industry
grouping at each of the four levels of the GICS. |
| Index
Maintenance |
| The
MSCI Global Investable Market Indices are maintained with the objective of
reflecting the evolution of the underlying
equity |

PS-24

| markets
and segments on a timely basis, while seeking to achieve index continuity,
continuous investability of constituents and replicability of the indices,
and index stability and low index turnover. |
| --- |
| In
particular, index maintenance involves: |
| (i)
Semi-Annual Index Reviews (“SAIRs”) in May and November of the Size
Segment and Global Value and Growth Indices which
include: |

| • | Updating
the indices on the basis of a fully refreshed Equity
Universe. |
| --- | --- |
| • | Taking
buffer rules into consideration for migration of securities across size
and style segments. |
| • | Updating
FIFs and Number of Shares (“NOS”). |

| The
objective of the SAIRs is to systematically reassess the various
dimensions of the Equity Universe for all markets on a fixed semi-annual
timetable. A SAIR involves a comprehensive review of the Size Segment and
Global Value and Growth Indices. |
| --- |
| (ii)
Quarterly Index Reviews (“QIRs”) in February and August (in addition to
the SAIRs in May and November) of the Size Segment Indices aimed
at: |

| • | Including
significant new eligible securities (such as IPOs that were not eligible
for earlier inclusion) in the index. |
| --- | --- |
| • | Allowing
for significant moves of companies within the Size Segment Indices, using
wider buffers than in the SAIR. |
| • | Reflecting
the impact of significant market events on FIFs and updating
NOS. |

| QIRs
are designed to ensure that the indices continue to be an accurate
reflection of the evolving equity marketplace. This is achieved by a
timely reflection of significant market driven changes that were not
captured in the index at the time of their actual occurrence but are
significant enough to be reflected before the next SAIR. QIRs may result
in additions or deletions due to migration to another Size Segment Index,
and changes in FIFs and in NOS. Only additions of significant new
investable companies are considered, and only for the Standard Index. The
buffer zones used to manage the migration of companies from one segment to
another are wider than those used in the SAIR. The style classification is
reviewed only for companies that are reassigned to a different size
segment. |
| --- |
| (iii)
Ongoing event-related changes. Ongoing event-related changes to the
indices are the result of mergers, acquisitions, spin-offs, bankruptcies,
reorganizations and other similar corporate events. They can also result
from capital reorganizations in the form of rights issues, bonus issues,
public placements and other similar |

PS-25

| corporate
actions that take place on a continuing basis. These changes generally are
reflected in the indices at the time of the event. Significantly large
IPOs are included in the indices after the close of the company’s tenth
day of trading. |
| --- |
| Announcement
Policy |
| The
results of the SAIRs are announced at least two weeks in advance of their
effective implementation dates as of the close of the last business day of
May and November. |
| The
results of the QIRs are announced at least two weeks in advance of their
effective implementation dates as of the close of the last business day of
February and August. |
| All
changes resulting from corporate events are announced prior to their
implementation in the MSCI indices. |
| The
changes are typically announced at least ten business days prior to the
changes becoming effective in the indices as an “expected” announcement,
or as an “undetermined” announcement, when the effective dates are not
known yet or when aspects of the event are uncertain. MSCI sends
“confirmed” announcements at least two business days prior to events
becoming effective in the indices, provided that all necessary public
information concerning the event is available. The full list of all new
and pending changes is delivered to clients on a daily basis, at 5:30
p.m., US Eastern Time. |
| In
exceptional cases, events are announced during market hours for same or
next day implementation. Announcements made by MSCI during market hours
are usually linked to late company disclosure of corporate events or
unexpected changes to previously announced corporate
events. |
| In
the case of secondary offerings representing more than 5% of a security’s
number of shares for existing constituents, these changes will be
announced prior to the end of the subscription period when possible and a
subsequent announcement confirming the details of the event (including the
date of implementation) will be made as soon as the results are
available. |
| Both
primary equity offerings and secondary offerings for U.S. securities,
representing at least 5% of the security’s number of shares, will be
confirmed through an announcement during market hours for next day or
shortly after implementation, as the completion of the events cannot be
confirmed prior to the notification of the pricing. |
| Early
deletions of constituents due to bankruptcy or other significant cases are
announced as soon as practicable prior to their implementation in the MSCI
indices. |
| Index
Calculation |
| Price
Index Level |

PS-26

●
Where:

| • | PriceIndexLevelUSD t -1 is
the Price Index level in USD at time t-1 |
| --- | --- |
| • | IndexAdjustedMarketCapUSD t is the Adjusted
Market Capitalization of the index in USD at time t |
| • | IndexInitialMarketCapUSD t is the Initial
Market Capitalization of the index in USD at
time t |
| • | PriceIndexLevelLocal t -1 is
the Price Index level in local currency at time t-1 |
| • | IndexAdjustedMarketCapForLocal t is the Adjusted
Market Capitalization of the index in USD converted using FX rate as of
t-1 and used for local currency index at time
t |

Security
Price Index Level
●
Where:

| • | SecurityPriceIndexLevel t -1 is
Security Price Index level at time t-1. |
| --- | --- |
| • | SecurityAdjustedMarketCapForLocal t is the Adjusted
Market Capitalization of security s in USD converted using FX rate as of
t-1. |

PS-27

| | SecurityInitialMarketCapUSD t is the Initial
Market Capitalization of security s in USD at time t. |
| --- | --- |
| • | IndexNumberOfShares t -1 is
the number of shares of security s at time t-1. |
| • | PricePerShare t is the price per share of security s at time t. |
| • | PricePerShare t -1 is
the price per share of security s at time t-1. |
| • | InclusionFactor t is the inclusion factor of security s at time t. The inclusion factor can
be one or the combination of the following factors: Foreign Inclusion
Factor, Domestic Inclusion Factor Growth Inclusion Factor, Value Inclusion
Factor, Index Inclusion Factor. |
| • | PAF t is the Price Adjustment Factor of security s at time t. |
| • | FXrate t -1 is
the FX rate of the price currency of security s vs USD at time t-1. It is
the value of 1 USD in foreign currency. |
| • | ICI t is the Internal
Currency Index of price currency at time t. The ICI is different than 1
when a country changes the internal value of its currency ( e.g. from Turkish Lira
to New Turkish Lira – ICI = 1,000,000). |
| • | ICI t -1 is
the Internal Currency Index of price currency at time
t-1. |
| Index
Market Capitalization | |
| ● | |
| Where: | |

| • | IndexNumberOfShares t -1 is
the number of shares of security s at time t-1. |
| --- | --- |
| • | PricePerShare t is the price per share of security s at time t. |
| • | PricePerShare t -1 is
the price per share of security s at time
t-1. |

PS-28

| • | InclusionFactor t is the inclusion factor of security s at time t. The inclusion factor can
be one or the combination of the following factors: Foreign Inclusion
Factor, Domestic Inclusion Factor Growth Inclusion Factor, Value Inclusion
Factor, Index Inclusion Factor. |
| --- | --- |
| • | PAF t is the Price Adjustment Factor of security s at time t. |
| • | FXrate t is the FX rate of the price currency of security s vs USD at time t. It is
the value of 1 USD in foreign currency. |
| • | FXrate t -1 is
the FX rate of the price currency of security s vs USD at time t-1. It is
the value of 1 USD in foreign currency. |
| • | ICI t is the Internal
Currency Index of price currency at time t. The ICI is different than 1
when a country changes the internal value of its currency ( e.g. from Turkish Lira
to New Turkish Lira – ICI = 1,000,000). |
| • | ICI t-1 is the Internal
Currency Index of price currency at time
t-1. |

| Corporate
Events |
| --- |
| Mergers and
Acquisitions. As a general principle, MSCI implements M&As as
of the close of the last trading day of the acquired entity or merging
entities (last offer day for tender offers), regardless of the status of
the securities (index constituents or non-index constituents) involved in
the event. MSCI uses market prices for implementation. This principle
applies if all necessary information is available prior to the completion
of the event and if the liquidity of the relevant constituent(s) is not
expected to be significantly diminished on the day of implementation.
Otherwise, MSCI will determine the most appropriate implementation method
and announce it prior to the changes becoming effective in the
indices. |
| Tender Offers. In
tender offers, the acquired or merging security is generally deleted from
the MSCI indices at the end of the initial offer period, when the offer is
likely to be successful and / or if the free float of the security is
likely to be substantially reduced (this rule is applicable even if the
offer is extended), or once the results of the offer have been officially
communicated and the offer has been successful and the security’s free
float has been substantially reduced, if all required information is not
available in advance or if the offer’s outcome is uncertain. The main
factors considered by MSCI when assessing the outcome of a tender offer
(not in order of importance) are: the announcement of the offer as
friendly or hostile, a comparison of the offer price to the acquired
security’s market price, the recommendation by the acquired company’s
board of directors, the major shareholders’ stated intention whether to
tender their shares, the required level of acceptance, the existence of
pending regulatory approvals, market perception of the transaction,
official preliminary results if any, and other additional conditions for
the offer. |

PS-29

| If
a security is deleted from an index, the security will not be reinstated
immediately after its deletion even when the tender offer is subsequently
declared unsuccessful and/or the free float of the security is not
substantially reduced. It may be reconsidered for index inclusion in the
context of a quarterly index review or annual full country index review.
MSCI uses market prices for implementation. |
| --- |
| Late Announcements of
Completion of Mergers and Acquisitions. When the completion of an
event is announced too late to be reflected as of the close of the last
trading day of the acquired or merging entities, implementation occurs as
of the close of the following day or as soon as practicable thereafter. In
these cases, MSCI uses a calculated price for the acquired or merging
entities. The calculated price is determined using the terms of the
transaction and the price of the acquiring or merged entity, or, if not
appropriate, using the last trading day’s market price of the acquired or
merging entities. |
| Conversions of Share
Classes. Conversions of a share class into another share class
resulting in the deletion and/or addition of one or more classes of shares
are implemented as of the close of the last trading day of the share class
to be converted. |
| Spin-Offs. On the
ex-date of a spin-off, a PAF is applied to the price of the security of
the parent company. The PAF is calculated based on the terms of the
transaction and the market price of the spun-off security. If the spun-off
entity qualifies for inclusion, it is included as of the close of its
first trading day. If appropriate, MSCI may link the price history of the
spun-off security to a security of the parent company. |
| In
cases of spin-offs of partially-owned companies, the post-event free float
of the spun-off entity is calculated using a weighted average of the
existing shares and the spun-off shares, each at their corresponding free
float. Any resulting changes to FIFs and/or DIFs are implemented as of the
close of the ex-date. |
| When
the spun-off security does not trade on the ex-date, a “detached” security
is created to avoid a drop in the free float-adjusted market
capitalization of the parent entity, regardless of whether the spun-off
security is added or not. The detached security is included until the
spun-off security begins trading, and is deleted thereafter. Generally,
the value of the detached security is equal to the difference between the
cum price and the ex price of the parent security. |
| Corporate Actions. Corporate actions such as splits, bonus issues and rights issues, which
affect the price of a security, require a price adjustment. In general,
the PAF is applied on the ex-date of the event to ensure that security
prices are comparable between the ex-date and the cum date. To do so, MSCI
adjusts for the value of the right and/or the value of the special assets
that are distributed. In general, corporate actions do not impact the free
float of the securities because the distribution of new shares is carried
out on a |

PS-30

| pro
rata basis to all existing shareholders. Therefore, MSCI will generally
not implement any pending number of shares and/or free float updates
simultaneously with the event. |
| --- |
| If
a security does not trade for any reason on the ex-date of the corporate
action, the event will be generally implemented on the day the security
resumes trading. |
| Share Placements and
Offerings. Changes in number of shares and FIF resulting from
primary equity offerings representing more than 5% of the security’s
number of shares are generally implemented as of the close of the first
trading day of the new shares, if all necessary information is available
at that time. Otherwise, the event is implemented as soon as practicable
after the relevant information is made available. A primary equity
offering involves the issuance of new shares by a company. Changes in
number of shares and FIF resulting from primary equity offerings
representing less than 5% of the security’s number of shares are deferred
to the next regularly scheduled Quarterly Index Review following the
completion of the event. For public secondary offerings of existing
constituents representing more than 5% of the security’s number of shares,
where possible, MSCI will announce these changes and reflect them shortly
after the results of the subscription are known. Secondary public
offerings that, given lack of sufficient notice, were not reflected
immediately will be reflected at the next Quarterly Index Review.
Secondary offerings involve the distribution of existing shares of current
shareholders’ in a listed company and are usually pre-announced by a
company or by a company’s shareholders and open for public subscription
during a pre-determined period. |
| Debt-to-Equity Swaps. In general, large debt-to-equity swaps involve the conversion of debt into
equity originally not convertible at the time of issue. In this case,
changes in numbers of shares and subsequent FIF and/or DIF changes are
implemented as of the close of the first trading day of the newly issued
shares, or shortly thereafter if all necessary information is available at
the time of the swap. In general, shares issued in debt-to-equity swaps
are assumed to be issued to strategic investors. As such, the post event
free float is calculated on a pro forma basis assuming that all these
shares are non-free float. Changes in numbers of shares and subsequent FIF
and/or DIF changes due to conversions of convertible bonds or other
convertible instruments, including periodical conversions of preferred
stocks and small debt-to-equity swaps are implemented as part of the
quarterly index review. |
| Suspensions and
Bankruptcies. MSCI will remove from the MSCI Equity Index Series as
soon as practicable companies that file for bankruptcy, companies that
file for protection from their creditors and/or are suspended and for
which a return to normal business activity and trading is unlikely in the
near future. When the primary exchange price is not available, MSCI will
delete securities at an over the counter or equivalent market price when
such a price is available and deemed relevant. If no over the counter or
equivalent price is available, the security will be deleted at the
smallest price |

PS-31

| | (unit
or fraction of the currency) at which a security can trade on a given
exchange. For securities that are suspended, MSCI will carry forward the
market price prior to the suspension during the suspension
period. |
| --- | --- |
| | Certain MSCI Indices are
Subject to Currency Exchange Risk. Because the closing
prices of the component securities are converted into U.S. dollars for
purposes of calculating the value of certain MSCI indices, investors in
the Securities linked to such MSCI indices will be exposed to currency
exchange rate risk. Exposure to currency changes will depend on
the extent to which the relevant currency strengthens or weakens against
the U.S. dollar. The devaluation of the U.S. dollar against the
applicable currency will result in an increase in the value of the
relevant index. Conversely, if the U.S. dollar strengthens
against such currency, the value of such index will be adversely affected
and may reduce or eliminate any return on your
investment. Fluctuations in currency exchange rates can have a
continuing impact on the value of the indices, and any negative currency
impact on the indices may significantly decrease the value of the
Securities. The return on an index composed of the component
securities where the closing price is not converted into U.S. dollars can
be significantly different than the return on the indices which are
converted into U.S. dollars. |
| Historical
Information | The
following table sets forth the published high and low Closing Prices, as
well as end-of-quarter Closing Prices, of the Shares for each quarter in
the period from January 1, 2005 through January 25, 2010. The
Closing Price on January 25, 2010 was $67.90. The graph
following the table sets forth the historical performance of the Shares
for the period from January 1, 2005 through January 25,
2010. |
| | The
historical prices of the Shares should not be taken as an indication of
future performance, and no assurance can be given as to the price of the
Shares on the Valuation Date. The Shares may close on the
Valuation Date at less than the Initial Share Price so that the Payment at
Maturity will be less than the Stated Principal Amount of the Securities
and could be zero. |
| | We
cannot give you any assurance that the price of the Shares will increase
so that at maturity you will receive a payment in excess of the Stated
Principal Amount of the Securities. Your return is linked to
the Final Share Price on the Valuation Date. |
| | We
obtained the information in the tables and graphs below from Bloomberg
Financial Markets, without independent
verification. |

| iShares ® MSCI Brazil Index Fund Historical
High, Low and Period End Closing Prices January
1, 2005 through January 25, 2010 | High | Low | Period
End |
| --- | --- | --- | --- |
| 2005 | | | |
| First
Quarter | 25.21 | 19.61 | 22.55 |
| Second
Quarter | 24.64 | 20.99 | 24.45 |

PS-32

| | High | Low | Period
End |
| --- | --- | --- | --- |
| Third
Quarter | 33.02 | 23.45 | 32.87 |
| Fourth
Quarter | 35.55 | 28.59 | 32.87 |
| 2006 | | | |
| First
Quarter | 42.51 | 34.23 | 39.38 |
| Second
Quarter | 46.32 | 31.56 | 38.63 |
| Third
Quarter | 40.10 | 35.71 | 37.97 |
| Fourth
Quarter | 46.20 | 37.60 | 46.15 |
| 2007 | | | |
| First
Quarter | 48.83 | 42.18 | 48.61 |
| Second
Quarter | 62.13 | 48.93 | 60.65 |
| Third
Quarter | 73.67 | 51.01 | 73.24 |
| Fourth
Quarter | 84.97 | 71.57 | 80.20 |
| 2008 | | | |
| First
Quarter | 87.68 | 68.70 | 76.55 |
| Second
Quarter | 99.84 | 79.34 | 89.03 |
| Third
Quarter | 87.23 | 50.67 | 56.22 |
| Fourth
Quarter | 55.90 | 26.72 | 34.90 |
| 2009 | | | |
| First
Quarter | 40.89 | 31.75 | 37.67 |
| Second
Quarter | 57.95 | 39.30 | 52.97 |
| Third
Quarter | 67.67 | 49.05 | 67.67 |
| Fourth
Quarter | 79.73 | 66.03 | 74.61 |
| 2010 | | | |
| First
Quarter (through January 25, 2010) | 77.79 | 67.90 | 67.90 |

	iShares ® MSCI Brazil Index Fund
	January
1, 2005 through January 25, 2010
	●
Currency
Exchange Information	The
following table sets forth the high, low and period-ending U.S.
dollar/Brazilian real exchange rates for each quarter from January 1, 2005
through January 25, 2010. The associated graph sets forth the
currency’s currency performance relative to the U.S. dollar for such
period.
	The
historical performance of the Brazilian real relative to the U.S. dollar
should not be taken as an indication of future performance, and no
assurance can be given as to the U.S. dollar/Brazilian real exchange rate
on the Valuation Date.

PS-33

| The
exchange rates between the Brazilian real and the U.S. dollar are at any
moment a result of the supply and demand for the two currencies, and
changes in the exchange rates result over time from the interaction of
many factors directly or indirectly affecting economic and political
developments in other countries. Of particular importance are
rates of inflation, interest rate levels, the balance of payments and the
extent of governmental surpluses or deficits in Brazil and the United
States, all of which are in turn sensitive to the monetary, fiscal and
trade policies pursued by Brazil, the United States and other
jurisdictions important to international trade and
finance |
| --- |
| We
obtained the exchange rates listed below from Bloomberg Financial Markets,
without independent verification. The historical exchange rates
for the Brazilian real should not be taken as an indication of future
performance. |

| Brazilian
real (expressed
as BRL per USD) Historical
High, Low and Period End Closing Prices January
1, 2005 through January 25, 2010 | High | Low | Period
End |
| --- | --- | --- | --- |
| 2005 | | | |
| First
Quarter | 2.7640 | 2.5665 | 2.6790 |
| Second
Quarter | 2.6588 | 2.3325 | 2.3325 |
| Third
Quarter | 2.4870 | 2.2140 | 2.2275 |
| Fourth
Quarter | 2.3800 | 2.1615 | 2.3355 |
| 2006 | | | |
| First
Quarter | 2.3364 | 2.1040 | 2.1640 |
| Second
Quarter | 2.3525 | 2.0555 | 2.1650 |
| Third
Quarter | 2.2244 | 2.1230 | 2.1690 |
| Fourth
Quarter | 2.1912 | 2.1294 | 2.1364 |
| 2007 | | | |
| First
Quarter | 2.1524 | 2.0444 | 2.0594 |
| Second
Quarter | 2.0478 | 1.9045 | 1.9290 |
| Third
Quarter | 2.0930 | 1.8336 | 1.8336 |
| Fourth
Quarter | 1.8390 | 1.7330 | 1.7800 |
| 2008 | | | |
| First
Quarter | 1.8307 | 1.6690 | 1.7519 |
| Second
Quarter | 1.7445 | 1.5915 | 1.6037 |
| Third
Quarter | 1.9634 | 1.5600 | 1.9047 |
| Fourth
Quarter | 2.5128 | 1.9176 | 2.3145 |
| 2009 | | | |
| First
Quarter | 2.4474 | 2.1765 | 2.3228 |
| Second
Quarter | 2.2738 | 1.9232 | 1.9519 |
| Third
Quarter | 2.0092 | 1.7670 | 1.7670 |
| Fourth
Quarter | 1.7866 | 1.6990 | 1.7445 |
| 2010 | | | |
| First
Quarter (through January 25, 2010) | 1.8247 | 1.7200 | 1.8210 |

PS-34

| | Brazilian
real |
| --- | --- |
| | January
1, 2005 through January 25, 2010 |
| | (expressed
as BRL per USD) |
| | ● |
| 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. The Original Issue Price of the Securities
includes the Agent’s commissions (as shown on the cover page of this
pricing supplement) paid with respect to the Securities and the cost of
hedging our obligations under the Securities. The cost of
hedging includes the projected profit that our subsidiaries expect to
realize in consideration for assuming the risks inherent in managing the
hedging transactions. Since hedging our obligations entails
risk and may be influenced by market forces beyond our or our
subsidiaries’ control, such hedging may result in a profit that is more or
less than initially projected, or could result in a loss. See
also “Use of Proceeds” in the accompanying prospectus. |
| | On
or prior to the Pricing Date, we, through our subsidiaries or others,
hedged our anticipated exposure in connection with the Securities by
taking positions in the Shares and in futures or options contracts on the
Shares or any component stocks of the MSCI Brazil Index listed on major
securities markets. Such purchase activity could have increased
the Initial Share Price, and, therefore, could have increased the price at
which the Shares must close on the Valuation Date before you will receive
at maturity a payment that exceeds the Stated Principal Amount of the
Securities. In addition, through our subsidiaries, we are
likely to modify our hedge position throughout the life of the Securities
by purchasing and selling the Shares and/or the stocks underlying the MSCI
Brazil Index or futures or options contracts on the Shares or the stocks
underlying the MSCI Brazil Index listed on major securities or commodities
markets or positions in any other available securities or instruments that
we may wish to use in connection with such hedging activities, including
by selling any such securities or instruments on the Valuation
Date. We cannot give any assurance that our hedging activities
will not affect the |

PS-35

| |
| --- |
| Supplemental
Information Concerning Plan
of Distribution; Conflicts of Interest |
| Under
the terms and subject to the conditions contained in the U.S. distribution
agreement referred to in the prospectus supplement under “Plan of
Distribution,” the Agent, acting as principal for its own account, has
agreed to purchase, and we have agreed to sell, the aggregate principal
amount of Securities set forth on the cover of this pricing
supplement. The Agent proposes initially to offer the
Securities directly to the public at the public offering price set forth
on the cover page of this pricing supplement; provided that the price
will be $9.9625 per Security and the agent’s commissions will be $0.1625
per Security for the purchase by any single investor of greater than or
equal to $1,000,000 and less than $3,000,000 principal amount of
securities, the price will be $9.9438 per Security and the agent’s
commissions will be $0.1438 per Security for the purchase by any single
investor of greater than or equal to $3,000,000 and less than $5,000,000
principal amount of securities and the price will be $9.925 per Security
and the agent’s commissions will be $0.125 per Security for the purchase
by any single investor of greater than or equal to $5,000,000 principal
amount of securities. The Agent may distribute the Securities
through Morgan Stanley Smith Barney LLC (“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, a fixed sales commission of $0.20 for each
Security they sell.; provided that, concessions allowed to such dealers in
connection with the offering may be reclaimed by the Agent if, within 30
days of the offering, the Agent repurchases the Securities distributed by
such dealers. After the initial offering of the Securities, the
Agent may vary the offering price and other selling terms from time to
time. |
| 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. In
accordance with NASD Rule 2720, MS & Co. or any of our other
affiliates may not make sales in this offering to any discretionary
account without the prior written approval of the
customer. |
| We
expect to deliver the Securities against payment therefor in New York, New
York on January 28, 2010, which is the third scheduled Business Day
following the date of this pricing supplement and of the pricing of the
Securities. |
| In
order to facilitate the offering of the Securities, the Agent may engage
in transactions that stabilize, maintain or otherwise affect the price of
the Securities. Specifically, the Agent may sell more
Securities than it is obligated to purchase in connection with
the |

PS-36

| offering,
creating a naked short position in the Securities, for its own
account. The Agent must close out any naked short position by
purchasing the Securities in the open market. A naked short
position is more likely to be created if the Agent is concerned that there
may be downward pressure on the price of the Securities in the open market
after pricing that could adversely affect investors who purchase in the
offering. As an additional means of facilitating the offering,
the Agent may bid for, and purchase, the Securities, the component stocks
of the MSCI Brazil Index, any of the basket commodities or the Shares in
the open market to stabilize the price of the Securities. Any
of these activities may raise or maintain the market price of the
Securities above independent market levels or prevent or retard a decline
in the market price of the Securities. The Agent is not
required to engage in these activities, and may end any of these
activities at any time. An affiliate of the Agent has entered
into a hedging transaction with us in connection with this offering of
Securities. See “—Use of Proceeds and Hedging”
above. |
| --- |
| General |
| No
action has been or will be taken by us, the Agent or any dealer that would
permit a public offering of the Securities or possession or distribution
of this pricing supplement or the accompanying prospectus supplement or
prospectus in any jurisdiction, other than the United States, where action
for that purpose is required. No offers, sales or deliveries of
the Securities, or distribution of this pricing supplement or the
accompanying prospectus supplement or prospectus or any other offering
material relating to the Securities, may be made in or from any
jurisdiction except in circumstances which will result in compliance with
any applicable laws and regulations and will not impose any obligations on
us, the Agent or any dealer. |
| The
Agent has represented and agreed, and each dealer through which we may
offer the Securities has represented and agreed, that it (i) will comply
with all applicable laws and regulations in force in each non-U.S.
jurisdiction in which it purchases, offers, sells or delivers the
Securities or possesses or distributes this pricing supplement and the
accompanying prospectus supplement and prospectus and (ii) will obtain any
consent, approval or permission required by it for the purchase, offer or
sale by it of the Securities under the laws and regulations in force in
each non-U.S. jurisdiction to which it is subject or in which it makes
purchases, offers or sales of the Securities. We shall not have
responsibility for the Agent’s or any dealer’s compliance with the
applicable laws and regulations or obtaining any required consent,
approval or permission. |
| Brazil |
| The
Securities have not been and will not be registered with the Comissão de
Valores Mobiliários (The Brazilian Securities Commission). The
Securities may not be offered or sold in the Federative Republic of Brazil
except in circumstances which do
not |

PS-37

| constitute
a public offering or distribution under Brazilian laws and
regulations. |
| --- |
| Chile |
| The
Securities have not been registered with the Superintendencia de Valores y
Seguros in Chile and may not be offered or sold publicly in
Chile. No offer, sales or deliveries of the Securities or
distribution of this pricing supplement or the accompanying prospectus
supplement or prospectus, may be made in or from Chile except in
circumstances which will result in compliance with any applicable Chilean
laws and regulations. |
| Hong
Kong |
| No
action has been taken to permit an offering of the Securities to the
public in Hong Kong as the Securities have not been authorized by the
Securities and Futures Commission of Hong Kong and, accordingly, no
advertisement, invitation or document relating to the Securities, whether
in Hong Kong or elsewhere, shall be issued, circulated or distributed
which is directed at, or the contents of which are likely to be accessed
or read by, the public in Hong Kong other than (i) with respect to the
Securities which are or are intended to be disposed of only to persons
outside Hong Kong or only to professional investors within the meaning of
the Securities and Futures Ordinance (Cap. 571) of Hong Kong (“SFO”) and
any rules made thereunder or (ii) in circumstances that do not constitute
an invitation to the public for the purposes of the
SFO. |
| Mexico |
| The
Securities have not been registered with the National Registry of
Securities maintained by the Mexican National Banking and Securities
Commission and may not be offered or sold publicly in
Mexico. This pricing supplement and the accompanying prospectus
supplement and prospectus may not be publicly distributed in
Mexico. |
| Singapore |
| The
Agent and each dealer represent and agree that they will not offer or sell
the Securities nor make the Securities the subject of an invitation for
subscription or purchase, nor will they circulate or distribute this
pricing supplement or the accompanying prospectus supplement or prospectus
or any other document or material in connection with the offer or sale, or
invitation for subscription or purchase, of the Securities, whether
directly or indirectly, to persons in Singapore other
than: |
| (a) an
institutional investor (as defined in section 4A of the Securities and
Futures Act (Chapter 289 of Singapore (the “SFA”)); |
| (b) an
accredited investor (as defined in section 4A of the SFA), and in
accordance with the conditions, specified in Section 275 of the
SFA; |

PS-38

| | (c) a
person who acquires the Securities for an aggregate consideration of not
less than Singapore dollars Two Hundred Thousand (S$200,000) (or its
equivalent in a foreign currency) for each transaction, whether such
amount is paid for in cash, by exchange of shares or other assets, unless
otherwise permitted by law; or |
| --- | --- |
| | (d) otherwise
pursuant to, and in accordance with the conditions of, any other
applicable provision of the SFA. |
| 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”), which we refer to as a “plan,” should consider the fiduciary
standards of ERISA in the context of the plan’s particular circumstances
before authorizing an investment in these 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 “parties in interest” within the meaning
of ERISA or “disqualified persons” within the meaning of 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 these 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 those 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
these 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 Section 4975(d)(20) of the Code 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 |

PS-39

| 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 these
Securities. |
| --- |
| Because
we may be considered a party in interest with respect to many plans, these
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 these Securities will be
deemed to have represented, in its corporate and its fiduciary capacity,
by its purchase and holding thereof that either (a) it is not a plan or a
plan asset entity, 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 or disposition are not prohibited by ERISA or Section
4975 of the Code or any Similar Law. |
| 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 these 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 these 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 of these 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., MSSB or a family member
and the employee |

PS-40

| | receives
any compensation (such as, for example, an addition to bonus) based on the
purchase of securities by the account, plan or annuity. |
| --- | --- |
| | 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. |
| United
States Federal Taxation | Prospective investors should note
that the discussion under the section called “United States Federal
Taxation” in the accompanying prospectus supplement does not apply to the
Securities issued under this pricing supplement and is superseded by the
following discussion. |
| | The following summary is a general
discussion of the principal U.S. federal tax consequences of
ownership and disposition of the Securities. This discussion
applies only to initial investors in the Securities
who: |
| | · purchase
the Securities at their “issue price”; and |
| | · will
hold the Securities as capital assets within the meaning of Section 1221
of the Internal Revenue Code of 1986, as amended (the
“Code”). |
| | This
discussion does not describe all of the tax consequences that may be
relevant to a holder in light of the holder’s particular circumstances or
to holders subject to special rules, such
as: |

| · | certain
financial institutions; |
| --- | --- |
| · | insurance
companies; |
| · | certain
dealers and traders in securities, commodities or foreign
currencies; |
| · | investors
holding the Securities as part of a hedging transaction, “straddle,”
conversion transaction, integrated transaction or constructive sale
transaction; |
| · | U.S.
Holders, as defined below, whose functional currency is not the U.S.
dollar; |
| · | partnerships
or other entities classified as partnerships for U.S. federal income tax
purposes; |
| · | regulated
investment companies; |
| · | real
estate investment trusts; |
| · | tax-exempt
entities, including an “individual retirement account” or “Roth IRA” as
defined in Section 408 or 408A of the Code, respectively;
or |
| · | persons
subject to the alternative minimum tax. |

As stated above, this discussion does not describe all of the tax consequences that may be relevant to a holder in light of the holder’s particular circumstances. As the law applicable to the U.S. federal income taxation of instruments such as the Securities is technical and complex, the discussion below necessarily represents only a general summary. Moreover, the effect of any applicable state, local or foreign tax laws is not discussed.

PS-41

| This discussion is based on the
Code, administrative pronouncements, judicial decisions and final,
temporary and proposed Treasury regulations, all as of the date hereof, changes to
any of which subsequent to the date of this pricing supplement may affect
the tax consequences described herein. Persons considering the
purchase of the Securities should consult their tax advisers with regard
to the application of the U.S. federal income tax laws to their
particular situations as well as any tax consequences arising under the
laws of any state, local or foreign taxing
jurisdiction. |
| --- |
| General |
| Under current law, each Security
should be treated as a single financial co ntract that is an “ open transaction” for U.S. federal income tax
purposes. |
| Due to the absence of statutory,
judicial or administrative authorities that directly address the treatment
of the Securities or instruments that are similar to the Securities
fo r U.S. federal
income tax purposes, no assurance can be given that the Internal Revenue
Service (the “ IRS” ) or the courts will agree with
the tax treatment described herein. Accordingly, you should
consult your tax advisers regarding all aspects of the U . S. federal tax consequences of an
investment in the Securities (including possible alternative treatments of
the Securities) and with respect to any tax consequences arising under the
laws of any state, local or foreign taxing jurisdiction. Unless
otherw i se stated, the following
discussion is based on the treatment of each Security as an open
transaction. |
| Tax Consequences to U.S. Holders |
| This section applies to you only
if you are a U.S. Holder. As used herein , the term “ U.S. Holder” means a benefic ial owner of a Security that is,
for U.S. federal income tax
purposes: |

| · | a
citizen or resident of the United States; |
| --- | --- |
| · | a
corporation, or other entity taxable as a corporation for U.S. federal
income tax purposes, created or organized in or under the laws of the
United States or any political subdivision thereof; or |
| · | an
estate or trust the income of which is subject to U.S. federal income
taxation regardless of its source. |

| The term “ U.S. Holder” also includes certain former
citizens and residents o f the United States . |
| --- |
| Tax Treatment of the
Securities |
| Assuming the characterization of
the Securities as set forth above is respected, the following U.S. federal income tax consequences
should result. |

PS-42

| Tax Treatment
Prior to Maturity. 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 as described
below. |
| --- |
| Tax
Basis . A U.S.
Holder ’ s tax basis in the Securities
should equal the amount paid by the U.S. Holder to acquire the
Securities. |
| Sale, Exchange or Settlement
of the Securities. Upon a sale or exchange of the
Securities, or upon settlement of the Securities at maturity, a U.S.
Holder should recognize gain or loss equal to the difference between the
amount realized on the sale, exchange or settlement and the U.S. Holder’s
tax basis in the Securities sold, exchanged or settled. Any
gain or loss recognized upon the sale, exchange or settlement of the
Securities should be long-term capital gain or loss if the U.S. Holder has
held the Securities for more than one year at such time, and short-term
capital gain or loss otherwise. |
| Possible Alternative Tax
Treatments of an Investment in the Securities |
| Due to the absence of authorities
that d irectly address
the proper tax treatment of the Securities, no assurance can be given that
the IRS will accept, or that a court will uphold, the treatment described
above. In particular, the IRS could seek to analyze the U.S. federal income tax
consequen c es of owning a Security under Treasury regulations
governing contingent payment debt instruments (the “ Contingent Debt
Regulations” ). |
| If the IRS were successful in
asserting that the Contingent Debt Regulations apply to the Securities,
the timing and ch aracter of income thereon would be
significantly affected. Among other things, a U.S. Holder would
be required to accrue original issue discount (“ OID” ) on the Securities every year at
a “ comparable
yield” determined at
the time of their issuance. Furthe rmore, any gain realized by a U.S.
Holder at maturity or upon a sale, exchange or other disposition of the
Securities would generally be treated as ordinary income, and any loss realized at
maturity would be treated as ordinary loss, to the extent of the
U .S.
Holder ’ s prior accruals of OID, and as
capital loss thereafter. |
| Even if the Contingent Debt
Regulations do not apply to the Securities, other alternative federal
income tax characterizations of the Securities are also possible, which if
applied co uld also
affect the timing and character of the income or loss with respect to the
Securities . 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 |

PS-43

| the
exchange-traded status of the instruments and the nature of the underlying
property to which the instruments are linked; 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 that is subject to 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. 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 and the issues
presented by this notice. |
| --- |
| Backup Withholding and Information
Reporting |
| Backup withholding may apply in
respect of the amounts paid to a U.S. Ho lder, unless such U.S. Holder
provides proof of an applicable exemption. The amounts withheld
under the backup withholding rules are not an additional tax and may be
refunded, or credited against the U.S. Holder ’ s U.S. federal income tax
liability, provi d ed that the required information
is furnished to the IRS. In addition, information returns will
be filed with the IRS in connection with payments on the Securities and
the proceeds from a sale, exchange or other disposition of the Securities,
unless the U .S. Holder provides proof of an
applicable exemption from the information reporting
rules. |
| Tax Consequences to Non-U.S.
Holders |
| This section applies to you only
if you are a Non-U.S. Holder. As used herein, the term
“ Non-U.S.
Holder” means a
benefic ial owner of a
Security that is, for U.S. federal income tax
purposes: |

| · | an
individual who is classified as a nonresident alien; |
| --- | --- |
| · | a
foreign corporation; or |
| · | a
foreign trust or estate. |
| The
term “Non-U.S. Holder” does not include any of the following
holders: | |
| · | a
holder who is an individual present in the United States for 183 days or
more in the taxable year of disposition and who is not otherwise a
resident of the United States for U.S. federal income tax
purposes; |
| · | certain
former citizens or residents of the United States; or |
| · | a
holder for whom income or gain in respect of the Securities is effectively
connected with the conduct of a trade or business in the United
States. |

PS-44

| Such
holders should consult their tax advisers regarding the U.S. federal
income tax consequences of an investment in Securities. |
| --- |
| Tax Treatment
upon Sale , Exchange or
Settlement of the Securities |
| In
general. A ssuming the treatment of the
Securities as set forth above is respected, a N on-U.S. Holder of the Securities
will not be subject to U.S. federal income or withholding tax
in respect of amounts paid to the Non-U.S.
Holder. |
| If all or any portion of a
Security were recharacterized as a debt instrument, any payment made to a
Non-U. S. Holder with
respect to the Securities would not be subject to U.S. federal withholding
tax, provided that: |

| · | the Non-U.S. Holder does not own,
directly or by attribution, ten percent or more of the total combined
voting power of all classes of our sto ck entitled to
vote; |
| --- | --- |
| · | the Non-U.S. Holder is not a
controlled foreign corporation related, directly or indirectly, to us
through stock ownership; |
| · | the Non-U.S. Holder is not a bank
receiving interest under Section 881(c)(3)(A) of the Code,
and |
| · | th e certification requirement
described below has been fulfilled with respect to the beneficial
owner. |

| Certification
Requirement. The certification
requirement referred to in the preceding paragraph will be fulfilled if
the beneficial owner of a Security (or a financial institution
holding the Securities on behalf of the beneficial owner) furnishes to us
an IRS Form W-8BEN, on which the beneficial owner certifies under
penalties of perjury that it is not a U.S. person. |
| --- |
| On December 7, 2007, the
Treasu ry Department
and the IRS released a notice requesting comments on the U.S. federal income tax treatment of
“ prepaid forward
contracts” and
similar instruments. 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 , it is possible that any Treasury
regulations or other guidance promulgated after consideration of these
issues might affect the withholding tax consequences of an investment
in the Securities,
possibly with retroactive effect. Non-U.S. Holders should note
that we currently do not intend to withhold on any payments made with
respect to the Securities to Non-U.S. Holders (subject to compliance by
such holders with certification n ecessary to establish an exemption
from backup withholding). However, in the event of a change of
law or any formal or informal guidance by the IRS, Treasury or Congress,
we may decide to withhold on payments made with respect to the Securities
to Non-U. S . Holders, and we will not be
required to pay any additional amounts with respect to amounts
withheld. If you are a Non-U.S. Holder, you should consult your
tax adviser |

PS-45

| regarding the U.S. federal withholding and income
tax consequences of an investment in the Securities, including
possible alternative treatments and the issues presented by the
notice. |
| --- |
| U.S. Federal
Estate Tax |
| Individual Non-U.S. Holders and
entities the property of which is potentially includible in such an
individual ’ s gross estate for U.S. federal estate tax
purposes (for example, a trust funded by such an individual and with
respect to which the individual has retained certain interests or powers),
should note that, absent an applicable treaty benefit, the Securities are
likely t o be treated as U.S. situs property
subject to U.S. federal estate tax. Prospective investors that
are non-U.S. individuals, or are entities of the type described above,
should consult their tax advisers regarding the U.S. federal estate tax consequences o f an investment in the
Securities. |
| Backup Withholding and Information
Reporting |
| Information returns may be filed
with the IRS in connection with the payment on the Securities at maturity
as well as in connection with the proceeds from a sale, exchan ge or other
disposition. A Non-U.S. Holder may be subject to backup
withholding in respect of amounts paid to the Non-U.S. Holder, unless such
Non-U.S. Holder complies with certification procedures to establish that
it is not a U.S. person for U.S. feder a l income tax purposes or otherwise
establishes an exemption. Compliance with the certification
procedures described above under “ ― Tax Treatment upon Sale , Exchange or Settlement of the
Securities ― Certification
Requirement” will
satisfy the certification requirements necessary to avoid
the backup withholding as well. The amount of any backup
withholding from a payment to a Non-U.S. Holder will be allowed as a
credit against the Non-U.S. Holder ’ s U.S. federal income tax liability and
may entitle the Non- U .S. Holder to a refund, provided
that the required information is furnished to the
IRS. |

PS-46