MORGAN STANLEY — Capital/Financing Update 2010

Jan 4, 2010

| CALCULATION
OF REGISTRATION FEE — Title
of Each Class of Securities Offered | Maximum
Aggregate Offering
Price | Amount
of Registration Fee |
| --- | --- | --- |
| Buffered
Securities due 2013 | $ 3,250,000 | $ 231.73 |

| PROSPECTUS
Dated December 23, 2008 | Pricing
Supplement No. 273 to |
| --- | --- |
| PROSPECTUS
SUPPLEMENT | Registration
Statement No. 333-156423 |
| Dated
December 23, 2008 | Dated
December 30, 2009 |
| | Rule
424(b)(2) |

$3,250,000

GLOBAL MEDIUM-TERM NOTES, SERIES F

Senior Fixed Rate Notes

Buffered Securities due January 7, 2013

Based on the Value of the Dow Jones-UBS Commodity Index SM

Unlike ordinary debt securities, the Buffered Securities due January 7, 2013, Based on the Value of the Dow Jones-UBS Commodity Index SM , which we refer to as the securities, do not pay interest and provide a minimum payment at maturity of only 15% of principal at maturity. At maturity you will receive for each $1,000 stated principal amount of the securities that you hold an amount in cash based upon the closing value of the Dow Jones-UBS Commodity Index SM , which we refer to as the index, on the valuation date, which will be January 2, 2013. 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 issue price of each security is $1,000.

• We will not pay interest on the securities.

• At maturity, you will receive an amount per security based on the performance of the index:

º If the final index value is greater than the initial index value, you will receive for each $1,000 stated principal amount of the securities that you hold a payment at maturity equal to $1,000 plus the upside payment, subject to the maximum payment at maturity. The upside payment will equal $1,000 times the index percent increase times 100%, which we refer to as the participation rate. The maximum payment at maturity on the securities will be $1,550, which is 155% of the stated principal amount.

º If the final index value is less than or equal to the initial index value but greater than or equal to 118.5515, which is approximately 85% of the initial index value, meaning the index has declined in value by an amount less than or equal to the buffer amount of 15%, you will receive your $1,000 stated principal amount at maturity.

º If the final index value is less than 118.5515, which is approximately 85% of the initial index value, meaning the value of the index has declined by more than the buffer amount of 15% from its initial value, you will receive for each $1,000 stated principal amount of the securities that you hold a payment at maturity equal to (i) $1,000 times (ii) the index performance factor plus (iii) $150, which will be an amount less than, and possibly significantly less than, the $1,000 stated principal amount of the securities. However, under no circumstances will the amount due at maturity be less than $150 per security.

• The index percent increase will be equal to (i) the final index value minus the initial index value divided by (ii) the initial index value.

º The initial index value is 139.4723, the official settlement price of the index on the day we priced the securities for initial sale to the public, which we refer to as pricing date.

º The final index value will equal the official settlement price of the index on the valuation date.

• The index performance factor will be equal to (i) the final index value divided by (ii) the initial index value.

• Investing in the securities is not equivalent to investing directly in the index or its component commodity contracts.

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

• The CUSIP number for the securities is 617482JE5.

• The ISIN for the securities is US617482JE52.

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-7.

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 100%

| | Price
to Public | Agent’s
Commissions (1) | Proceeds
to Company |
| --- | --- | --- | --- |
| Per
security | $1,000.00 | $21.00 | $979.00 |
| Total | $3,250,000 | $68,250 | $3,181,750 |

(1) 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 $21.00 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 “Description of Securities––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 the pricing supplement or the accompanying prospectus supplement or the 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 Buffered Securities due January 7, 2013, Based on the Value of the Dow Jones-UBS Commodity Index SM , which we refer to as the securities, we are offering to you in general terms only. You should read the summary together with the more detailed information that is contained in the rest of this pricing supplement and in the accompanying prospectus and prospectus supplement. You should carefully consider, among other things, the matters set forth in “Risk Factors.”

The securities offered are Series F medium-term senior unsecured debt securities of Morgan Stanley. The payment on the securities at maturity is based on the value of the Dow Jones-UBS Commodity Index SM , which we refer to as the index, at maturity. All payments on the securities are subject to the credit risk of Morgan Stanley.

“Dow Jones ® ,” “DJ,” “UBS,” “Dow Jones–UBS Commodity Index SM ,” “DJ-UBS SM ” and “DJ-UBSCI SM ” are service marks of Dow Jones & Company, Inc. and UBS AG, as the case may be, and have been licensed for use for certain purposes by Morgan Stanley.

| Each
security costs $1,000 | We,
Morgan Stanley, are offering Buffered Securities due January 7, 2013,
Based on the Value of the Dow Jones-UBS Commodity Index SM ,
which we refer to as the securities. The stated principal
amount and issue price of each security is $1,000. |
| --- | --- |
| | 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 includes 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 from 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 the repayment of 100% of the principal, nor do
they pay interest | Unlike
ordinary debt securities, the securities do not pay interest and do not
guarantee the repayment of 100% of the stated principal amount at
maturity. If the final index value is less than 118.5515, which
is approximately 85% of the initial index value, we will pay to you an
amount in cash per security that is less than the $1,000 stated principal
amount of each security by an amount proportionate to the decrease in the
value of the index below 85% of the initial index value. The
initial index value is 139.4723, the official settlement price of the
index on the day we priced the securities for initial sale to the public,
which we refer to as the pricing date. The final index value
will be the official settlement price of the index on January 2, 2013,
which we refer to as the valuation date. |
| Payment
at maturity based on the index | At
maturity, you will receive for each $1,000 stated principal amount of the
securities that you hold an amount in cash based upon the value of the
index, determined as follows: |
| | • If the final index value is
greater than the initial index value , you will receive for each
$1,000 stated principal amount of the securities that you hold a payment
at maturity equal to: |
| | $1,000 + upside
payment, subject
to a maximum payment at maturity of $1,550 per security (155% of the
stated principal amount) |

PS-3

where,

upside payment = $1,000 x participation rate x index percent increase

and
participation
rate will be 100%
and

| index
percent increase |
| --- |
| initial
index value |

| and
where, |
| --- |
| final
index value = the official settlement price of the index on the valuation
date initial
index value = 139.4723, the official settlement price of the index on the
pricing date |

| • If the final index value is
less than or equal to the initial index value but greater than or equal to
118.5515, which is approximately 85% of the initial index value, meaning
the index has declined in value by an amount less than or equal to the
buffer amount of 15%, you will receive for each security that you
hold the stated principal amount of $1,000 at maturity. |
| --- |
| • If the final index value is
less than 118.5515, which is approximately 85% of the initial index value,
meaning the value of the index has declined by more than the buffer amount
of 15%, you will receive for each $1,000 stated principal amount of
the securities that you hold a payment at maturity equal
to: |

| $1,000 x index
performance
factor + $150 |
| --- |
| where, |

index performance factor
initial
index value

| Because
the index performance factor will be less than 85%, this payment will be
less than $1,000. However, under no circumstances will the
payment due at maturity be less than $150 per security. All
payments on the securities are subject to the credit risk of Morgan
Stanley. |
| --- |
| On
PS-6, 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 index. The graph does not show every situation that may
occur. |
| You
can review the historical values of the index in the section of this
pricing supplement called “Description of Securities—Historical
Information.” |

PS-4

| | Investing
in the securities is not equivalent to investing directly in the index or
its component commodity contracts. |
| --- | --- |
| Postponement
of maturity date | If
the scheduled valuation
date is
not a trading day
or if a market disruption event occurs on that day so that the valuation
date as
postponed falls less than two business days prior to the scheduled
maturity date, the maturity date of the securities will
be postponed to the
second business day followin g
that valuation
date as
postponed. |
| Morgan
Stanley Capital Group Inc. will be the Calculation Agent | We
have appointed our affiliate, Morgan Stanley Capital Group Inc., or its
successors, which we refer to as MSCG, 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 notes. As calculation agent,
MSCG has determined the initial index value and will determine the final
index value, the index percent increase or the index performance factor,
and the payment to you at maturity. |
| Morgan
Stanley & Co. Incorporated will be the agent; conflicts of
interest | The
agent for the offering of the securities, Morgan Stanley & Co.
Incorporated, our wholly-owned subsidiary, which we refer to as 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. See “Description of Securities—Supplemental
Information Concerning Plan of Distribution; Conflicts of Interest” on
PS-25. |
| Where
you can find more information on the securities | The
securities are senior unsecured notes 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 note in
the section of the prospectus supplement called “Description of Notes” and
in the section of the prospectus called “Description of Debt
Securities.” |
| | Because
this is a summary, it does not contain all of the information that may be
important to you. For a detailed description of the terms of
the securities, you should read the “Description of Securities” section in
this pricing supplement. You should also read about some of the
risks involved in investing in the securities in the section called “Risk
Factors.” The tax treatment of investments in index-linked
notes such as these differ from that of investments in ordinary debt
securities. See the section of this pricing supplement called
“Description of Securities—United States Federal Taxation.” You
should consult with your investment, legal, tax, accounting and other
advisers with regard to any proposed or actual investment in the
securities. |
| How
to reach us | You
may contact your local Morgan Stanley Smith Barney branch office or call
us at (866) 477-4776. |

PS-5

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 index. The Buffer Zone illustrates the buffer effect in the event of a decline in the value of the index. The graph is based on the following terms:

• Stated Principal Amount per Security: $1,000

• Participation Rate: 100%

• Buffer Amount: 15%

• Maximum Payment at Maturity: $1,550

Where the final index value is greater than the initial index value, the payment at maturity on the securities reflected in the graph below is greater than the $1,000 stated principal amount per security, subject to the maximum payment at maturity of $1,550. An investor would realize the maximum payment at maturity at a final index value of 155% of the initial index value. Where the final index value is less than or equal to the initial index value but greater than or equal to 85% of the initial index value, the payment at maturity on the securities reflected in the graph below is the $1,000 stated principal amount per security. Where the final index value is less than 85% of the initial index value, the payment at maturity on the securities reflected in the graph below is less than the $1,000 stated principal amount per security, subject to the minimum payment at maturity of $150.

PS-6

RISK FACTORS

The securities are not secured debt, are riskier than ordinary debt securities and, unlike ordinary debt securities, do not pay interest and provide a minimum payment at maturity of only 15% of principal at maturity. This section describes the most significant risks relating to the securities.

| The
securities do not pay interest or guarantee repayment of 100% of your
principal | The
terms of the securities differ from those of ordinary debt securities in
that we will not pay you interest on the securities and a minimum payment
of only 15% of the stated principal amount of the securities will be due
at maturity. At maturity you will receive for each $1,000
stated principal amount of the securities that you hold an amount in cash
based upon the final index value. If the final index value is
less than 85% of the initial index value, meaning the index has declined
in value from its initial value by more than the 15% buffer amount, you
will receive an amount in cash at maturity that is less than the $1,000
stated principal amount of each security by an amount proportionate to the
decrease in the value of the index below 85% of its initial
value. See “Hypothetical Payouts on the Securities at Maturity”
on PS–6 . |
| --- | --- |
| Appreciation
potential for the securities is limited | The
appreciation potential of the securities is limited by the maximum payment
at maturity of $1,550 per security, or 155% of the stated principal
amount. |
| 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. Our
affiliate Morgan Stanley & Co. Incorporated, which we refer to as MS
& Co., may, but is not required to, make a market in the securities
but is not required to do so. 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, many of which are 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,
including: • the
value of the index at any time, |
| | • the
volatility (frequency and magnitude of changes in value) of the
index, |
| | • the
market prices of the commodities and the commodity contracts underlying
the index, and the volatility of such prices, |
| | • trends
of supply and demand for the commodities underlying the index at any
time, |
| | • interest
and yield rates in the market, |
| | • geopolitical
conditions and economic, financial, political, regulatory or judicial
events that affect the commodity contracts underlying the index or
commodities generally and that may affect the final index
value, |
| | • the
time remaining to the maturity of the securities, and |
| | • any
actual or anticipated changes in our credit ratings or credit
spreads. |

PS-7

| | Some
or all of these factors will influence the price you will receive if you
sell your securities prior to maturity. For example, you may
have to sell your securities at a substantial discount from the stated
principal amount if at the time of sale the value of the index is at or
below the initial index value. |
| --- | --- |
| | You
cannot predict the future performance of the index based on its historical
performance. The final index value may be less than 118.5515,
which is approximately 85% of the initial index value so that you will
receive at maturity an amount that is less than the $1,000 stated
principal amount of the securities by an amount proportionate to the
decrease in the value of the index below 85% of its initial value. In
addition, there can be no assurance that the final index value will be
greater than the initial index value so that you will receive at maturity
an amount in excess of the $1,000 stated principal amount for each
security you hold. |
| Not
equivalent to investing in the index | Investing
in the securities is not equivalent to investing in the index or the
futures contracts that underlie the index. |
| The
securities are subject to the credit risk of Morgan Stanley, and its
credit ratings and 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 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. |
| The
inclusion of commissions and projected profit from hedging in the original
issue price is likely to adversely affect secondary market
prices | Assuming
no change in market conditions or any other relevant factors, the price,
if any, at which MS & Co. is willing to purchase the securities 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 as the projected profit included in the cost of
hedging our obligations under the securities. The cost of hedging
includes the projected profit that our subsidiaries may rea lize
in consideration for assuming the risks inherent in managing the hedging
transactions. In addition, any such prices may differ from values determined by pricing
models used by MS & Co., as a result of dealer discounts, mark-ups or
other transaction costs. |
| Investments
linked to commodities are subject to sharp fluctuations in commodity
prices | Investments,
such as the securities, linked to the prices of commodities are subject to
sharp fluctuations in the prices of commodities and related contracts over
short periods of time for a variety of factors, including: changes in
supply and demand relationships; weather; climatic events; the occurrence
of natural disasters; wars; political and civil upheavals; acts of
terrorism; trade, fiscal, monetary, and exchange control programs;
domestic and foreign political and economic events and policies; disease;
pestilence; technological developments; changes in interest rates; and
trading activities in commodities and related contracts. These
factors may affect the settlement price of the index and the value of your
securities in varying and potentially inconsistent
ways. |

PS-8

| Suspensions
or disruptions of market trading in commodity and related futures markets
could adversely affect the price of the securities | The
commodity markets are subject to temporary distortions or other
disruptions due to various factors, including the lack of liquidity in the
markets, the participation of speculators and government regulation and
intervention. In addition, U.S. futures exchanges and some
foreign exchanges have regulations that limit the amount of fluctuation in
futures contract prices which may occur during a single business
day. These limits are generally referred to as “daily price
fluctuation limits” and the maximum or minimum price of a contract on any
given day as a result of these limits is referred to as a “limit
price.” Once the limit price has been reached in a particular
contract, no trades may be made at a different price. Limit
prices have the effect of precluding trading in a particular contract or
forcing the liquidation of contracts at disadvantageous times or
prices. These circumstances could adversely affect the value of
the index and, therefore, the value of the securities. |
| --- | --- |
| Higher
future prices of the index commodities relative to their current prices
may adversely affect the value of the index and the value of the
securities | The
index is composed of futures contracts on physical
commodities. Unlike equities, which typically entitle the
holder to a continuing stake in a corporation, commodity futures contracts
normally specify a certain date for delivery of the underlying physical
commodity. As the futures contracts that compose the index
approach expiration, they are replaced by contracts that have a later
expiration. Thus, for example, a contract purchased and held in
September may specify an October expiration. As time passes,
the contract expiring in October is replaced by a contract for delivery in
November. This process is referred to as
“rolling.” If the market for these contracts is (putting aside
other considerations) in “backwardation,” where the prices are lower in
the distant delivery months than in the nearer delivery months, the sale
of the October contract would take place at a price that is higher than
the price of the November contract, thereby creating a “roll
yield.” While many of the contracts included in the index have
historically exhibited consistent periods of backwardation, backwardation
will most likely not exist at all times. Moreover, certain of
the commodities included in the indices have historically traded in
“contango” markets. Contango markets are those in which the
prices of contracts are higher in the distant delivery months than in the
nearer delivery months. The absence of backwardation in the
commodity markets could result in negative “roll yields,” which could
adversely affect the value of the index and, accordingly, the value of the
securities. |
| Adjustments
to the index could adversely affect the value of the
securities | Dow
Jones & Company, Inc., in conjunction with UBS Securities LLC, as the
index publisher, may add, delete or substitute the commodity contracts
constituting the index or make other methodological changes that could
change the value of the index. The index publisher may
discontinue or suspend calculation or publication of the index at any
time. Any of these actions could adversely affect the value of
the securities. Where the index is discontinued, MSCG, as the
calculation agent, will have the sole discretion to substitute a successor
index that is comparable to the index and is not precluded from
considering indices that are calculated and published by the calculation
agent or any of its affiliates. |
| The
economic interests of the calculation agent and other of our affiliates
are potentially adverse to your interests | 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, MSCG has determined the initial index value and will
determine the final index value, and calculate the amount of cash you will
receive at maturity. Determinations made by MSCG, in its
capacity as calculation agent, including with respect to the calculation
of any index value in the event of the unavailability, modification or
discontinuance of the index, may affect the payout to you at
maturity. See the section of this pricing supplement called
“Description of Securities—Discontinuance of the Index; Alteration of
Method of Calculation.” |

PS-9

| Hedging
and trading activity by the calculation agent and its affiliates could
potentially 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, including
trading in swaps or futures contracts on the index and on the commodity
contracts underlying the index. MS & Co. and some of our
other subsidiaries also trade in financial instruments related to the
index or the prices of the commodity contracts underlying the index on a
regular basis as part of their general broker-dealer and other
businesses. Any of these hedging or trading activities on or
prior to the pricing date could have increased the value of the index on
the pricing date and, accordingly, could have increased the value at which
the index must close before you would receive at maturity an amount in
cash worth as much as or more than the stated principal amount 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 supp lement, 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, such as the securities. The notice focuses
in particular on whether to require hold e rs 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 sub j ect 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 accru a ls) realized by non-U.S. investors
should be subject to withholding tax; and 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 or d inary income that is subject to an
interest charge. While the notice requests comments on
appropriate transition rules and effective dates, 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-10

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 $1,000 stated principal amount of our Buffered Securities due January 7, 2013, Based on the Value of the Dow Jones-UBS Commodity Index SM (the “Index”). In this pricing supplement, the terms “we,” “us” and “our” refer to Morgan Stanley.

| Aggregate
Principal Amount | $3,250,000 |
| --- | --- |
| Original
Issue Date (Settlement Date) | January
5, 2010 |
| Maturity
Date | January 7, 2013 , 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 Business Days prior to the
scheduled Maturity Date, the
Maturity Date will be the second Business Day following the Valuation
Date as
postponed. See “–– Valuation
Date ” below. |
| Pricing
Date | December
30, 2009 |
| Issue
Price | 100%
($1,000 per Security) |
| Stated
Principal Amount | $1,000
per Security |
| Denominations | $1,000
and integral multiples thereof |
| CUSIP
Number | 617482JE5 |
| ISIN | US617482JE52 |
| Interest
Rate | None |
| Specified
Currency | U.S.
dollars |
| Payment
at Maturity | At
maturity, upon delivery of the Securities to the Trustee, we will pay with
respect to the $1,000 Stated Principal Amount of each Security an amount
in cash equal to (i) if the Final Index Value is greater than the Initial
Index Value, $1,000 plus the Upside Payment, subject to the Maximum
Payment at Maturity, (ii) if the Final Index Value is less than or equal
to the Initial Index Value but greater than or equal to 118.5515, which is
approximately 85% of the Initial Index Value, the Stated Principal Amount
of $1,000 or (iii) if the Final Index Value is less than 118.5515, which
is approximately 85% of the Initial Index Value, $1,000 times the Index
Performance Factor plus $150. |
| | 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 to be delivered with respect to the $1,000
Stated Principal Amount of each Security, on or prior to 10:30 a.m. (New
York City time) on the Business Day preceding the Maturity Date, and (ii)
deliver the aggregate cash amount due with respect to the Securities to
the Trustee for delivery to DTC, as holder of the Securities, on the
Maturity Date. We expect such amount of cash will be
distributed |

PS-11

| | to investors on the
Maturity Date in accordance with the standard rules and procedures of DTC
and its direct and indirect participants. See “—Book Entry Note
or Certificated Note” below, and see “Forms of Securities—The Depositary”
in the accompanying prospectus. |
| --- | --- |
| Upside
Payment | The
product of (i) $1,000 and (ii) the Participation Rate and (iii) the Index
Percent Increase. |
| Maximum
Payment at Maturity | $1,550
per Security, which is equal to 155% of the Stated Principal
Amount. |
| Minimum
Payment at Maturity | $150
per Security |
| Participation
Rate | 100% |
| Index
Percent Increase | A
fraction, the numerator of which is the Final Index Value minus the
Initial Index Value and the denominator of which is the Initial Index
Value. |
| Index
Performance Factor | A
fraction, the numerator of which is the Final Index Value and the
denominator of which is the Initial Index Value. |
| Initial
Index Value | 139.4723,
the Index Value on the Pricing Date, as determined by the Calculation
Agent. |
| | If
the Initial Index Value as finally published by the Index Publisher, as
determined by the Calculation Agent, differs from any Initial Index Value
specified in this pricing supplement, we will include the definitive
Initial Index Value in an amended pricing supplement. |
| Final
Index Value | The
Index Value on the Valuation Date, as determined by the Calculation
Agent. |
| Index
Value | The
Index Value on any Index Business Day will equal the official settlement
price of the Index published by the Index Publisher, or any Successor
Index (as defined under “—Discontinuance of the Index; Alteration of
Method of Calculation”). In certain circumstances, the Index
Value will be based on the alternate calculation of the Index described
under “—Discontinuance of the Index; Alteration of Method of
Calculation.” |
| Valuation
Date | January
2, 2013, subject to postponement in accordance with the following
paragraph. |
| | (a)
if the Valuation Date is not an Index Business Day, the Index Value for
the Valuation Date will be the Index Value on the next succeeding Index
Business Day, subject to the Market Disruption Event provisions described
in (b); and (b) if a Market Disruption Event occurs on the Valuation Date
with respect to the Index or one or more commodity contracts underlying
the Index (each, an “index contract”), the Calculation Agent will
calculate the Index Value for the Valuation Date using as a price (i) for
each index contract which did not suffer a Market
Disruption Event on the Valuation Date, the official settlement price on
that date of each |

PS-12

| | such index contract
and (ii) for each index contract which did suffer a Market Disruption Event on such date, the official settlement
price of that index contract on the next Trading Day on which no Market
Disruption Event occurs with respect to such index contract; provided
that , if a Market Disruption Event has occurred with respect to
such index contract on each of the three consecutive Trading Days
immediately succeeding the Valuation Date, the Calculation Agent will
determine the price of such index contract for the Valuation Date on such
third succeeding Trading Day by requesting the principal office of each of
the three leading dealers in the relevant market, selected by the
Calculation Agent, to provide a quotation for the relevant
price. If such quotations are provided as requested, the price
of the relevant index contract for the Valuation Date shall be the
arithmetic mean of such quotations. Quotes of Morgan Stanley
& Co. Incorporated (“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 quotes obtained. If fewer than
three quotations are provided as requested, the price of the relevant
index contract for the Valuation Date shall be determined by the
Calculation Agent in its sole discretion (acting in good faith) taking
into account any information that it deems relevant. In
calculating the price of the Index for the purposes of this paragraph, the
Calculation Agent will use the formula for calculating the Index last in
effect prior to the Valuation Date; provided that if the relevant Market Disruption Event in respect of the Index is
due to a Material Change In Formula, the Calculation Agent will use the
formula last in effect prior to that Market Disruption
Event. |
| --- | --- |
| Trading
Day | A
day, as determined by the Calculation Agent, on which trading is generally
conducted on the Relevant Exchange(s) for the applicable commodity
contracts. |
| Index
Business Day | Any
day on which the official settlement price of the Index is scheduled to be
published. |
| 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. |
| Market
Disruption Event | Market
Disruption Event means, with respect to the Index or any index contract,
any of a Price Source Disruption, Trading Disruption, Disappearance of
Commodity Reference Price, Tax Disruption, Material Change in Formula or
Material Change in Content, in each case, as determined by the Calculation
Agent. |
| Price
Source Disruption | Price
Source Disruption means a (i) the temporary or permanent failure of the
Index Publisher to announce or publish the Index Value (or the value of
any Successor Index, if applicable) (or the information necessary for
determining the Index Value (or the value of any Successor Index, if
applicable)) or (ii) the temporary discontinuance or unavailability of the
Index. |
| Trading
Disruption | Trading
Disruption means the material suspension of, or material limitation
imposed on, trading in any of the index contracts on the Relevant Exchange
for such contract. |

PS-13

| Disappearance
of Commodity | |
| --- | --- |
| Reference
Price | Disappearance
of Commodity Reference Price means either (i) the failure of trading to
commence, or the permanent discontinuance of trading in any of the index
contracts on the Relevant Exchange, (ii) the disappearance of, or of
trading in, any of the commodities underlying the Index or (iii) the
disappearance or permanent discontinuance or unavailability of the Index
Value, notwithstanding the availability of the price source or the status
of trading in the relevant futures contracts. |
| | For
purposes of this definition, a discontinuance of publication of the Index
shall not be a Disappearance of Commodity Reference Price if Morgan
Stanley Capital Group Inc. (“MSCG”) shall have selected a Successor Index
in accordance with “—Discontinuance of the Index; Alteration of Method of
Calculation.” |
| Material
Change in Formula | Material
Change in Formula means the occurrence since the date of this pricing
supplement of a material change in the formula for, or the method of
calculating, the Index Value. |
| Material
Change in Content | Material
Change in Content means the occurrence since the date of this pricing
supplement of a material change in the content, composition or
constitution of the Index. |
| Tax
Disruption | Tax
Disruption means the imposition of, change in or removal of an excise,
severance, sales, use, value-added, transfer, stamp, documentary,
recording or similar tax on, or measured by reference to, a commodity
(other than a tax on, or measured by reference to overall gross or net
income) by any government or taxation authority after the date of this
pricing supplement, if the direct effect of such imposition, change or
removal is to raise or lower the price on any day that would otherwise be
the Valuation Date from what it would have been without that imposition,
change or removal. |
| Relevant
Exchange | Relevant
Exchange means the primary exchange or market of trading for any contract
or commodity then included in the Index or any Successor
Index. |
| Discontinuance
of the Index; Alteration of | |
| Method
of Calculation | If,
following the Original Issue Date, the Index Publisher discontinues
publication of the Index and the Index Publisher or another entity
(including MSCG or MS & Co.) publishes a successor or substitute index
that MSCG, as the Calculation Agent, determines, in its sole discretion,
to be comparable to the discontinued Index (such index being referred to
herein as a “Successor Index”), then any subsequent Index Value will be
determined by reference to the published value of such Successor Index at
the regular weekday close of trading on the Index Business Day that any
Index Value is to be determined. |
| | 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 Morgan Stanley and to DTC, as holder of the Securities, within
three Business Days of such selection. We expect that such
notice will be made available to |

PS-14

| | 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,
following the Original Issue Date, the Index Publisher ceases to publish
the Index and no other entity undertakes to publish a commodity index
using the same methods of computation and the same composition of futures
contracts as in effect immediately prior to such cessation, then the Index
Value will be calculated by the Calculation Agent in accordance with the
formula used to calculate the Index and composition of the futures
contracts of the Index on the last day on which the Index was
published. |
| | If
the Index Publisher changes its method of calculating the Index in any
material respect that the Calculation Agent determines, in its sole
discretion, not to be a Material Change in Formula, the Calculation Agent
may make adjustments necessary in order to arrive at a calculation of
value comparable to the Index as if such changes or modifications had not
been made and calculate any Index Value in accordance with such
adjustments. Notwithstanding these alternative arrangements,
discontinuance of the publication of the Index may adversely affect the
value of the Securities. |
| Book
Entry Note or Certificated Note | 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 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 notes, please read “ Forms of Securities––The Depositary” and “ Securities
Offered on a G lobal
Basis Through the Depositary” in the accompanying
prospectus. |
| Senior
Note or Subordinated Note | Senior |
| Trustee | The
Bank of New York Mellon, a New York banking corporation (as successor
trustee to JPMorgan Chase Bank, N.A.) |
| Agent | MS
& Co. and its successors |

| Calculation
Agent |
| --- |
| 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 will be rounded to
the nearest one hundred-thousandth, with five
one- |

PS-15

| | 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 subsidiary, 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 Calculation Agent must make in
determining the Initial Index Value and the Final Index
Value. See “—Discontinuance of the Index; Alteration of Method
of Calculation.” MSCG is obligated to carry out its duties and
functions as Calculation Agent in good faith and using its reasonable
judgment. |
| 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 (an “Event of Default
Acceleration”) shall be determined by the Calculation Agent and shall be
an amount in cash equal to the Payment at Maturity calculated using the
Index Value as of the date of such acceleration as the Final Index
Value. |
| | 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 with respect to the Securities as promptly as possible and in no event
later than two Business Days after the date of
acceleration. |
| Index
Publisher | Dow
Jones & Company, Inc., in conjunction with UBS Securities LLC, or any
successor publisher of the Index. |
| The
Index | Dow
Jones-UBS Commodity Index SM |
| | The
Dow Jones-UBS Commodity Index SM was formerly known as the Dow Jones-AIG Commodity Index SM . On May 6, 2009, UBS Securities LLC acquired AIG
Financial Product Corp.’s commodity business, as a result of which the Dow
Jones-AIG Commodity Index SM became re-branded, and on May 8, 2009 began being published as the Dow
Jones - UBS
Commodity Index SM . |
| | We have derived all
information contained in this pricing supplement regarding the Dow
Jones-UBS Commodity Index SM ,
including, without limitation, its make-up, method of calculation and
changes in its components, from publicly available
information. Such information reflects the policies of, and is
subject to change by, Dow Jones & Company, Inc. (“Dow Jones”) and UBS
Securities LLC. The Index is calculated, maintained |

PS-16

| and
published by Dow Jones, in conjunction with UBS Securities
LLC. |
| --- |
| The
Index reflects the returns that are potentially available through an
unleveraged investment in the futures contracts on physical commodities
constituting the Index. The value of the Index is computed on
the basis of hypothetical investments in the basket of commodities that
make up the Index. |
| The
Securities are linked to the Dow Jones-UBS Commodity Index SM and not the Dow Jones- UBS Commodity Index Total Return SM . The
Dow Jones- UBS Commodity Index Total Return is a total return index which,
in addition to reflecting the same returns of the Dow Jones- UBS Commodity
Index, reflects interest that could be earned on cash collateral invested
in hypothetical one-month U.S. Treasury bills. |
| Overview |
| The
Index was introduced in July 1998 to provide a unique, diversified and
liquid benchmark for commodities as an asset class. The Index
currently is composed of the prices of nineteen exchange-traded futures
contracts on physical commodities. An exchange-traded futures
contract is a bilateral agreement providing for the purchase and sale of a
specified type and quantity of a commodity or financial instrument during
a stated delivery month for a fixed price. The commodities
included in the Index for 2009 are: aluminum, coffee, copper, corn,
cotton, crude oil, gold, heating oil, lean hogs, live cattle, natural gas,
nickel, silver, soybeans, soybean oil, sugar, unleaded gasoline, wheat and
zinc. Futures contracts on the Index are currently listed for
trading on the Chicago Board of Trade (“CBOT”). |
| The
Index is a proprietary index that Dow Jones, in conjunction with UBS
Securities LLC, calculates, maintains and publishes. The
methodology for determining the composition and weighting of the Index and
for calculating its value is subject to modification by Dow Jones and UBS
Securities LLC at any time. |
| The
Dow Jones-UBS Commodity Index Supervisory Committee |
| Dow
Jones and UBS Securities LLC have established the Dow Jones-UBS Commodity
Index Supervisory Committee (the “Committee”) to assist them in connection
with the operation of the Index. The Committee includes
prominent members of the financial, academic and legal communities and
meets annually to consider any changes to be made to the Index for the
coming year. The Committee may also meet at such other times as
may be necessary. |
| As
described in more detail below, the Index is reweighted and rebalanced
each year in January on a price-percentage basis. The annual
weightings for the Index are determined each year in June by UBS
Securities LLC. Following the Committee’s annual meeting in
June or July, the annual weightings are publicly announced in
July. |

PS-17

| Composition of the
Index |
| --- |
| Commodities
Available For Inclusion in the Index |
| With
the exception of several metals contracts (aluminum, lead, tin, nickel and
zinc) that trade on the London Metal Exchange (“LME”), each of the
commodities with the potential for inclusion in the Index is the subject
of a futures contract that trades on a U.S. exchange. |
| The
23 potential commodities currently are aluminum, cocoa, coffee, copper,
corn, cotton, crude oil, gold, heating oil, lead, live cattle, lean hogs,
natural gas, nickel, platinum, silver, soybeans, soybean oil, sugar, tin,
unleaded gasoline, wheat and zinc. |
| The
19 commodities underlying the Index selected for 2009 are as follows:
aluminum, coffee, copper, corn, cotton, crude oil, gold, heating oil, lean
hogs, live cattle, natural gas, nickel, silver, soybeans, soybean oil,
sugar, unleaded gasoline, wheat and
zinc. |

| Designated
Contracts for Each Commodity |
| --- |
| A
futures contract known as a Designated Contract is selected for each
commodity. With the exception of several LME contracts, where
the Committee believes that there exists more than one futures contract
with sufficient liquidity to be chosen as a Designated Contract for a
commodity, the Committee selects the futures contract that is traded in
North America and denominated in dollars. If more than one such
contract exists, the Committee selects the most actively traded
contract. Data concerning this Designated Contract will be used
to calculate the Index. The termination or replacement of a
futures contract on an established exchange occurs infrequently; if a
Designated Contract were to be terminated or replaced, a comparable
futures contract would be selected, if available, to replace that
Designated Contract. |
| The
composition of the Index is recalculated by UBS Securities LLC in June of
each year, under the supervision of the Committee, taking in account the
relative liquidity and production percentages for each commodity
designated for potential inclusion in the Index. |
| Commodity
Groups |
| For
purposes of applying the diversification rules discussed above and below,
the commodities available for inclusion in the Index are assigned to
“Commodity Groups.” The Commodity Groups, and the commodities
currently included in each Commodity Group, are as
follows: |

| Commodity
Group | Commodity |
| --- | --- |
| Energy: | Crude
Oil |
| | Heating
Oil |
| | Natural
Gas |

PS-18

| Commodity
Group | Commodity |
| --- | --- |
| | Unleaded
Gasoline |
| Precious
Metals: | Gold |
| | Platinum |
| | Silver |
| Industrial
Metals: | Aluminum |
| | Copper |
| | Lead |
| | Nickel |
| | Tin |
| | Zinc |
| Livestock: | Live
Cattle |
| | Lean
Hogs |
| Grains: | Corn |
| | Soybeans |
| | Soybean
Oil |
| | Wheat |
| Softs: | Cocoa |
| | Coffee |
| | Cotton |
| | Sugar |

| Annual Reweightings
and Rebalancings of the Index |
| --- |
| The
Index is reweighted and rebalanced each year in January on a
price-percentage basis. The annual weightings for the Index are
determined each year in June by UBS Securities LLC under the supervision
of the Committee, announced in July and implemented the following
January. |
| Determination
of Relative Weightings |
| The
relative weightings of the component commodities included in the Index are
determined annually according to both liquidity and dollar-adjusted
production data in 2/3 and 1/3 shares, respectively. Each June,
for each commodity designated for potential inclusion in the Index,
liquidity is measured by the Commodity Liquidity Percentage (“CLP”) and
production by the Commodity Production Percentage (“CPP”). The
CLP for each commodity is determined by taking a five-year average of the
product of trading volume and the historic dollar value of the Designated
Contract for that commodity, and dividing the result by the sum of such
products for all commodities which were designated for potential inclusion
in the Index. The CPP is determined for each commodity by
taking a five-year average of annual world production figures, adjusted by
the historic dollar value of the Designated Contract, and dividing the
result by the sum of such production figures for all the commodities which
were designated for potential inclusion in the Index. The CLP
and the CPP are then combined (using a ratio of 2:1) to establish the
Commodity Index Percentage (“CIP”) for each commodity. This CIP
is then adjusted in accordance with certain diversification rules in order
to determine the commodities which will be included in the Index (the
“Index Commodities”) and their respective percentage
weights. |
| The
Index is designed to provide diversified exposure to commodities as an
asset class. To ensure that no single commodity or commodity
sector dominates the Index, the |

PS-19

| following
diversification rules are applied to the annual reweighting and
rebalancing of the Index as of January of the applicable
year: |
| --- |
| • No
related group of commodities designated as a “Commodity Group” e.g.,
energy, precious metals, livestock, or grains) may constitute more than
33% of the Index. |
| • No
single commodity may constitute more than 15% of the Index. |
| • No
single commodity, together with its derivatives (e.g., crude oil, together
with heating oil and unleaded gasoline), may constitute more than 25% of
the Index. |
| • No
single commodity that is in the Index may constitute less than 2% of the
Index. |
| Following
the annual reweighting and rebalancing of the Index in January, the
percentage of any single commodity or group of commodities at any time
prior to the next reweighting or rebalancing will fluctuate and may exceed
or be less than the percentages set forth
above. |

| Commodity
Index Multipliers |
| --- |
| Following
application of the diversification rules discussed above, CIPs are
incorporated into the Index by calculating the new unit weights for each
Index Commodity. Towards the beginning of each new calendar
year (the “CIM Determination Date”), the CIPs, along with the settlement
values on that date for Designated Contracts included in the Index, are
used to determine a “Commodity Index Multiplier” or “CIM” for each Index
Commodity. This CIM is used to achieve the percentage
weightings of the Index Commodities, in dollar terms, indicated by their
respective CIPs. After the CIMs are calculated, they remain
fixed throughout the year. As a result, the observed price
percentage of each Index Commodity will float throughout the year, until the CIMs
are reset the following year based on new CIPs. |
| Calculations |
| The
Index is calculated by Dow Jones, in conjunction with UBS Securities LLC,
by applying the impact of the changes to the futures prices of commodities
included in the Index (based on their relative
weightings). Once the CIMs are determined as discussed above,
the calculation of the Index is a mathematical process whereby the CIMs
for the Index Commodities are multiplied by the prices in U.S. dollars for
the applicable Designated Contracts. These products are then
summed. The percentage change in this sum is then applied to
the prior Index value to calculate the current Index
value. |

PS-20

| The
Index is a Rolling Index |
| --- |
| The
Index is composed of futures contracts on physical
commodities. Unlike equities, which typically entitle the
holder to a continuing stake in a corporation, commodity futures contracts
normally specify a certain date for the delivery of the underlying
physical commodity. In order to avoid delivering the underlying
physical commodities and to maintain exposure to the underlying physical
commodities, periodically futures contracts on physical commodities
specifying delivery on a nearby date must be sold and futures contracts on
physical commodities that have not yet reached the delivery period must be
purchased. The rollover for each contract occurs over a period
of five Index Business Days each month according to a pre-determined
schedule. This process is known as “rolling” a futures
position. The Index is, therefore, a “rolling
index”. |
| Index
Calculation Disruption Events |
| From
time to time, disruptions can occur in trading futures contracts on
various commodity exchanges. The daily calculation of the Index
will be adjusted in the event that UBS Securities LLC determines that any
of the following Index calculation disruption events
exists: |

| • | the
termination or suspension of, or material limitation or disruption in the
trading of any futures contract used in the calculation of the Index on
that day, |
| --- | --- |
| • | the
settlement value of any futures contract used in the calculation of the
Index reflects the maximum permitted price change from the previous day's
settlement value, |
| • | the
failure of an exchange to publish official settlement values for any
futures contract used in the calculation of the Index,
or |
| • | with
respect to any futures contract used in the calculation of the Index that
trades on the LME, a business day on which the LME is not open for
trading. |

Historical Information The following table sets forth the published high and low Index Values, as well as end-of-quarter Index Values, of the Index for each quarter in the period from January 1, 2004 through December 30, 2009. The related graph sets forth the daily closing values for the Index for the period from January 1, 2004 through December 30, 2009. The Index Value on December 30, 2009 was 139.4723. We obtained the information in the table below from Bloomberg Financial Markets, without independent verification. The historical values of the Index should not be taken as an indication of future performance, and no assurance can be given as to the level of the Index on the Valuation Date.

PS-21

| Dow
Jones-UBS Commodity
Index SM | High | Low | Period
End |
| --- | --- | --- | --- |
| 2004 | | | |
| First
Quarter | 151.6910 | 136.8180 | 150.8370 |
| Second
Quarter | 154.9940 | 143.2890 | 144.0340 |
| Third
Quarter | 153.1750 | 140.9910 | 153.1750 |
| Fourth
Quarter | 159.2940 | 141.2710 | 145.6040 |
| 2005 | | | |
| First
Quarter | 165.2460 | 142.1800 | 162.0940 |
| Second
Quarter | 162.3890 | 146.0780 | 152.8850 |
| Third
Quarter | 179.0690 | 154.1070 | 178.2490 |
| Fourth
Quarter | 180.2400 | 163.3580 | 171.1490 |
| 2006 | | | |
| First
Quarter | 174.2240 | 158.7800 | 165.1940 |
| Second
Quarter | 187.6280 | 164.7230 | 173.2350 |
| Third
Quarter | 179.9620 | 156.5870 | 159.9570 |
| Fourth
Quarter | 175.2140 | 156.0750 | 166.5090 |
| 2007 | | | |
| First
Quarter | 173.5030 | 155.8800 | 171.9630 |
| Second
Quarter | 176.4840 | 168.5220 | 169.6710 |
| Third
Quarter | 179.7150 | 161.0620 | 178.2500 |
| Fourth
Quarter | 185.5680 | 172.1230 | 184.9640 |
| 2008 | | | |
| First
Quarter | 219.0930 | 181.1570 | 201.5980 |
| Second
Quarter | 234.1150 | 199.5660 | 233.0340 |
| Third
Quarter | 237.9530 | 167.3910 | 167.7760 |
| Fourth
Quarter | 167.4840 | 106.0920 | 117.2440 |
| 2009 | | | |
| First
Quarter | 123.4580 | 101.9990 | 109.7820 |
| Second
Quarter | 131.1160 | 107.4940 | 122.5360 |
| Third
Quarter | 132.9180 | 113.2370 | 127.6830 |
| Fourth
Quarter (through December 30, 2009) | 140.0458 | 124.1740 | 139.4723 |

Historical Daily Closing Values of the Dow Jones-UBS Commodity Index SM

| License
Agreement among Dow Jones, | |
| --- | --- |
| UBS
AG and Morgan Stanley | “Dow
Jones ® ”,
“DJ”, “UBS”, “Dow Jones-UBS Commodity Index SM ”,
“DJ-UBS SM ”
and “DJ-UBSCI SM ”
are service marks of Dow Jones & Company, Inc. (“Dow Jones”) and UBS
AG, as the case may be, and have been licensed for use for certain
purposes by Morgan Stanley. |

PS-22

| The
license agreement among Dow Jones, UBS AG and Morgan Stanley provides that
the following language must be set forth in this pricing
supplement: |
| --- |
| The
Securities are not sponsored, endorsed, sold or promoted by Dow Jones, UBS
AG, UBS Securities LLC (“UBS Securities”) or any of their subsidiaries or
affiliates. None of Dow Jones, UBS AG, UBS Securities or any of
their subsidiaries or affiliates makes any representation or warranty,
express or implied, to the owners of or counterparts to the Securities or
any member of the public regarding the advisability of investing in
securities or commodities generally or in the Securities
particularly. The only relationship of Dow Jones, UBS AG, UBS
Securities or any of their subsidiaries or affiliates to Morgan Stanley is
the licensing of certain trademarks, trade names and service marks and of
the DJ-UBS SM ,
which is determined, composed and calculated by Dow Jones in conjunction
with UBS Securities without regard to Morgan Stanley or the
Securities. Dow Jones and UBS Securities have no obligation to
take the needs of Morgan Stanley or the owners of the Securities into
consideration in determining, composing or calculating DJ-UBS SM . None
of Dow Jones, UBS AG, UBS Securities or any of their respective
subsidiaries or affiliates is responsible for or has participated in the
determination of the timing of, prices at, or quantities of the Securities
to be issued or in the determination or calculation of the equation by
which the Securities are to be converted into
cash. None of Dow Jones, UBS AG, UBS Securities or any of their
subsidiaries or affiliates shall have any obligation or liability,
including, without limitation, to the Securities customers, in connection
with the administration, marketing or trading of the
Securities. Notwithstanding the foregoing, UBS AG, UBS
Securities and their respective subsidiaries and affiliates may
independently issue and/or sponsor financial products unrelated to the
Securities currently being issued by Morgan Stanley, but which may be
similar to and competitive with the Securities. In addition,
UBS AG, UBS Securities and their subsidiaries and affiliates actively
trade commodities, commodity indexes and commodity futures (including the
Dow Jones-UBS Commodity Index SM and Dow Jones-UBS Commodity Index Total Return SM ),
as well as swaps, options and derivatives which are linked to the
performance of such commodities, commodity indexes and commodity
futures. It is possible that this trading activity will affect
the value of the Dow Jones-UBS Commodity Index SM and the Securities. |
| This
pricing supplement relates only to the Securities and does not relate to
the exchange-traded physical commodities underlying any of the Dow
Jones-UBS Commodity Index SM components. Purchasers of the Securities should not conclude
that the inclusion of a futures contract in the Dow Jones-UBS Commodity
Index SM is any form of investment recommendation of the futures contract or the
underlying exchange-traded physical commodity by Dow Jones, UBS AG, UBS
Securities or any of their subsidiaries or affiliates. The
information in this pricing supplement regarding the Dow Jones-UBS
Commodity Index SM components has been derived solely from publicly available
documents. None of Dow Jones, UBS AG, UBS Securities or any of
their subsidiaries or affiliates has made any due diligence inquiries with
respect to the Dow Jones-UBS Commodity Index SM components in connection with the Securities. None of Dow |

PS-23

| | Jones, UBS AG, UBS
Securities or any of their subsidiaries or affiliates makes any
representation that these publicly available documents or any other
publicly available information regarding the Dow Jones-UBS Commodity
Index SM components, including without limitation a description of factors
that affect the prices of such components, are accurate or
complete. |
| --- | --- |
| | NONE
OF DOW JONES, UBS AG, UBS SECURITIES OR ANY OF THEIR SUBSIDIARIES OR
AFFILIATES GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS OF THE DOW
JONES-UBS COMMODITY INDEX SM OR ANY DATA RELATED THERETO AND NONE OF DOW JONES, UBS AG, UBS SECURITIES
OR ANY OF THEIR SUBSIDIARIES OR AFFILIATES SHALL HAVE ANY LIABILITY FOR
ANY ERRORS, OMISSIONS OR INTERRUPTIONS THEREIN. NONE OF DOW
JONES, UBS AG, UBS SECURITIES OR ANY OF THEIR SUBSIDIARIES OR AFFILIATES
MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY
MORGAN STANLEY, OWNERS OF THE SECURITIES OR ANY OTHER PERSON OR ENTITY
FROM THE USE OF THE DOW JONES-UBS COMMODITY INDEX SM OR ANY DATA RELATED THERETO. NONE OF DOW JONES, UBS AG, UBS
SECURITIES OR ANY OF THEIR SUBSIDIARIES OR AFFILIATES MAKES ANY EXPRESS OR
IMPLIED WARRANTIES AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO
THE DOW JONES-UBS COMMODITY INDEX SM OR ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT SHALL DOW JONES, UBS AG, UBS SECURITIES OR ANY OF
THEIR SUBSIDIARIES OR AFFILIATES HAVE ANY LIABILITY FOR ANY LOST PROFITS
OR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES OR LOSSES, EVEN IF
NOTIFIED OF THE POSSIBILITY THEREOF. THERE ARE NO THIRD PARTY
BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS AMONG DOW JONES, UBS
SECURITIES AND MORGAN STANLEY, OTHER THAN UBS AG. |
| 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 |

PS-24

| | 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 swaps and futures contracts on the commodity contracts
underlying the Index. Such purchase activity could have increased the
value of the Index and, accordingly, could have increased the Initial
Index Value, and, therefore, the value at which the Index must close
before you would receive at maturity an amount in U.S. dollars worth as
much as or more than 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 swaps and futures contracts on the commodities
underlying the Index or positions in any other available securities or
instruments that we may wish to use in connection with such hedging
activities. We cannot give any assurance that our hedging
activities will not affect the value of the Index and, therefore,
adversely affect the value of the Securities or the payment you will
receive at maturity. |
| 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 principal amount of
the 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. 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 $21.00 for each Security they sell. 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. |

PS-25

| We
expect to deliver the Securities against payment therefor in New York, New
York on January 5, 2010, which will be the third scheduled Business Day
following the pricing of the Securities. Under Rule 15c6-1 of
the Exchange Act, trades in the secondary market generally are required to
settle in three Business Days, unless the parties to any such trade
expressly agree otherwise. Accordingly, purchasers who wish to
trade the Securities on the date of pricing or on or prior to the third
Business Day prior to the Original Issue Date will be required to specify
alternative settlement arrangements to prevent a failed
settlement. |
| --- |
| 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
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 or the futures
contracts underlying the Index 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 the 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 |

PS-26

| 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 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. |

PS-27

| 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 the
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. |
| 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 |

PS-28

| 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 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,
unless otherwise specified in the applicable prospectus supplement, 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. Unless otherwise specified in the applicable prospectus
supplement, 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 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 nonexempt prohibited |

PS-29

| | 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 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
s hould 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 fo llowing 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; |

PS-30

| · | 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. |
| --- |
| 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 affec t 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 consequence s 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 contract that is an “ open transaction” for U.S. federal income tax
purposes. |
| Due to the absen ce of statutory, judicial or
administrative authorities that directly address the treatment of the
Securities or instruments that are similar to the Securities for U.S.
federal income tax purposes, no assurance can be given that the Internal
Revenue Servi c e (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
alternativ e treatments of the Securities) and
with respect to any tax consequences arising under the laws of any state,
local or foreign taxing jurisdiction. Unless otherwise stated,
the following discussion is based on the treatment of each Security as an
open tra n saction. |

PS-31

| 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 beneficial 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 of the United States . |
| --- |
| Tax Treatment of the
Securities |
| Assuming the characte rization of the Securities as set
forth above is respected, the following U.S. federal income tax consequences
should result. |
| Tax Treatment
Prior to Maturity. A U.S. Holder should
not be required to recognize taxable income over the term of the
Securiti es 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 directly 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 consequences
of owning a Security under Treasury regulations governing contingent
payment debt instruments (the “ Contingent Debt
Regulations” ). |

PS-32

| If the IRS were successful in
asserting that the Contingent Debt Regulations apply to the Securities,
the timing and character 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. Furthermore, any gain realized by a
U.S. Holder at maturity or upon a sale, exchange or othe r 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. The risk that a b uffered security will be
recharacterized, for U.S. federal income tax purposes, as a
debt instrument rather than as an open transaction, is higher than with
other non-principal protected commodity-linked securities . |
| --- |
| Even if the Contingent Debt
Regulation s do not
apply to the Securities, other alternative federal income tax
characterizations of the Securities are also possible, which if applied could 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, such as the Securities. The
notice focuses in particular on whether to require holders of these
instruments to accrue income over the term of their
investment. It also asks for comments on a number of related
topics, including the character of income or loss with respect to these
instruments; whether short-term instruments should be subject to any such
accrual regime; the relevance of factors such as the exchange-traded
status of the instruments and the nature of the underlying property to
which the instruments are linked; and 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. While
the notice requests comments on appropriate transition rules and effective
dates, 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 withholdin g may apply in respect of the
amounts paid to a U.S. Holder, 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, provided 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 |

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| a sale, exch ange
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
beneficial 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. |

| 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 Non-U.S. Holder of the
Securities will not be subject to U.S. federal income or
withholdi ng 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 stock entitled to
vote; |
| --- | --- |
| · | the Non-U.S. Holder is not a
controlled foreign corporation related, directly or indirect ly, 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 |
| · | the certification requirement
described below has been fulfilled with respect to the beneficial
owner. |

PS-34

| Certification
R equirement. 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-8B EN, on which the
beneficial owner certifies under penalties of perjury that it is not a U.S. person. |
| --- |
| 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, such as the Securities. It is possible that any Treasury
regulations or other guidance p romulgated 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 ma d e with respect to the Securities
to Non-U.S. Holders (subject to compliance by such holders with
certification necessary to establish an exemption from backup
withholding). However, in the event of a change of law or any
formal or informal guidance by th e 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 shoul d consult your tax adviser
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 ce r tain interests or powers), should
note that, absent an applicable treaty benefit, the Securities are likely
to 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 t h e type described above, should
consult their tax advisers regarding the U.S. federal estate tax consequences
of an investment in the Securities. |
| Backup Withho lding and Information
Reporting |
| Information returns may be filed
with the IRS in connection wi th the payment on the Securities
at maturity as well as in connection with the proceeds from a sale,
exchange 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. federal 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. |

PS-35

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-36