Morgan Stanley MSCI Style Select Europe Protected Shares Morgan Stanley MSCI Style Select Europe Protected Shares

Overview

The Morgan Stanley MSCI StyleSelect Protected Shares will be shares in a closed-ended investment company that provide exposure in GBP to the European equity markets via the independently maintained StyleSelect IndexSM on MSCI Europe (Bloomberg: MSQISSEU Index) with the security of 100% capital protection at maturity. The shares are linked to the independently maintained StyleSelect IndexSM on MSCI Europe (Bloomberg: MSQISSEU Index), an index designed by Morgan Stanley’s Quantitative and Derivative Strategies group. An active strategy in a passive shell, the aim of this index is to provide investors access to a disciplined and transparent quantitative stock-selection process designed to provide exposure to, and outperformance over, the MSCI Europe Index. These shares provide fully protected access to equities drawn from the MSCI Europe Index (Bloomberg: MXEU Index) using a quantitative methodology with no currency risk for sterling based investors.

Key Terms

Availability Period: Available until 14th March 2007 Investment Term: 5 years Underlying Index: StyleSelect IndexSM on MSCI Europe (Bloomberg: MSQISSEU Index) MSCI: Morgan Stanley Capital International Inc. Currency: GBP Return at Maturity: Investors will receive 100% of their initial investment plus160% of growth of the StyleSelect IndexSM on MSCI Europe from the Initial Index Level to the Final Index Level Initial Index Level: The official closing level of the StyleSelect IndexSM on MSCI Europe on the 16th March 2007 Final Index Level: The arithmetic mean of the official closing levels of the StyleSelect IndexSM on MSCI Europe on the 16th March 2011, and on each month to 16th March 2012 inclusive (13 observations)

Further Information

Marc Chamberlain +44 (0) 207 425 5112 [email protected] Nicholas Coghill +44 (0) 207 425 6349 [email protected] Matthew Robinson +44 (0) 207 425 6343 [email protected] David Stimpson +44 (0) 207 425 6343 [email protected]

This communication is directed to those persons who are classified as Market Counterparties or intermediate Customers As defined by the Financial Services Authority Morgan Stanley MSCI Style Select Europe Protected Shares

The Opportunity

Quantitative investing, using deterministic models in order to make trading decisions, is growing twice as fast as the rest of the industry. The StyleSelect IndexSM on MSCI Europe currently comprises 80 names from the MSCI Europe Index, drawn from a quantitative methodology developed by Morgan Stanley’s Quantitative and Derivative Strategies group. MSCI calculates this custom index and rebalances it quarterly.

General Information

Liquidity: Liquid secondary market prices will be updated daily on Reuters page MSVAL87, Bloomberg page MSVA, and web page www.ms.com/amps Listing: Application will be made to list the shares on the Channel Islands Stock Exchange Issue Price: 100 pence Minimum Investment Amount: GBP 25,000 Investment: Preference Shares, issued by a Guernsey incorporated investment company Taxation: Gains on redemption of preference shares should be treated as capital gains for tax purposes for certain investors

Key Benefits Key Risks

● 100% principal protection at maturity, subject ● The investment should be viewed as a medium term to stated risks investment. Returns only apply if the investment is held until maturity ● At maturity, returns 160% of the growth of the StyleSelect IndexSM on MSCI Europe ● If investors seek to realise their investment before between the Initial Index Level and the Final maturity, they may receive less than their initial Index Level investment ● No currency risk, investors receive 1.6 times ● Exposure to the StyleSelect IndexSM on MSCI Europe , the absolute positive return of the this may increase or decrease in value. Consequently the StyleSelect IndexSM on MSCI Europe in GBP price of the investment can increase or decrease during where the Index has increased over the the life of the investment. period. ● The investment company will use the net proceeds to ● Secondary market liquidity invest in assets issued by, and in contracts entered into with, Morgan Stanley & Co. International Limited and/or ● No upfront or annual management fee other financial institutions rated A+ or better by Standard and Poor’s at time of purchase. Investors will have credit risk to these financial institutions ● The levels and basis of taxation and relief from taxation can change at any time

The StyleSelect IndexSM on MSCI Europe

The StyleSelect IndexSM on MSCI Europe is built around the core principle that value and growth characteristics in stocks are negatively correlated. By assessing stocks from the MSCI Europe Index (MXEU Index) that have characteristics of both value and growth, the StyleSelect IndexSM dynamically ranks and selects individual stocks that belong to an ‘optimal’ style zone. As the Index selects stocks from both Value and Growth, the investor takes advantage of each style of investing with the confidence that the Index’s methodology and calculation are applied by an independent agent: MSCI. The Index is fully UCITS III compliant, matches the sector exposure of the MSCI Europe and employs turnover and diversification constraints, all making the StyleSelect IndexSM on MSCI Europe an innovative, transparent and efficient trading strategy in a passive shell.

Historical Performance Statistics

Annual Price Return

StyleSelect IndexSM on MSCI Europe EuroStoxx 50 MSCI Europe

1 Year 22.19% 16.44% 16.18%

2 Year 22.87% 18.54% 17.89%

3 Year 19.90% 14.75% 12.91%

Annual Volatility

StyleSelect IndexSM on MSCI Europe EuroStoxx 50 MSCI Europe

1 Year 13.51% 12.16% 13.75%

2 Year 11.86% 10.73% 12.11%

3 Year 11.29% 10.49% 12.31%

Annual Information Ratio (Annual Price Return/Annual Volatility)

StyleSelect IndexSM on MSCI Europe EuroStoxx 50 MSCI Europe

1 Year 1.64 1.35 1.18

2 Year 1.93 1.73 1.48

3 Year 1.76 1.41 1.05

Source: Morgan Stanley & Bloomberg. Arithmetic average returns on weekly data to end January 2007. Past performance is not indicative of future performance.

Key Dates

Offer Start Date 12th March 2007 Offer Close Date 14th March 2007 Issue Date: 30th March 2007 Settlement Date: 16th March 2007 Maturity Date: 18th March 2012

Comparative Index Performance

The historical performances of the underlying StyleSelect IndexSM on MSCI Europe (MSQISSEU Index) and the MSCI Europe Index (MXEU Index) are shown over the period 9th August 1996 until the 24th January 2007. January 2000 The StyleSelect IndexSM on MSCI Europe had appreciated in value by 141%, the MSCI Europe by 131% and the Dow Jones EuroStoxx 50 by 188% January 2007 The StyleSelect IndexSM on MSCI Europe had appreciated in value by 424% , the MSCI Europe by 137% and the Dow Jones EuroStoxx 50 by 158% Past performance is not indicative of future performance. Both indices are presented net of dividends and are based on price return.

600% Sty le Select Index on MSCI Europe (MSQISSEU Index ) 500% MSCI Europe (MXEU Index ) Dow Jones EuroStox x 50 (SX5E Index ) 400%

300%

200% Normalised Index Level

100%

0% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Date

Source: Morgan Stanley & Bloomberg

This communication is directed to those persons who are classified as Market Counterparties or intermediate Customers As defined by the Financial Services Authority IMPORTANT INFORMATION:

This information has been prepared solely for information purposes and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular trading strategy. This information is confidential and is being delivered to a limited number of sophisticated prospective investors in order to assist them in determining whether they have an interest in the type of securities described herein and is solely for internal use. This information is based on or derived from information generally available to the public from sources believed to be reliable. No representation or warranty can be given with respect to the accuracy or completeness of the information, or with respect to the terms of any future offer of transactions conforming to the terms hereof. We do not undertake to update this information. Certain assumptions may have been made in the analysis that resulted in any information and returns/results detailed herein. No representation is made that any results/returns indicated would be achieved or that all assumptions in achieving these returns have been considered or stated. Changes to the assumptions may have a material impact on any results/returns detailed. Morgan Stanley Morgan& Co. International Stanley Limited MSCI and its affiliatesStyle disclaimSelect any Europe and all liability Protected relating to thisShares information, including without limitation any express or implied representations or warranties for statements contained in, and omissions from, this information. Additional information is available on request. Morgan Stanley & Co. International Limited and others associated with it may deal as principal in or own or act as market maker for securities and instruments mentioned herein or of issuers mentioned herein and may also advise or seek to advise issuers of such securities and instruments. Where you provide us with information relating to a customer order or proposed transaction, we may use that information to facilitate the execution of your order or transaction, in managing our market making, other client facilitation activities or otherwise in carrying out our legitimate business (which may include, but is not limited to, hedging a risk or otherwise limiting the risks to which we are exposed). Where we commit our capital in relation to either ongoing management of inventories used to facilitate clients, or in relation to providing you with quotes we may make use of that information to enter into transactions that subsequently enable us to facilitate clients on terms that are competitive in the prevailing market conditions. Past performance is not necessarily indicative of future results. Price and availability are subject to change without notice. Morgan Stanley does not give investment, tax, accounting and legal or regulatory advice and prospective investors should consult with their professional advisors. Unless indicated, these views are the author's and may differ from those of Morgan Stanley research analysts or others in the Firm. This communication is not a product of Morgan Stanley’s Research Department and should not be regarded as a research report. This document is communicated by Morgan Stanley & Co. International Limited, authorised and regulated by the Financial Services Authority and is directed in the UK to those persons who are market counterparties or intermediate customers (as defined by the Financial Service Authority’s rules).

Index Licence Information The MSCI indexes are the exclusive property of Morgan Stanley Capital International Inc. ("MSCI"). MSCI and the MSCI index names are service mark(s) of MSCI or its affiliates and have been licensed for use for certain purposes by Morgan Stanley and Co. International Ltd (MSIL). The financial securities referred to herein are not sponsored, endorsed, or promoted by MSCI, and MSCI bears no liability with respect to any such financial securities. The Prospectus contains a more detailed description of the limited relationship MSCI has with MSIL and any related financial securities. No purchaser, seller or holder of this product, or any other person or entity, should use or refer to any MSCI trade name, trademark or service mark to sponsor, endorse, market or promote this product without first contacting MSCI to determine whether MSCI's permission is required. Under no circumstances may any person or entity claim any affiliation with MSCI without the prior written permission of MSCI.

This communication is directed to those persons who are classified as Market Counterparties or intermediate Customers As defined by the Financial Services Authority