URGENT!

16 Mar 2009

The Undersigned
Investors of Pinnacle Performance Limited
Pinnacle Notes 9 & 10
(Collectively known as “Noteholders”)

To:
Mr. Heng Swee Keat
Managing Director
Monetary Authority of Singapore
10 Shenton Way MAS Building
Singapore 079117

Cc:
Mr. Goh Chok Tong
Chairman, MAS
Senior Minister

Cc:
Mr. Tharman Shanmugaratnam
Minister of Finance
100 High Street
#06-03 The Treasury
Singapore 179434

Dear Sirs,

Re : Notice (“Notice”) of Mandatory Redemption Event for Pinnacle Performance Limited – Pinnacle
Notes 9 & 10 (“Note” or Collectively “Notes”)

We are Noteholders of the Notes. We have been issued with the above mentioned Notices dated 14th Nov 2008 and
latest 13th February 2009. We are disturbed by the Notice which has not provided any explanation nor transparency as
to the working of the Notes leading to this Notice but more importantly we are of the view that there are issues which
raise questions on the representation of information made by Morgan Stanley in publicly available documentation,
marketing collateral and training material given to distributors.

Please note that this is NOT a complaint letter on the selling of the Notes and as such we are not able to follow the 3-
step process announced at MAS web-site. This letter is to request MAS, the authority / regulator, to start an
investigation on the offer of the Notes by the Notes Issuers based on the findings given below in this letter. Please
also note that these findings are regardless of where (i.e. financial institution, broking house, etc) the Noteholders has
purchased the Notes.
Findings

1. We refer to page (iii) and (iv) of the Supplementary Pricing Statement Dated 7 November 2007 which contains
the term-sheet of the Notes. This term-sheet was the content of the public advertisements in the mass media at
the point of issue of the Notes. This term-sheet to a layman on a reasonable basis would seem to indicate that
investments into the Notes would have had an allocation to Credit-Linked securities in the Reference Entities
(Australia, Singapore, Hong Kong, SingTel, and Temasek). We have now been informed by Morgan Stanley that
there never was ANY allocation of the Notes holder’s capital into the Note. In fact, Morgan Stanley has now
confirmed that it utilized its own capital to enter into a Credit Default Swap (“CDS”) with another third party
where the Issuer was betting against any of the Primary Entities would experience a Credit Event. If there was no
Credit Event AND if the Issuer announces a Mandatory Credit Event (“MCE”), then the cost of CDS is charged
and claimed against the assets of the Note. This effectively means that there is an incentive for the Issuer to
announce a MCE and charge the cost of the CDS which the Issuer being the swap counterparty could recover its
cost!
This information of the Issuer benefiting from any Credit Event of the Primary Entity had NEVER been disclosed
to the Notes holders. More importantly, this does not seem an accurate representation as the Primary Reference
Entities which were boldly highlighted in the term-sheet and advertisements had in fact no economic effect on the
Notes since the CDS was not even done by capital contributed into the Notes. It would appear it was done
primarily to give the impression to the public as to the Notes being associated with these Primary Entities
(Australia, Singapore, Hong Kong, SingTel, and Temasek). Could you kindly investigate as to why the Notes had
been represented to the public in this way?

2. This gross representation is aggravated from the fact that should a Mandatory Credit Event occur, Morgan
Stanley would be able to claim the swap costs of the CDS against the redemption proceeds of the Notes
notwithstanding that the capital in the Notes never participated into the CDS in the first place. Could you kindly
investigate into whether there is an incentive for Morgan Stanley to force a Mandatory Redemption Event to
claim the cost of the CDS which it is incurring as a Credit Event has NOT occurred on the Primary Entity?

3. Morgan Stanley has now confirmed that 100% of the initial capital into the Notes has now gone into a single
Synthetic Collateralized Debt Obligation (“SCDO”). Morgan Stanley is also now claiming that while this SCDO
had an underlying pool of 100 credits, the equity value of the SCDO was only 5% of the 100% capital committed.
Could you kindly investigate on such possibility? Even if it was possible, how could Morgan Stanley agree to
invest the capital in this manner which is not in the interest of Noteholders?

4. Even if for some reason, Morgan Stanley did invest 100% of the capital into a SCDO with 5% equity value, then
the following credit events and recovery rates for the following credits still do NOT add up to 5% as shown:-

S/No. Credit Name Recovery Rate (%)

1. Federal Home Loan Mortgage Corporation 0.91%
2. Federal National Mortgage Association 0.91%
3. Lehman Brothers Holdings Inc 0.8%
4. Kaupthing banki hf 0.4%
5. Landsbanki Islands hf 0.1%
Total 3.12%
This would mean that the Underlying Assets would have an equity value in the SCDO of 3.12% or about 62% of the
equity value of the SCDO at the onset. As such, could you kindly investigate into the reason Morgan Stanley is now
hurrying to declare a Mandatory Redemption Event?

5. Is Morgan Stanley now using the provision in the Prospectus “at its sole discretion” to declare a MCE so as to
benefit by claiming the cost of the CDS from the proceeds of redemption at the expense of Noteholders?

6. As the arranger of the issue, why did Morgan Stanley not contemplate surrendering the CDS so as to protect the
redemption value of the Underlying Assets for Notes holders?

7. In the Pricing Statement, the Reference Entities of the Notes are given to be Australia, Singapore, Hong Kong,
SingTel, and Temasek. This information is made known as part of sales and marketing materials. However,
another list of 100 "Reference Entities" is only known to Noteholders when we were told there will be a
Mandatory Redemption Event. These 100 "Reference Entities" where never made known to Noteholders in any
sales and marketing materials. In that case, please help to investigate the reason for the 5 Reference Entities
being represented in the product sales and marketing materials to the public in this way?

8. Representation of Credit Default Swap (“CDS”) on Reference Entities (“RE”)

It has come to our attention that the representation of the CDS the Note has been inconsistently disclosed in
the Base Prospectus dated 7th August 2006 (“BP”) and the Pricing Statement (“PS”). The description of the
CDS associated with the RE as it is detailed in the BP) as follows:

(a) “An investment in the First-to-Default Notes will expose the investors to the credit risk of the Issuer
as well as credit risk of the Reference Entities”. (Page A-1, paragraph 3, line 3)

(b) “If a Credit Event occurs (as further described below) during the term of the Notes and the Issuer
gives notice to the Noteholders of the occurrence of such Credit Event, the Notes will be redeemed on the
Credit Event Redemption Date at the Credit Event Redemption Amount as adjusted ( as more fully described
in the paragraph below headed “Procedure for redemption of the Notes following a Credit Event”), being an
amount which may be substantially less than the principal amount of the Notes. (Page A-2, paragraph 3, line
1)

Both these disclosures clearly indicate that the nature of the CDS is to protect the Noteholders from the
benefit of the interest and principal repayment due to them in the event that the RE do NOT default in the
language of the BP, face a Credit Event. This had been further emphasized by the Arranger of the Note that in
Marketing Collateral where the names of these REs are used as the primary value proposition to induce
potential investors into the Notes.

However this view of the role of the CDS and the RE seems to have been reversed in the PS as follows:

(c) “Pursuant to the terms of the Credit Default Swap Transaction the Issuer has agreed to sell credit
protection to the Swap Counterparty in relation to the Reference Entities in a currency amount equal to the
US dollar investment of the Principal Amount of the Notes against payment of a premium amount (the
“Credit Default Swap Premium”) and the Issuer has agreed that the giving of the notice of the occurrence of a
Credit Event, it will pay to the Swap Counterparty an amount equal to the Liquidation Proceeds and the
Swap Counterparty will pay an amount equal to the Credit Event Redemption Amount”. (Page 8, paragraph
(e) (i), line 19)
 Hence it is very clear that 2(c) above completely contradicts 2(a) and 2(b) as one refers to a “call” CDS on
the RE while the other refers to a “short” CDS on the RE. What was even more disturbing was that the use of
the names of the RE in the marketing material, advertisement and training material to Distributors clearly
misrepresented the interpretation of the CDS as disclosed in the BP as indicated in 2(a) and 2(b). This
effectively meant that Noteholders were buying an investment that would enjoy the benefit of the CDS on the
RE when the RE defaulted and if the RE did NOT default, then the cost of the CDS can be claimed against
the Underlying Assets of the Notes. This is currently being for the Notes as they are being liquidated.

9. Wrongful Emphasis of RE in Marketing Collateral and Advertisements

If the above finding in paragraph 2 were true, then it would imply that the emphasis of the RE in marketing
material and advertisement is grossly misrepresented. The reasonable man view of the representation of the
RE in marketing material, advertisement and BP is that the prospective investor is buying into an investment
linked to the credit worthiness of the RE when in fact the REVERSE is true.

10. No Economic Value for the RE and CDS

In the BP on page A-1, paragraph 4, line 1 it is disclosed that:

“The entire proceeds of the issuance of a Series of First-to-Default Notes will be invested in an equal
aggregate principal amount (after conversion into the Base Currency, where applicable) of Original
Underlying Assets which are assets which satisfy the criteria set out in the section headed “Information on
the Underlying Assets” in Part 1 of the Base Prospectus and the Applicable Pricing Statement”.

This would mean that the CDS on the RE would have no economic value to the Notes. It would thus raise the
high probability that the CDS on the RE was included structured with the SOLE intention of deliberately
including the names of these RE in the advertisement, marketing material, PS and training material used to
train Distributors of the Notes and thus could possibly mislead prospective investors.

11. Implied Leverage

The raised issues in point 8, 9 and10 above show clearly that there is an implied leverage that was structured
into the Notes which were deliberately never disclosed nor alerted to prospective investors. The general view
among most financial market jurisdictions was that there where there is any form of leveraging on the assets
of prospective investments, this would automatically disqualify the product from mass retail market
distribution as they are considered higher in risk. Yet this pertinent information was never disclosed or
alerted to prospective investors.

We would like to ask MAS to urgently investigate these issues which we have raised as they indicated a high
probability of fraudulent behavior on the part of Morgan Stanley who is the Arranger and the Issuer of the
Notes. Please investigate and advise us of the findings and our recourse against the Arranger and / or Issuers
(NOT the Distributors).

Note: This letter was sent without prejudice to any parties.

Thank you.

Yours faithfully,

Noteholders