Index Detail Page

Prior to making an investment decision in respect of any Financial Product, prospective investors should consider carefully all of the information set out in this Description, including in this Section 2 (Risk Factors and Investment Considerations). This Section 2 (Risk Factors and Investment Considerations) is intended to describe various risk factors which the Strategy Sponsor believes represent the principal risks associated with any securities issues, derivative transactions or other financial product the return of which is linked to, or otherwise determined by reference to, the Strategy (each such issue, transaction or product, a “Financial Product”). Each investor in relation to a Financial Product is referred to as a “Financial Product Investor”. There may be other risks and considerations not set out below that prospective investors should consider that are relevant either to their particular circumstances or more generally, whether arising from market factors or otherwise. In particular, other risks may exist in relation to the Financial Product itself. Each prospective investor should make their own investigations and form their own views as to the appropriateness or otherwise of the Strategy taking into account their own circumstances.

Index Specific Risk Considerations

The Strategy is actively managed – The Strategy Components and the Target Weights assigned to such Strategy Components are subject to a rebalancing by the Strategy Allocator, subject to the rebalancing conditions set out in this Description. There is no guarantee or assurance that any such rebalancing will enhance the performance of the Strategy. For so long as the Strategy Allocator elects not to make any changes to the composition of the Strategy, or no proposed changes to composition of the Strategy are made that meet the rebalancing conditions, then the Strategy Components and the Target Weights assigned to such Strategy Components will remain unchanged.

There is no guarantee that a rebalancing will increase the value of the Strategy. None of the Strategy Sponsor or the Strategy Calculation Agent have the right to, and nor will they, assess whether or not any proposed rebalancing is in the best interests of investors in Financial Products.

In addition, the rebalancing conditions may prevent the Strategy Allocator from rebalancing the Strategy as rapidly, frequently or to the degree it considers appropriate in view of market, political, financial or other factors. As a result, investors in Financial Products may be exposed to more or less risk than investors engaging in the Strategy Components themselves or investing in managed products with fewer restrictions.

None of the Strategy Sponsor, the Strategy Calculation Agent or the Strategy Allocator or any of their respective affiliates make any representation express or implied that the Strategy will achieve a positive performance, or a higher performance than any other index or strategy, whether managed or not managed.

The Strategy Allocator – The Strategy Allocator is a third party not affiliated with the Strategy Sponsor or any of its Affiliates and is not an agent of the Strategy Sponsor. The Strategy Allocator acts as an independent contractor and has not been appointed by the Strategy Sponsor or the Strategy Calculation Agent as a sub-advisor in respect of the Strategy or any Financial Product nor as an agent of the Strategy Sponsor or the Strategy Calculation Agent.

The Strategy Allocator is solely responsible for ensuring that the Strategy continues to reflect the economic and thematic reality it is intended to capture. In doing so, the Strategy Allocator may use both proprietary and non-proprietary research and data.

The Strategy Allocator has the right, but not the obligation, to propose changes to the Strategy Components and the Target Weights assigned to such Strategy Components. If the Strategy Allocator elects not to submit a proposed rebalancing, the value of the Strategy may be adversely affected. In addition, if a proposed rebalancing is rejected by the Strategy Sponsor, no such rebalancing of the Strategy shall take place which may also have an adverse effect on the value of the Strategy.

Therefore, the value of the Strategy will depend not only on the methodology contained in this Description but also on the determinations made by the Strategy Allocator in respect of each proposed rebalancing. There is no guarantee that the Strategy Allocator will act rationally and in accordance with current market trends in determining the adjustable parameter values. Therefore, the ability of the Strategy to achieve its objective may be substantially affected by the abilities of, and determinations made by, the Strategy Allocator.

The Strategy Allocator''s ability to determine the proposed Strategy Components and the Target Weights of such proposed Strategy Components in respect of a proposed rebalancing of the Strategy may depend, to a great extent, upon the expertise of key individuals associated with the day-to-day operations of the Strategy Allocator. Any withdrawal of any of these individuals could have an adverse effect on the Strategy and, consequently, any Financial Product.

Strategy Components assigned a weight or quantity of zero will not contribute to the value of a Strategy - Some Strategy Components may be assigned a weight of zero in respect of a rebalancing day and, in such case, the Strategy shall not have any exposure to such Strategy Component until the next rebalancing day (if any) on which such Strategy Components are assigned a non-zero weight or quantity. As a result, any changes in the performance of such Strategy Components will not affect the value of the Strategy for the relevant period following such rebalancing day.

The Strategy Sponsor may reject a proposed rebalancing – If a proposed rebalancing does not satisfy the rebalancing conditions, then the Strategy Sponsor may reject the proposed rebalancing in its entirety and no rebalancing will occur in respect of the Strategy.

Furthermore, the Strategy Sponsor is under no obligation to effect all or any part of any proposed rebalancing and may reject the proposal in its entirety in its sole discretion and for any reason (which, for the avoidance of doubt and without limitation, could include where a proposed rebalancing would otherwise satisfy the relevant rebalancing conditions) and no rebalancing of the Strategy will occur.

In either case, any such rejection may have an adverse impact on the performance of the Strategy, perhaps materially so, and the determination of the Strategy Sponsor shall be conclusive and binding in all circumstances. In particular, the Strategy Sponsor will not take into account the interests of any investors in Financial Products when making such determination, and none of the Strategy Sponsor, Strategy Calculation Agent or any of their affiliates shall have any liability for or in connection with the performance of the Strategy (or any Financial Product) as a result thereof. Notwithstanding that the Strategy Sponsor may be entitled to reject any such proposed rebalancing, the Strategy Sponsor shall be entitled to rely upon and assume, and shall not in any circumstances be obliged to verify, that the rebalancing conditions in respect of a proposed rebalancing have been satisfied.

No rebalancing once implemented can be set aside on the basis that, as a factual matter, the rebalancing conditions were not satisfied. The determination of the Strategy Sponsor will be conclusive and binding in all circumstances without liability to the Strategy Sponsor or any of its affiliates.

The day on which any proposed rebalancing is implemented may be postponed or may not be the one proposed by the Strategy Allocator - The Strategy Sponsor or any other relevant person shall not be liable (whether in contract, tort or otherwise) to any person for the failure of the Strategy Sponsor to acknowledge receipt of a notification from the Strategy Allocator outlining a proposed rebalancing. As a result of such failure or any other events as specified in this Description (including but not limited to any potential disruptions with respect to implementing the rebalancing), the proposed rebalancing may not take effect on the day proposed by the Strategy Allocator, which may have an adverse impact on the performance of the Strategy and any Financial Product.

Each proposed rebalancing is irrevocable - Each proposed rebalancing is irrevocable and may not be subsequently changed or cancelled by the Strategy Allocator following notification thereof. The inability of the Strategy Allocator to revoke or amend any proposed rebalancing may have an adverse impact upon the performance of the Strategy (which may be material).

No liability for Target Weights or Strategy Components – The determination of the Strategy Components or the Target Weights in respect of such Strategy Components is the responsibility of the Strategy Allocator and neither the Strategy Sponsor nor the Strategy Calculation Agent exercise any discretion or monitoring with respect thereof. No liability whatsoever shall attach to the Strategy Sponsor or Strategy Calculation Agent as a result of the composition or any rebalancing of the Strategy. Neither the Strategy Sponsor nor the Strategy Calculation Agent shall have any responsibility or obligation to monitor whether or not the Strategy Allocator is complying with any restrictions, parameters or guidelines applicable to it or is following this Description.

Termination of Strategy Allocation Agreement – If the Strategy Allocation Agreement is terminated in accordance with the terms of such appointment, Financial Product Investors should note that the Strategy Sponsor may decide to cancel the Strategy and cease to calculate the Strategy and, if so, a Financial Product will no longer be linked to the Strategy and/or may be terminated as a result. Until the Strategy Sponsor cancels the Strategy (if it indeed does), the Strategy will continue but will cease to follow a managed strategy and, in such circumstances, the inability of the Strategy Allocator to submit further rebalancing instructions, and the static exposure to the Strategy Components without the possibility to reduce the exposure to poor performing Strategy Components (or increase exposure to strongly performing Strategy Components), is likely to significantly impact the performance of the Strategy, the Strategy will no longer be rebalanced and, if so specified in a Financial Product, such Financial Product will no longer be linked to the Strategy and/or may be terminated as a result.

At any given time, the issuer of a share, exchange traded fund or fund interest which is also a Strategy Component may be placed on the “restricted trading list” of a member of the Morgan Stanley Group, and that may adversely affect the Strategy’s performance - As part of its activities as a full-service global financial institution, a member of the Morgan Stanley Group may from time to time place companies on its internal “restricted trading list” (the “RTL”). Where an issuer of a share, exchange traded fund or fund interest is placed on the RTL of a member of the Morgan Stanley Group, the relevant share, exchange traded fund or fund (as applicable) may be removed as a Strategy Component or substituted for another component by the Strategy Sponsor upon such company being placed on the RTL. The removal or substitution of the relevant share, exchange traded fund or fund as a Strategy Component in such circumstances may adversely affect the performance of the Strategy.

Costs – The calculation of the Strategy Level includes a deduction for certain costs. Such costs are calculated in accordance with the methodology specified in this Description. Any such deduction(s) shall mean that the Strategy Level is less than would be the case if no costs were deducted.

The Strategy may provide short exposure to one or more of the Strategy Components – The Strategy may specify that the Target Weight of a Strategy Component may be less than zero, i.e. a short position in such Strategy Component. A short position in a Strategy Component means that the Strategy will have negative exposure to such Strategy Component and the Strategy Level will be negatively affected if the value of such Strategy Component should increase and positively affected if the value of such Strategy Component should decrease. Therefore, Financial Product Investors should be aware that an investment linked to the Strategy may decline in value in a period, even if the value of such Strategy Component increases during that timeframe. Further, given that short positions may create exposure to uncapped losses, increases in the value of such Strategy Component could result in a decrease in the Strategy Level that is greater than the Target Weight in respect of such Strategy Component and may result in the Strategy Level falling to zero.

FX – The calculation of the Strategy Level is made by reference to certain foreign currency exchange rates. Foreign currency exchange rates are highly volatile and determined by and influenced by a number of factors, including supply and demand for currencies in the international foreign exchange markets, economic factors including inflation rates in the countries concerned, interest rate differences between the respective countries, economic forecasts, international political factors, changes in balances of payments and trade, domestic and international rates of inflation, international trade restrictions, currency devaluations, currency convertibility, safety of making financial investments in the currency concerned, speculation and measures taken by governments and central banks. Any such circumstance (or a combination of them) may cause unexpected volatility or illiquidity in the foreign currency markets. This may have an adverse effect on the Strategy Levels which may in turn have an adverse effect on the performance of any Financial Product.

Emerging Markets – Any Financial Product referencing a strategy linked, directly or indirectly, to emerging markets jurisdictions will be exposed to the risks of volatility, governmental intervention and the lack of a developed system of law which are associated with such jurisdictions. A strategy linked indirectly to emerging markets, via securities, indices, commodities or currencies, may be exposed to the risks of economic, social, political, financial and military conditions in such jurisdictions, including, in particular, political uncertainty and financial instability; the increased likelihood of restrictions on export or currency conversion; the greater potential for an inflationary environment; the possibility of nationalisation or confiscation of assets; the greater likelihood of regulation by national, provincial and local governments, including the imposition of currency exchange laws and taxes; less liquidity in emerging market currency markets as compared to liquidity in developed markets and less favourable growth prospects, capital reinvestment and self-sufficiency.

The Strategy is adjusted by deductions included in the Strategy Level - Notional embedded costs are included within the Strategy and will reduce the Strategy Level. Any such amounts will be deducted from the performance of the Strategy with the intention of reflecting synthetically strategy servicing costs (which are applicable to the Strategy rather than the Strategy Components and are applicable on an ongoing basis).

Factors affecting the performance of an Underlying Index may adversely affect the Strategy Level – An Underlying Index may be comprised of a synthetic portfolio of shares or other assets, and as such, the performance of an Underlying Index is dependent upon the macroeconomic factors relating to the shares or other components that comprise such Underlying Index, which may include interest and price levels on the capital markets, currency developments, political factors and (in the case of shares) company-specific factors such as earnings position, market position, risk situation, market liquidity for the shares, shareholder structure and dividend policy.

A change in the composition or discontinuance of an Underlying Index could adversely affect the market value of a Financial Product – The sponsor of any Underlying Index may add, delete or substitute the components of such Underlying Index or make other methodological changes that could change the level of one or more components. The changing of components of any Underlying Index may affect the level of such Underlying Index as a newly added component may perform significantly worse or better than the component it replaces, which in turn may affect the Strategy Level and, therefore, payments made under a Financial Product. The sponsor of any such Underlying Index may also alter, discontinue or suspend calculation or dissemination of such Underlying Index.

Exposure to Underlying Index Modification, Underlying Index Cancellation and Underlying Index Disruption – The Strategy Calculation Agent has discretionary authority under this Description to make certain determinations and adjustments following an Underlying Index Modification (broadly, changes in the methodology of an Underlying Index), Underlying Index Cancellation (permanent cancellation of an Underlying Index) and Underlying Index Disruption (failure to calculate and publish the level of an Underlying Index). The Strategy Calculation Agent may determine that the consequence of any such event is to make adjustments to this Description and any such determination may have a negative adverse effect on the return of a Financial Product.

Certain risks in relation to the EU and UK Benchmarks Regulation – If an Underlying Index is a "benchmark" under the EU Benchmarks Regulation or the UK Benchmarks Regulation and (i) it would be unlawful or contradictory to any applicable licensing requirements for the Strategy Calculation Agent to determine the level or other value of such Underlying Index or make any other determination in respect of the Strategy which it would otherwise be obliged to do so pursuant to this Description, or (ii) if the relevant benchmark administrator does not obtain or maintain (as applicable) such authorisation or registration or, if a non-EU entity (in respect of the EU Benchmarks Regulation) or a non-UK entity (in respect of the UK Benchmarks Regulation), "equivalence" is not available and it is not recognised, then the Strategy Calculation Agent may determine that a change in the composition or calculation of the Strategy is required to account for such successor and, if so, the procedures under Section 9.2 (Adjustment procedures, notification and consultation process) will apply.

Reform of interest rate index and equity, commodity and foreign exchange rate index “benchmarks” – Underlying Indices which are deemed to be “benchmarks” are the subject of recent national, international and other regulatory guidance and proposals for reform. Some of these reforms are already effective while others are still to be implemented. These reforms may cause such “benchmarks” to perform differently than in the past, or to disappear entirely, or have other consequences which cannot be predicted. Any such consequence could have a material adverse effect on any Financial Product.

Any of the international, national or other proposals for reform or the general increased regulatory scrutiny of “benchmarks” could increase the costs and risks of administering or otherwise participating in the setting of a “benchmark” and complying with such regulations or requirements. Such factors may have the effect of discouraging market participants from continuing to administer certain “benchmarks”, trigger changes in the rules or methodologies used in certain “benchmarks” or lead to the disappearance of certain “benchmarks”. The disappearance of a “benchmark” could have materially adverse consequences in relation to a Financial Product.

Exposure to the risk that returns on a Financial Product do not reflect a direct investment in underlying shares or other assets comprising an Underlying Third Party Index – The return payable on Financial Products that reference an Index which in turn references one or more Underlying Indices may not be the same as the return a Financial Product Investor would realise if you actually owned the relevant assets comprising the components of the relevant Underlying Third Party Index. For example, if the components of an Underlying Third Party Index are shares, a Financial Product Investor will not receive any dividends paid on those shares and will not participate in the return on those dividends, save where the Strategy takes such dividends into account for purposes of calculating the Strategy Level. Accordingly, Financial Product Investors may receive a lower return on a Financial Product linked to Underlying Indices (indirectly by referencing the Strategy) than they would have received if they had invested in the components of such Underlying Indices directly.

Loss of return of dividends in respect of Financial Products linked to equity Underlying Indices – The rules governing the composition and calculation of a relevant Underlying Third Party Index may stipulate that dividends distributed on its components are not included in the calculation of the relevant level of such Underlying Third Party Index, which may result in a decrease in such level if all other circumstances remain the same. In such cases, Financial Product Investors will not participate in dividends or other distributions paid on the components comprising the relevant Underlying Third Party Index. Even if the rules of the relevant Underlying Third Party Index provide that distributed dividends or other distributions of the components are reinvested in the relevant Underlying Third Party Index, in some circumstances the dividends or other distributions may not be fully reinvested in such Underlying Third Party Index.

None of the Strategy Sponsor, the Strategy Calculation Agent or any member of the Morgan Stanley Group is liable for the actions of omissions of the sponsor of an Underlying Third Party Index, any information concerning an Underlying Third Party Index, the performance of an Underlying Third Party Index or use thereof in connection with a Financial Product – The Strategy Sponsor, the Strategy Calculation Agent or any member of the Morgan Stanley Group are not liable to a Financial Product Investor for any act or failure to act by a sponsor of an Underlying Third Party Index in connection with the calculation, adjustment, or maintenance of such Underlying Third Party Index. Although the Strategy Calculation Agent will obtain information concerning an Underlying Third Party Index from publicly available sources it believes reliable, it will not independently verify this information. Accordingly, no representation, warranty, or undertaking (express or implied) is made and no responsibility is accepted by the Strategy Sponsor, the Strategy Calculation Agent or any member of the Morgan Stanley Group as to the accuracy, completeness, and timeliness of information concerning such Underlying Third Party Index. In addition, the Strategy Sponsor, the Strategy Calculation Agent or any member of the Morgan Stanley Group makes no representation whatsoever, whether express or implied, as to the performance of any Underlying Third Party Index, any data included in, or omitted from, such Underlying Third Party Index, or the use of such Underlying Third Party Index in connection with the Strategy.

The Strategy is not promoted by an Underlying Third Party Index or the sponsor of such Underlying Third Party Index – The Strategy is not sponsored, endorsed, or promoted by an Underlying Third Party Index or the sponsor of such Underlying Third Party Index. The sponsor of an Underlying Third Party Index makes no representation whatsoever, whether express or implied, either as to the results to be obtained from the use of such Underlying Third Party Index or the levels at which such Underlying Third Party Index stands at any particular time on any particular date. Neither an Underlying Third Party Index nor sponsor of such Underlying Third Party Index shall be liable (whether in negligence or otherwise) to any person for any error in such Underlying Third Party Index. A sponsor of an Underlying Third Party Index is under no obligation to advise any person of any error in such Underlying Third Party Index. A sponsor of an Underlying Third Party Index does not make any representation whatsoever, whether express or implied, as to the advisability of investing or assuming any risk in connection with the Strategy.

Nature of Underlying MS Indices – An Underlying MS Index is a notional, rules-based index comprising its component(s) and the level of such Underlying MS Index may go down as well as up, depending on the performance of the components and their effect on the strategy that the Underlying MS Index has been developed to reflect. There can be no assurance as to the future performance of any such Underlying MS Index, and the level of such Underlying MS Index on any day may not reflect either its past performance or its future performance. The strategy that any such Underlying MS Index has been developed to reflect may not be successful, and other strategies using the components and alternative indices and benchmarks may perform better than such Underlying MS Index. Any past performance of an Underlying MS Index (actual or simulated) is not an indication of its future performance.

Prospective Financial Product Investors should be familiar with investments in the global financial and commodity markets, financial instruments and indices generally.

A Financial Product Investor will have no rights in respect of such Underlying MS Index or any components of such Underlying MS Index – The investment exposure provided by any Underlying MS Index is notional or synthetic. Financial Product Investors will (1) have no legal or beneficial ownership interest in any Underlying MS Index or any component comprising an Underlying MS Index (or components thereof) and therefore have no recourse to any such component; (2) have no right to take delivery of any such component; (3) have no rights generally with respect to any such component (where in relation to voting or otherwise); and (4) have no right to receive dividends, distributions or other payments with respect to any such component.

An Underlying MS Index may have a limited operating history and may perform in unanticipated ways – An Underlying MS Index may be a relatively new strategy. Where limited historical performance data exists with respect to the components referenced by such Underlying MS Index and/or the Underlying MS Index itself, any investment in respect of which returns are linked to the performance of such an Underlying MS Index or its components may involve greater risk than an investment linked to returns generated by an investment strategy with a proven track record. While a longer history of actual performance could provide more reliable information on which to assess the validity of a strategy that an Underlying MS Index is intended to reflect and on which to base an investment decision, the fact that such an index and/or the relevant components are relatively new would not allow this. There can be no guarantee or assurance that an Underlying MS Index or its components will operate in a manner consistent with the data available.

Morgan Stanley or an affiliate of Morgan Stanley’s hedging activity may affect the level of an Underlying MS Index – By executing products linked to an Underlying MS Index, Morgan Stanley and/or its affiliates will have an exposure to such Underlying MS Index and its components. Morgan Stanley will take risk positions to hedge this exposure in its sole discretion and in a principal capacity. Financial Product Investors will not have any rights in respect of any Morgan Stanley hedge positions, including without limitation, any shares, futures, options, commodities or currencies. Morgan Stanley may execute its hedging activity by trading in the components of any Underlying MS Index at any time and this may have an adverse impact on the performance of an Underlying MS Index. Morgan Stanley’s hedging activity, and hence the size of such impact, may be linked to the amount of new and outstanding products (including any Financial Products) linked to the relevant Underlying MS Index at the relevant time.

Additionally, Morgan Stanley may generate revenues if it executes its hedging activity at different levels from those used to determine the value of an Underlying MS Index. Such hedging activity could generate significant returns to Morgan Stanley that will not be passed on to Financial Product Investors.

Morgan Stanley or an affiliate of Morgan Stanley in its capacity as sponsor or calculation agent in respect of an Underlying MS Index has the authority to make determinations that could materially affect such Underlying MS Index and create conflicts of interest – Morgan Stanley or an affiliate of Morgan Stanley in its capacity as the sponsor of an Underlying MS Index and/or, if applicable, the calculation agent of such an Underlying MS Index does not generally exercise any discretion in relation to the operation of such Underlying MS Index. Morgan Stanley owes no fiduciary duties in respect of such Underlying MS Index. Morgan Stanley may, however, exercise discretion in certain limited situations including, but not limited to, those situations described in any description of the relevant Underlying MS Index. Determinations made by Morgan Stanley as the sponsor and, if applicable, calculation agent of such an Underlying MS Index could adversely affect the level of such Underlying MS Index and the exercise by Morgan Stanley of its discretion could present it with a conflict of interest. Subject as provided in any Underlying Index Rules in respect of an Underlying MS Index, in making those determinations, the sponsor and/or the calculation agent, as applicable, of such index will not be required to, and will not, take the interests of any Financial Product Investor into account or consider the effect its determinations will have on the value of any Financial Product. All determinations made by relevant sponsor and/or the calculation agent shall be (including, without limitation, any Financial Products) conclusive for all purposes and will bind all Financial Product Investors. The strategy sponsor and/or the calculation agent in respect of an Underlying MS Index shall not have any liability for such determinations.

General Strategy Risk Considerations

The Strategy performance is subject to fluctuations – The Strategy is a notional, rules-based strategy comprising the Strategy Components and the Strategy Level may decline. The Strategy methodology described in this Description was developed based on historical data and conditions and there are no assurances that the methodology will generate positive performance in the future. The performance of the Strategy is dependent on many factors, including developments and trends in the markets for the Strategy Components. The Strategy performance can go up as well as down, and can register significant losses, including in some cases that the Strategy falls to zero. Any past performance of the Strategy (actual or simulated) is not an indication of its future performance.

Risks and rewards of a Financial Product – Financial Product Investors should ensure that they review the economic terms of the relevant Financial Product and not only the terms of the Strategy in order to understand the risks and rewards of an investment in such Financial Product.

The Strategy is not an investment in the Strategy Components – The Strategy is calculated as a “notional” strategy. This means that the Strategy is calculated by reference to the Strategy Component Value in respect of each Strategy Component, however the strategy embedded in the Strategy means that any return might be higher or lower than the aggregate performance of the Strategy Components. However, there is no requirement for the Strategy Sponsor to obtain an exposure in relation to any Strategy Component in order to calculate the Strategy.

A Financial Product Investor will have no rights in respect of the Strategy or any Strategy Components – The investment exposure provided by the Strategy is synthetic. An investment referenced to a Strategy therefore not make a Financial Product Investor a holder of, or give a Financial Product Investor a direct investment position in, a Strategy or any Strategy Component (or any components thereof).

No liability – Notwithstanding any other provision within this Description, and subject as provided by any applicable law or regulation, in no event shall the Strategy Sponsor or the Strategy Calculation Agent, acting in each case in such capacity, be liable (whether directly or indirectly, in contract, tort or otherwise) for any loss incurred by any person that arises out of or in connection with the Strategy, including in relation to the performance of the Strategy Sponsor or the Strategy Calculation Agent, as applicable, of any part of its respective role under this Description, provided that nothing shall relieve each of the Strategy Sponsor and the Strategy Calculation Agent from any liability arising by reason of fraud or acts or omissions constituting any breach of regulation or other applicable law.

The Strategy Sponsor may make adjustments to this Description in certain circumstances – The Strategy Sponsor may make adjustments to this Description without consulting with Financial Product Investors in circumstances where the Strategy Sponsor has determined that such change is not material to Financial Product Investors, including if it is of a formal, minor or technical nature. Before making any other adjustment to this Description, the Strategy Sponsor will give prior notice to Financial Product Investors. Such adjustments could include, but are not limited to: (i) adjusting any relevant Strategy Component Value, (ii) replacing or removing a Strategy Component, (iii) postponing the publication of a Strategy Level or (iv) suspending or cancelling the Strategy. Any adjustments made to the Strategy may impact its future performance and result in an adverse return to a Financial Product Investor.

Discretion – This Description confers on each of the Strategy Sponsor and the Strategy Calculation Agent the right to make determinations, calculations, adjustments and modifications in relation to the Strategy and related matters, which involve, in certain circumstances, a degree of discretion in order to ensure that the Strategy can, where reasonably practicable, continue to be calculated and determined notwithstanding the relevant circumstances or, to allow a delay or a cancellation of the Strategy (including, without limitation, upon the occurrence of certain Adjustment Events, certain dilutive or concentrative events or other market disruption events in relation to Strategy Components as specified in this Description). Such adjustments may include, without limitation, adjusting the composition of the Strategy which exposes Financial Product Investors to the risk that any replacement Strategy Component may perform differently from the original Strategy Component, which may have an adverse effect on the performance of the Strategy.

Each of the Strategy Sponsor and the Strategy Calculation Agent will, as far as reasonably practicable, exercise any such discretion with the aim of ensuring that the Strategy continues to reflect, as closely as possible, the underlying economic interest it is designed to represent. The exercise of these discretions may have a significant effect on the Strategy and a Financial Product. Financial Product Investors should note that they are exposed to the exercise by the Strategy Sponsor of such discretions and in exercising such discretions, the Strategy Sponsor and the Strategy Calculation Agent have no obligations to consider the interests of any other person including (but not limited to) Financial Product Investors. Each of the Strategy Sponsor and the Strategy Calculation Agent, unless otherwise specified, is required to act using reasonable discretion, however, there can be no assurance that the exercise of any such discretion (or the absence of exercise, as the case may be) will not increase or decrease the Strategy Level and/or alter the volatility of the Strategy.

Correlation of Strategy Components – Correlation of Strategy Components indicates the level of interdependence among the individual Strategy Components with respect to their performance. If, for example, all of the Strategy Components (or the constituent assets of such Strategy Components) originate from the same sector and the same country or region, a high positive correlation may generally be assumed. Past rates of correlation may not be determinative of future rates of correlation. Prospective investors should be aware that, although Strategy Components may not appear to be correlated based on past performance, it may be that they suffer the same adverse performance following a general downturn or other economic or political event. Where the Strategy Components are subject to high correlation, any move in performance of the Strategy Components will exaggerate the performance of the Strategy.

Exposure to the performance of a basket of Strategy Components – Even in the case of a positive performance of one or more Strategy Components, the performance of a basket of Strategy Components as a whole may be negative if the performance of the other Strategy Components is negative to a greater extent. The performance of a Strategy with a fewer number of Strategy Components will generally be more affected by changes in the value of any particular Strategy Component included therein than a Strategy that includes a greater number of Strategy Components.

Political and economic factors – Strategy Component Values may be influenced by a number of circumstances, including, but not limited to, political events, general economic conditions, government intervention, changes in balances of payments and trade, domestic and international rates of inflation, international trade restrictions and currency devaluations. Any such circumstance (or a combination of them) may cause unexpected volatility or illiquidity in the relevant markets. The Strategy may fail to take account of such events and, as a result, investment losses may occur which may in turn have an adverse effect on the performance of a Financial Product.

With respect to any emerging or developing nation, there is the possibility of nationalisation, expropriation or confiscation, political changes, government regulation, social instability or other developments (including war) which could affect adversely the economies of such nations or Strategy Component Values that are linked or have an exposure to such nations.

Market volatility – The underlying markets for Strategy Components (including, without limitation and, if applicable, in commodities, metals, financial instruments, interest rates and indices) may be volatile and subject to sudden fluctuations of varying magnitude, any may be influenced by, amongst other things, government trade, fiscal, monetary and exchange control programmes and policies, national and international political and economic events and changes in interest rates. The volatility of such underlying markets may render it difficult or impossible to predict or anticipate fluctuations in the value of Strategy Components which could result in losses and an adverse effect on the Strategy.

Rules-based Strategy – The Strategy is quantitative and rules-based. Consequently, the Morgan Stanley Group does not have discretion to change this Description if there are significant changes in the performance of the Strategy Components that cause the Strategy to decline significantly or underperform.

Information about the Strategy is no guarantee of the performance of the Strategy – Certain presentations and historical analysis or other statistical analysis materials in respect of the operation and/or potential returns of the Strategy which may be provided are based on a number of assumptions, historical estimates, simulated analyses and hypothetical circumstances to estimate how the Strategy may have performed prior to its actual existence. The Strategy Sponsor may use historical data that is available to calculate the hypothetical level of the Strategy prior to its inception. If the Strategy Sponsor determines that such historical data is not available or is incomplete, the Strategy Sponsor may use alternate sources of data in place of such historical data as well as make certain modifications to the Strategy methodology as it deems necessary to calculate the hypothetical level of the Strategy prior to its inception. The Strategy Sponsor provides no assurance or guarantee that the Strategy will operate or would have operated in the past in a manner consistent with those materials.

Strategy Base Date – The Strategy will only have been calculated since the Strategy Base Date, being a date determined by the Strategy Sponsor as the date on which the Strategy Level would have been equal to the Initial Strategy Level based on back-testing (using simulated analyses and hypothetical circumstances, as further described in this Description). As such, any historical returns or any hypothetical simulations based on such back-tested data or analyses with respect to the period from the Strategy Base Date to the date on which Financial Products are first implemented (which may be materially later than the Strategy Base Date), may not reflect the performance of, and are no guarantee or assurance in respect of the performance or returns of, the Strategy over any time period.

Limited operating history and unanticipated performance – The Strategy is a relatively new strategy. Where limited historical performance data exists with respect to the Strategy Components and the Strategy itself, any investment in respect of which returns are linked to the performance of the Strategy or the Strategy Components may involve a greater risk than an investment linked to returns generated by an investment strategy with a proven track record. While a longer history of actual performance could provide more reliable information on which to assess the validity of the Strategy and on which to base an investment decision, the fact that the Strategy and the Strategy Components are relatively new would not allow this. There can be no guarantee or assurance that the Strategy or the Strategy Components will operate in a manner consistent with the data available.

Reliance on information – Calculations related to the Strategy may rely on information obtained from various publicly available sources. The Morgan Stanley Group and the Strategy Calculation Agent have relied on and will rely on these sources. In addition, the Morgan Stanley Group and the Strategy Calculation Agent have not verified independently and will not verify independently the information extracted from these sources. Accordingly, Financial Product Investors are subject to the risk that such third party information is inaccurate or incomplete and, in such circumstances, any such inaccuracy or incompleteness will be reflected in the calculation of the Strategy and may have a material impact on the performance of the Strategy.

No disclosure of information– The Morgan Stanley Group may be in possession at any time of information in relation to Strategy Components and/or the Strategy Allocator which may not be available to Financial Product Investors. There is no obligation on any member of the Morgan Stanley Group to disclose to Financial Product Investors any such information.

Conflict of interests – The Morgan Stanley Group (including the Strategy Calculation Agent and the Strategy Sponsor) and the Strategy Allocator may from time to time engage in transactions involving the Strategy Components for their own account and/or for the account of their clients and may act as market-maker for such Strategy Components. Such activities may not be for the benefit of Financial Product Investors and may have an effect on the value of the Strategy and, consequently, on the value and performance of any Financial Products.

In addition, the Morgan Stanley Group and the Strategy Allocator may from time to time act in other capacities such as the issuer of investments or the advisor thereof. Morgan Stanley Group entities and the Strategy Allocator also may issue, hold or enter into financial instruments and/or enter into derivative contracts in respect of the Strategy Components and the use of such instruments and/or derivatives may affect the value of the Strategy Components.

Morgan Stanley Group entities may, but are not obliged to, enter into hedging transactions in respect of the Strategy Components in order to meet obligations in respect of Financial Products or for any other purpose which may affect the value of such components or of any Financial Products. If they do, Morgan Stanley Group entities will have certain rights pursuant to such hedging transactions and/or in relation to any transactions that have given them exposure to Strategy Components and will pursue actions and take steps as they deem appropriate to protect their own interests.

In addition, the unwinding of such hedging transactions may affect the value of such Strategy Components or instruments which may affect the value of the Strategy. Morgan Stanley Group entities may make gains and/or losses from such hedging activity.

In acting in any of these capacities, subject as provided by any applicable law or regulation, no member of the Morgan Stanley Group or the Strategy Allocator is obliged to take into account the interests of any person including (but not limited to) Financial Product Investors.

In addition, the Strategy Calculation Agent will utilize data from the Morgan Stanley stock loan team to determine the borrow rate and borrow availability of Strategy Components, which in turn will impact the universe for the Strategy and could impact the return of an investment linked to the Strategy. The Strategy Calculation Agent may also exclude Strategy Components in cases where the Strategy Calculation Agent or one of its affiliates is subject to an internal restriction that limits trading in such Strategy Components.

Litigation and disputes – The Strategy Sponsor, the Strategy Calculation Agent or any member of the Morgan Stanley Group may be subject to litigation or arbitration proceedings or disputes with other entities. Any such event may adversely affect the ability of the Strategy Sponsor or the Strategy Calculation Agent to perform their duties in respect of the Strategy and, therefore, may adversely affect the Strategy and, consequently, any Financial Product.

Morgan Stanley research – The Morgan Stanley Group may issue research reports on securities or other financial instruments that are, or may become, Strategy Components. These reports are independent of the obligations of the Strategy Sponsor and the Strategy Calculation Agent described in this Description.

The Strategy Sponsor’s determinations are final and conclusive – The Strategy Calculation Agent is responsible for compiling and calculating the Strategy pursuant to this Description and has certain discretions relating to the Strategy. The Strategy Sponsor retains the discretion to appoint an alternative Strategy Calculation Agent. The Strategy Sponsor retains the final discretion as to the manner in which the Strategy is calculated and constructed. Furthermore, the Strategy Sponsor has the final authority on the Strategy and the interpretation and application of this Description. The Strategy Sponsor makes no representation (implied or otherwise) as to the performance of any Strategy Component and/or the Strategy.

FEES

Rebalance Costs associated with rebalancing the Index Components and an Index Fee are debited from the Index. Such costs and fees will reduce the performance of the Index.

Important Information and Qualifications

The information provided herein was prepared by sales, trading, or other non-research personnel of one of the following: Morgan Stanley & Co. LLC, Morgan Stanley & Co. International PLC, Morgan Stanley MUFG Securities Co., Ltd, Morgan Stanley Capital Group Inc. and/or Morgan Stanley Asia Limited (together with their affiliates, hereinafter “Morgan Stanley”), but is not a product of the Morgan Stanley Research Department. This communication is a marketing communication and is not a research report, though it may refer to a Morgan Stanley Research report or the views of a Morgan Stanley research analyst. We are not commenting on the fundamentals of any companies mentioned. Unless indicated, all views expressed herein are the views of the author and may differ from or conflict with those of the Morgan Stanley Research or others in the Firm. For additional information and important disclosures, see http://www.morganstanley.com/disclaimers.

Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be, and do not constitute, advice, including within the meaning of Section 975 of the Dodd- Frank Wall Street Reform and Consumer Protection Act.

This material is not (and should not be construed to be) investment advice (as defined under ERISA or similar concepts under applicable law) from Morgan Stanley with respect to an employee benefit plan or to any person acting as a Fiduciary for an employee benefit plan. This material is not designed to be a recommendation for any specific investment product, strategy, plan feature or other purposes. Any examples used in this material are generic, hypothetical and for illustration purposes only. Communications such as this are not impartial and are provided in connection with the marketing of products and services.

The information provided herein has been prepared solely for informational purposes and is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities or instruments mentioned or to participate in any particular trading strategy. These materials have been based upon information generally available to the public from sources believed to be reliable. No representation is given with respect to their accuracy or completeness, and they may change without notice. Morgan Stanley on its own behalf and on behalf of its affiliates disclaims any and all liability relating to these materials, including, without limitation, any express or implied representations or warranties for statements or errors contained in, or omissions from, these materials. Morgan Stanley and others associated with it may make markets or specialize in, have or may in the future enter into principal positions (long or short) in and effect transactions in securities of companies or trading strategies mentioned or described herein and may also perform or seek to perform investment banking, brokerage or other services for those companies and may enter into transactions with them. We may at any time modify or liquidate all or a portion of such positions and we are under no obligation to contact you to disclose any such intention to modify or liquidate or any such modification or liquidation. Morgan Stanley acts as “prime broker” and lender for a number of hedge funds. As a result, Morgan Stanley may indirectly benefit from increases in investments in hedge funds.

Unless stated otherwise, the material contained herein has not been based on a consideration of any individual client circumstances and as such should not be considered to be a personal recommendation. We remind investors that these investments are subject to market risk and will fluctuate in value. The investments discussed in this communication may be unsuitable for investors depending upon their specific investment objectives and financial position. Where an investment is denominated in a currency other than the investor’s currency, changes in rates of exchange may have an adverse effect on the value, price of, or income derived from the investment. The performance data quoted represents past performance. Past performance is not indicative of future returns. No representation or warranty is made that any returns indicated will be achieved. Certain assumptions may have been made in this analysis, which have resulted in any returns detailed herein. Transaction costs (such as commissions) are not included in the calculation of returns. Changes to the assumptions may have a material impact on any returns detailed. Potential investors should be aware that certain legal, accounting and tax restrictions, margin requirements, commissions and other transaction costs and changes to the assumptions set forth herein may significantly affect the economic consequences of the transactions discussed herein. The information and analyses contained herein are not intended as tax, legal or investment advice and may not be suitable for your specific circumstances. By submitting this communication to you, Morgan Stanley is not advising you to take any particular action based on the information, opinions or views contained herein, and acceptance of such document will be deemed by you acceptance of these conclusions. You should consult with your own municipal, financial, accounting and legal advisors regarding the information, opinions or views contained in this communication.

To receive further information in relation to the past performance of the financial instrument and or underlying (as applicable) and/or the functioning of the financial instrument in different market conditions referred to in any communications produced by employees of any Morgan Stanley entity based in Europe, the Middle East, and Africa (“EMEA”), please contact your EMEA Morgan Stanley Sales representative.

These materials may not be distributed in any jurisdiction where it is unlawful to do so. The instruments and or underlyings described in this communication may not be marketed or sold or be available for offer or sale in a number of jurisdictions where it is unlawful to do so. This publication is disseminated in Japan by Morgan Stanley MUFG Securities Co., Ltd only to those investors who are “Professional Investors” (tokutei toushika) as defined in the Financial Instrument Exchange Law of Japan and may not be redistributed to other types of investors without the prior written consent of Morgan Stanley (For guidance purposes only. Morgan Stanley MUFG Securities Co., Ltd is a joint venture in Japan between Morgan Stanley and Mitsubishi UFJ Financial Group. Morgan Stanley and Mitsubishi UFJ Financial Group have formed another joint venture in Japan called Mitsubishi UFJ Morgan Stanley Securities Co.,Ltd); in Hong Kong by Morgan Stanley Asia Limited; in Singapore by Morgan Stanley Asia (Singapore) Pte. and/or Morgan Stanley Asia (Singapore) Securities Pte. Ltd., each of which is regulated by the Monetary Authority of Singapore and accepts responsibility for its contents of these materials, only to those investors who are institutional investors, accredited investors or expert investors, as defined in the Securities and Futures Act, Chapter 289 of Singapore; in Australia by Morgan Stanley Australia Limited A.B.N. 67 003 734 576, A.F.S.L. No. 233742 and/or Morgan Stanley Australia Securities Limited A.B.N. 55 078 652 276, A.F.S.L. No. 233741, which accept responsibility for its contents; in Canada by Morgan Stanley Canada Limited, which has approved of, and has agreed to take responsibility for, the contents of this publication in Canada; in Spain by Morgan Stanley, S.V., S.A., a Morgan Stanley group company, which is supervised by the Spanish Securities Markets Commission (CNMV) and states that this document has been written and distributed in accordance with the rules of conduct applicable to financial research as established under Spanish regulations; in the United States it is directed only to institutional clients and is distributed by Morgan Stanley & Co. LLC, which accepts responsibility for its contents; and in the United Kingdom it is directed only to those persons who are eligible counterparties or professional clients and must not be acted on or relied upon by retail clients (each as defined in the UK Financial Conduct Authority's rules) and is distributed in the European Union by Morgan Stanley & Co. International plc, except as provided above. Private U.K. investors should obtain the advice of their Morgan Stanley & Co. International plc representative about the investments concerned. In Australia, this publication, and any access to it, is intended only for “wholesale clients” within the meaning of the Australian Corporations Act. The trademarks and service marks contained herein are the property of their respective owners. Third-party data providers make no warranties or representations of any kind relating to the accuracy, completeness, or timeliness of the data they provide and shall not have liability for any damages of any kind relating to such data.

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING STRATEGY IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.

Any estimates, projections or predictions (including in tabular form) given in this communication are intended to be forward-looking statements. Although Morgan Stanley believes that the expectations in such forward-looking statement are reasonable, it can give no assurance that any forward-looking statements will prove to be correct. Such estimates are subject to actual known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those projected. These forward-looking statements speak only as of the date of this communication. Morgan Stanley expressly disclaims any obligation or undertaking to update or revise any forward-looking statement contained herein to reflect any change in its expectations or any change in circumstances upon which such statement is based. Prices indicated are Morgan Stanley offer prices at the close of the date indicated. Actual transactions at these prices may not have been effected.

The trademarks and service marks contained herein are the property of their respective owners. Additional information on securities discussed herein is available on request. This communication or any portion hereof, may not be reprinted, resold or redistributed without the prior written consent of Morgan Stanley.