Please read this information in conjunction
with the summary terms on the front cover of this document.
|
to have represented, in its corporate and its fiduciary capacity,
by its purchase and holding of the notes that either (a) it is not a Plan or a Plan Asset Entity and is not purchasing such notes
on behalf of or with “plan assets” of any Plan or with any assets of a governmental, non-U.S. or church plan that is
subject to any federal, state, local or non-U.S. law that is substantially similar to the provisions of Section 406 of ERISA or
Section 4975 of the Code (“Similar Law”) or (b) its purchase, holding and disposition of these notes will not constitute
or result in a non-exempt are not prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or violate any
Similar Law.
Due to the complexity of these rules and the penalties that may
be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries or other
persons considering purchasing the notes 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 the notes has exclusive responsibility
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the Code or any Similar Law. The sale of any notes 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
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plan. In this regard, neither this discussion nor anything provided in this document is or is intended to be investment advice
directed at any potential Plan purchaser or at Plan purchasers generally and such purchasers of these notes should consult and
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However, individual retirement accounts, individual retirement
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an addition to bonus) based on the purchase of the notes by the account, plan or annuity.
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Additional considerations:
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Client accounts over which Morgan Stanley, Morgan Stanley Wealth Management or any of their respective subsidiaries have investment discretion are not permitted to purchase the notes, either directly or indirectly.
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Supplemental information regarding plan of distribution; conflicts of interest:
|
Selected dealers, which may include our affiliates, and their
financial advisors will collectively receive from the agent a fixed sales commission of $ for each note they sell.
MS & Co. is an affiliate of MSFL and a wholly owned subsidiary
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participation rate, such that for each note the estimated value on the pricing date will be no lower than the minimum level described
in “Investment Summary” beginning on page 2.
MS & Co. will conduct this offering in compliance with the
requirements of FINRA Rule 5121 of the Financial Industry Regulatory Authority, Inc., which is commonly referred to as FINRA, regarding
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|
Contact:
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Morgan Stanley clients may contact their local Morgan Stanley branch office or Morgan Stanley’s principal executive offices at 1585 Broadway, New York, New York 10036 (telephone number (866) 477-4776). All other clients may contact their local brokerage representative. Third-party distributors may contact Morgan Stanley Structured Investment Sales at (800) 233-1087.
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Where you can find more information:
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Morgan Stanley and MSFL have filed a registration statement (including
a prospectus, as supplemented by the product supplement for Equity-Linked Notes) with the Securities and Exchange Commission, or
SEC, for the offering to which this communication relates. You should read the prospectus in that registration statement, the product
supplement for Equity-Linked Notes and any other documents relating to this offering that Morgan Stanley and MSFL have filed with
the SEC for more complete information about Morgan Stanley, MSFL and this offering. You may get these documents without cost by
visiting EDGAR on the SEC web site at
.
www.sec.gov. Alternatively, Morgan Stanley, MSFL, any underwriter
or any dealer participating in the offering will arrange to send you the prospectus and the product supplement for Equity-Linked
Notes if you so request by calling toll-free 800-584-6837.
You may access these documents on the SEC web site at
.
www.sec.gov
as follows:
Product
Supplement for Equity-Linked Notes dated November 16, 2017
Prospectus
dated November 16, 2017
Terms used but not defined in this document are defined in the
product supplement for Equity-Linked Notes or in the prospectus.
|
M
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tanley
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inance
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Dual Directional Market-Linked Notes due June 28, 2024
Based on the Value of the Morgan Stanley MAP Trend Index
Annex A—Morgan Stanley MAP Trend Index
Overview
The Morgan Stanley MAP Trend Index (the “
Index
”)
has been developed by and is calculated, published and maintained by Morgan Stanley & Co. LLC. MAP stands for “Multi-Asset
Portfolio.” The Index was established by Morgan Stanley on March 7, 2017 and employs a rules-based quantitative strategy
(the “
Index Methodology
”) that combines a risk-weighted approach to portfolio construction with a momentum-based,
or trend-following, asset allocation methodology to construct a notional portfolio. In addition, the strategy imposes an
overall volatility-targeting feature upon the resulting portfolio. The goal of the Index is to maximize returns for a given
level of risk based upon recent trends in the underlying assets. The investment assumption underlying the allocation strategy is
two-fold: that historical volatility of the underlying assets can be used to risk-weight a portfolio, and that past trends are
likely to continue to be a good indicator of the future performance of that portfolio. The Index therefore seeks to capture returns
by taking risk-weighted positions indicated by such trends. As the portfolio is risk-weighted based upon a pre-set allocation as
modified by recent volatility, increased volatility in an underlying asset will result in reduced exposure to that asset, potentially
at a time when that asset then increases in value; at the same time, lower volatility will result in higher exposure, potentially
at a time when the asset starts to decline in value. In addition, as a trend-following, momentum-based index, the Index will
tend to perform well when prices on the relevant ETFs are steadily trending either up or down. On the other hand, the Index will
likely perform poorly when prices on the relevant ETFs do not move in a consistent manner, and, in particular, when they experience
sharp reversals, in which case the Index will likely allocate to ETFs that trended upward, but that are now declining. In addition,
sharp, correlated reversals in the equity markets as a whole will also have an adverse effect on the level of the Index, as any
diversification benefits inherent in investing in a variety of ETFs will be lost.
The components of the Index consist of (i)
20 U.S.-listed exchange traded funds (“
ETFs
”), representing U.S. and non-U.S. equities, fixed income securities,
commodities and real estate, and (ii) the Morgan Stanley Two Year Treasury Index (collectively, the “
Index Components
”).
The notional portfolio constructed by the Index Methodology of Index Components is referred to as the “
Asset Portfolio
.”
The Asset Portfolio will consist of long-only positions in each Index Component, and each Index Component except for the Morgan
Stanley Two Year Treasury Index is subject to a maximum exposure cap. The actual number of ETFs represented in the Asset Portfolio
will be determined according to the Index Methodology but will likely be less than 20 at any one time and, if all the ETFs are
trending down, could be only the Morgan Stanley Two Year Treasury Index. The targeted volatility for the Index is 5% (the “
Volatility
Target
”).
The Index is calculated on an excess return
basis, and therefore the level is determined by the weighted return of the Asset Portfolio reduced by the return on an equivalent
cash investment receiving the 3-month LIBOR. The Index performance is further reduced by a servicing cost of 0.85% per annum calculated
on a daily basis.
Calculation of Pre-Signal Base Allocation
for each ETF
The Index is rebalanced each Strategy Business
Day (the “
Daily Rebalancing
”). Upon each Daily Rebalancing for the Index, the Index Methodology uses the pre-assigned
Risk Budget assigned to each ETF which remains static throughout the life of the Index and is set forth in the table below. Based
upon those pre-set Risk Budgets, the Index Methodology determines the base allocation of each ETF in the Asset Portfolio by analyzing
the volatility for each ETF and the historical correlation among the components. The base allocation of ETFs will be proportional
to each ETFs’ Risk Budget and the inverse of each ETF’s volatility and scaled based upon the volatility of the other
ETFs to 100% exposure.
1
Assuming that two ETFs have the same Risk
1
Look-back period for volatility for the pre-signal allocation is approximately one year.
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Dual Directional Market-Linked Notes due June 28, 2024
Based on the Value of the Morgan Stanley MAP Trend Index
Budget, this initial weighting scheme allocates
more to less volatile assets and less to more volatile assets.
2
While the Risk Budget is used to determine proportions
for the pre-signal base allocations, those pre-signal base allocations can be higher or lower than the original Risk Budget; however,
after the entirety of the Index calculation is complete, no ETF’s exposure will exceed its maximum exposure cap as listed
in the table below.
Determining the Trend Signal for each
ETF
The Index Methodology then calculates a
signal based on the upward or downward trend of each ETF (the “
Trend Signal
”). The Index calculates each Trend
Signal by observing two moving averages, one short-term and one long-term, over different look-back periods for each respective
ETF.
3
These moving averages are calculated using a formula that considers the entirety of the look-back period but
gives more weight to the recent data points than the data points further in the past. For some of the less liquid ETFs, a signal-smoothing
moving average is incorporated that creates a weighted average of the Trend Signal using the prior two or three days of signal
data in order to try to avoid unrepresentative signals due to that relative illiquidity.
4
A Trend Signal that converges
toward one indicates an upward trend and a Trend Signal that converges toward zero indicates a downward trend.
The Index compares each ETF’s short-term
and long-term moving averages against its spot horizon to determine the Trend Signal. The Trend Signal will be 0 if the spot horizon
is below both the short-term and long-term moving averages, 0.5 if the spot horizon is between the short-term and long-term moving
averages or 1 if the spot horizon is above the short-term and long-term moving averages. An ETF’s spot horizon value is not
always its most recent price and, in the equity and alternatives asset classes, the date for determining the spot horizon is a
date 4 Strategy Business Days before the short-term horizon date, which is typically the Strategy Business Day prior to the Rebalancing
Date. The result of this is that the Index, in the equity and alternatives asset classes, will allocate more exposure to ETFs that
are trending down in the short-term and less to ETFs that are trending up in the short-term in an effort to capitalize on possible
countertrends or overreactions in the market. However, if a short-term downward trend persists and the ETF steadily declines, the
Trend Signal in these asset classes will remain at 1 and therefore the Index will be fully exposed to the decline. The Trend Signal
will remain at 1 until the ETF begins trending up and the short-term horizon exceeds the spot horizon or continues declining such
that the spot horizon is below the long-term horizon. Even if the spot horizon falls below the long-term horizon, the Trend Signal
will be 0.5 and the Index will not fully divest its position until the spot horizon of the ETF is down compared to both the long-term
horizon and the short-term horizon.
Scaling of Allocation of ETFs According
to Trend Signal
Once the Trend Signal is calculated for
each ETF, the previously determined base allocations are scaled by the Trend Signal by allocating more upward-trending securities
to the Asset Portfolio subject to each ETFs’
2
Volatility is a market standard statistical measure of the magnitude and frequency of price changes of a financial asset over a period of time, used to express the riskiness of the asset. Note, however, that volatility does not identify the direction of the asset’s price movement.
3
The look-back period for each moving average is asset-class dependent. Equity ETFs have a short term period of 1 day, a long term period of 200 days and a spot horizon of 5 days. Fixed Income ETFs have a short term period of 5 days, a long term period of 20 days and a spot horizon of 1 day. Alternative ETFs have a short term period of 5 days, a long term period of 200 days and a spot horizon of 5 days.
4
As classified in the table below, Other Equity ETFs have a signal smoothing period of 2 days. Core Fixed Income ETFs have a signal smoothing period of 2 days while Other Fixed Income ETFs have a signal smoothing period of 3 days.
M
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Dual Directional Market-Linked Notes due June 28, 2024
Based on the Value of the Morgan Stanley MAP Trend Index
maximum exposure cap as outlined in the
table below. The magnitude of each position taken by the Index following the Trend Signal adjustment is then scaled to the
Volatility Target based on a pro-rata volatility-scaling that seeks to achieve a balanced level of volatility in the
Index’s exposure to each of the ETFs. The volatility of the Index is calculated by estimating the volatility of
each ETF adjusted for correlations over a period of approximately 30 and 60 days. The higher volatility of the two time
periods is used to scale the Index’s exposure to the ETFs. ETFs with a Trend Signal of 0 on a Rebalancing Day will not
be allocated any exposure and therefore will not be a part of the Asset Portfolio on that day. Any unused exposure is
allocated to the Morgan Stanley Two Year Treasury Index. Because the Index is limited to 125% leverage it may not be possible
to achieve the Volatility Target of 5% during periods of very low volatility. Moreover, the volatility of the Index may
exceed the 5% Volatility Target in times of extreme volatility due to trading limits on the ETFs. The daily trading limit for
each ETF is one-third of the maximum exposure cap. Once the composition of the Asset Portfolio is determined, the Index value
is equivalent to the sum of each Index Component’s market price less the 3-month LIBOR excess return cost and the 0.85%
servicing cost.
M
organ
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inance
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Dual Directional Market-Linked Notes due June 28, 2024
Based on the Value of the Morgan Stanley MAP Trend Index
Morgan Stanley MAP Trend Index – Summary
The procedure for determining the composition
of the Asset Portfolio is summarized in the graphic and bullets below:
|
•
|
Base allocations depend
on each ETF’s liquidity and are proportional to the Risk Budget and the inverse of each ETF’s relative historical
realized volatility scaled to 100%.
|
|
•
|
All things being equal,
this weighting scheme allocates more to less volatile assets and less to more volatile assets.
|
|
•
|
For each ETF, compute one
short-term and one long-term moving average.
|
|
•
|
Compare the short-term
and long-term moving averages versus the ETF spot price, a Trend Signal of 100% indicates an upward trend and a Trend Signal 0%
indicates a downward trend.
5
If applicable, the Trend Signal is smoothed over a few days for the less liquid ETFs.
|
|
•
|
Scale the base allocations
by the Trend Signal for each ETF.
|
|
•
|
The maximum exposure caps
on each Rebalancing Date for each Index Component are specified in the table below.
|
|
•
|
Estimate the volatility
of the portfolio and scale the allocations to target a 5% volatility. Because the ETFs are subject to a maximum exposure cap and
the Index is limited to 125% leverage, it may not be possible to achieve the Volatility Target of 5% during periods of very low
volatility.
|
|
•
|
Allocate any unused exposure
into Morgan Stanley Two Year Treasury Index.
|
|
•
|
The level of the Index
is calculated on an excess return basis and is determined by the weighted return of the Asset Portfolio
reduced
by the
return on an equivalent cash investment receiving the 3-month LIBOR and a servicing cost of 0.85% per annum.
|
5
Note that because the spot horizon period is longer than the short-term horizon period for ETFs in the equity and alternative asset classes of the index, an actual upward trend in an ETF may result in a Trend Signal less than 1 and therefore the Index may divest itself of these ETFs despite recent positive movement.
M
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Dual Directional Market-Linked Notes due June 28, 2024
Based on the Value of the Morgan Stanley MAP Trend Index
Index Components
The potential Index Components included in the Index and the
maximum asset weightings on each Rebalancing Date for each Index Component are specified in the table below.
Equities
|
Ticker
|
Maximum Exposure Cap
|
Risk Budget*
|
Core
|
|
|
|
SPDR S&P 500
|
SPY
|
25%
|
11%
|
PowerShares QQQ ETF
|
QQQ
|
25%
|
11%
|
iShares Russell 2000
|
IWM
|
25%
|
11%
|
iShares MSCI EAFE
|
EFA
|
5%
|
2%
|
iShares MSCI Emerging Markets
|
EEM
|
5%
|
2%
|
Others
|
|
|
|
iShares Edge MSCI Minimum Volatility USA
|
USMV
|
5%
|
2%
|
iShares Nasdaq Biotechnology
|
IBB
|
5%
|
2%
|
iShares Select Dividend
|
DVY
|
3%
|
1%
|
Fixed Income
|
|
|
|
Core
|
|
|
|
iShares 20+ Year Treasury Bond
|
TLT
|
25%
|
11%
|
iShares 7-10 Year Treasury Bond
|
IEF
|
25%
|
11%
|
iShares iBoxx High Yield Corporate Bond
|
HYG
|
25%
|
11%
|
iShares iBoxx Investment Grade Corporate Bond
|
LQD
|
5%
|
2%
|
iShares Core US Aggregate Bond
|
AGG
|
5%
|
2%
|
Others
|
|
|
|
iShares TIPS Bond
|
TIP
|
5%
|
2%
|
iShares JPMorgan USD Emerging Markets Bond
|
EMB
|
5%
|
2%
|
iShares US Preferred Stock
|
PFF
|
3%
|
1%
|
Alternatives
|
|
|
|
SPDR Gold Shares
|
GLD
|
10%
|
4%
|
United States Oil
|
USO
|
10%
|
4%
|
Vanguard REIT ETF
|
VNQ
|
10%
|
4%
|
The PowerShares DB US Dollar Index Bullish Fund
|
UUP
|
10%
|
4%
|
Risk-Off
|
|
|
|
Morgan Stanley Two Year Treasury Index
|
N/A
|
100%
|
N/A
|
*
Rounded to the nearest percentage
The ETFs make periodic filings with the Securities and Exchange
Commission (“SEC”). Information provided to or filed with the SEC by each ETF pursuant to the securities laws can
be located through the SEC’s website at
www.sec.gov
. In addition, information may
be obtained from other sources including, but not limited to, press releases, newspaper articles and other publicly disseminated
documents.
Neither the issuer nor the agent makes any representation that such publicly available documents or any other publicly
available information regarding the ETFs is accurate or complete.
The Morgan Stanley Two Year Treasury Index has been developed
by Morgan Stanley & Co. LLC (the “Sponsor'') and will be calculated and rebalanced by Morgan Stanley & Co. LLC (acting
in such capacity as the ''Calculation Agent''). The Morgan Stanley Two Year Treasury Index is a rules-based index that
seeks to capture the yield from US Treasury notes with a maturity of between two years and two years and three months by notionally
purchasing futures contracts on US Treasury notes. The Morgan Stanley Two Year Treasury Index is published on Bloomberg under
the ticker symbol MSUST2TR <Index>.
The Morgan Stanley Two Year Treasury Index, including its name,
methodology and levels (the “Index Information”) is the exclusive property of the Sponsor. Unless specifically agreed
by the Sponsor, no third party is authorized to use
M
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Dual Directional Market-Linked Notes due June 28, 2024
Based on the Value of the Morgan Stanley MAP Trend Index
the Index Information in any way. The Sponsor and its affiliates disclaim any
responsibility for any unauthorised use of the Index Information by any third party intending to promote,
sponsor, endorse, market, offer, sell, distribute or reference the Index Information or any product, service or contract relating
or linked to or otherwise referencing the Index Information.
iShares
®
is a registered mark of BlackRock Institutional
Trust Company, N.A. (“BTC”). The Index is not sponsored, endorsed, sold, or promoted by BTC. BTC makes no representations
or warranties to the owners of any investment linked to the underlying index or any member of the public regarding the advisability
of investing in any investment linked to the underlying index. BTC has no obligation or liability in connection with the operation,
marketing, trading or sale of any investment linked to the underlying index.
“S&P
®
”, “S&P 500
®
”
and “SPDR
®
” are trademarks of Standard & Poor’s Financial Services LLC (“S&P”).
The Index is not sponsored, endorsed, sold, or promoted by S&P or the SPDR
®
Gold Trust (together, the “Trusts”).
S&P and the Trusts make no representations or warranties to the owners of any investment linked to the underlying index or
any member of the public regarding the advisability of investing in any investment linked to the underlying index. S&P and
the Trusts have no obligation or liability in connection with the operation, marketing, trading or sale of any investment linked
to the underlying index.
“PowerShares
®
” is a registered trademark
of Invesco PowerShares Capital Management LLC (“Invesco PowerShares”). The Index is not sponsored, endorsed, sold,
or promoted by Invesco PowerShares. Invesco PowerShares makes no representations or warranties to the owners of any investment
linked to the underlying index or any member of the public regarding the advisability of investing in any investment linked to
the underlying index. Invesco PowerShares has no obligation or liability in connection with the operation, marketing, trading or
sale of any investment linked to the underlying index.
“Vanguard
®
”
is a registered mark of The Vanguard Group, Inc. (“Vanguard”). The Index is not sponsored, endorsed, sold,
or promoted by Vanguard. Vanguard makes no representations or warranties to the owners of any investment linked to the
underlying index or any member of the public regarding the advisability of investing in any investment linked to the underlying
index. Vanguard has no obligation or liability in connection with the operation, marketing, trading or sale of any investment
linked to the underlying index.
Adjustments, Disruptions and Errors
Definitions
“
Rules
” means the description
produced by Morgan Stanley that provides an overview of the methodology of the Strategy.
“
Strategy
” means the Morgan Stanley
MAP Trend Strategy.
“
Strategy Business Day
”
means a day that is not a public holiday in the New York Stock Exchange calendar or the Chicago Board of Trade calendar.
“
Strategy Calculation Agent
” is
Morgan Stanley & Co. LLC.
“
Strategy Level
” means the calculation
of the level of the Strategy.
“
Strategy Live Date
” is March 7,
2017
“
Strategy Sponsor
” is Morgan Stanley
& Co. International plc.
Overview
The Strategy is calculated on the basis
of algorithmic formulas and therefore no discretion can be exercised by the Strategy Sponsor or the Strategy Calculation Agent
in the calculation of the Strategy. However, on occasion, there may be situations requiring adjustments to the Strategy that are
outside the scheduled adjustments and rebalances. Such adjustments might be made by Strategy Sponsor or the Strategy Calculation
Agent by having recourse to discretionary decisions. Any discretion will be used in a commercially reasonable manner and exclusively
in order to ensure that the Strategy continues to reflect, as closely as possible, the value of the Strategy components in the
sole determination of the Strategy Sponsor.
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Adjustment Events
The Strategy Calculation Agent will determine
whether a circumstance relating to any Index Component has a dilutive, concentrative or other effect on the theoretical value of
such Index Component and, if so, will (1) make the corresponding adjustment, if any, to the Units or closing prices for such Index
Component and/or any of the other provisions hereof as the Strategy Calculation Agent determines appropriate to account for that
dilutive, concentrative or other effect; and (2) determine the effective date of that adjustment. As a result of the foregoing
adjustments, the total number of Index Components may, on a given Strategy Business Day, increase or decrease.
Disruption Events
Each of the following is a “
Disruption
Event
”:
|
·
|
A
Material Change in the Index Components’ Methodology
occurs if the Strategy Sponsor determines that there has
been a material change to the Index Components or other related indices and including hours of continuous market trading and publication
of bid and ask prices or the de-listing of any of the Index Components;
|
|
·
|
An
Underlying Strategy Disruption
occurs if any dependencies needed to calculate the Trend Signal are (i) not calculated
and announced by the Strategy Sponsor (regardless of whether the dependencies are calculated by a successor sponsor or not); (ii)
replaced by a successor Strategy using the same or substantially the same methodology; or (iii) cancelled permanently;
|
|
·
|
A
Termination of Data License
occurs if the Strategy Sponsor
determines there has been a termination, revocation or suspension of any third-party license agreement or permission pursuant to
which data are supplied to compile or calculate the Strategy
|
|
·
|
A
Price Source Disruption
occurs if the Strategy Sponsor or
the Strategy Calculation Agent determines that any of the source data required to calculate the Strategy are not available. This
may include the published level of an ETF or data provided by a third party vendor. A Price Source Disruption may also include
any permanent cancellation or prolonged suspension of any Index Component.
|
|
·
|
A
Change in Law
occurs if there has been a change in applicable
law or regulation that prevents the Strategy Sponsor and/or the Strategy Calculation Agent from calculating, publishing or hedging
the Strategy.
|
|
·
|
A
Hedging Disruption
occurs if the Strategy Sponsor determines
that Morgan Stanley or any of its affiliates would be unable after using commercially reasonable efforts to:
|
|
o
|
acquire, establish, re-establish, substitute, maintain, unwind or dispose of any transactions or instruments deemed necessary
to hedge its position in relation to any relevant transactions relating to or calculated by reference to the Strategy; or
|
|
o
|
realize, recover or remit the proceeds of any such transactions or instruments;
|
|
·
|
A
Force Majeure Event
occurs if the Strategy Sponsor determines
that an event or circumstance has occurred that is beyond the reasonable control of the Strategy Sponsor and, as a result of which,
the Strategy Sponsor or the Strategy Calculation Agent is unable to calculate, publish or take any other necessary action in relation
to the Strategy. Such event or circumstance may include (without limitation) a systems failure, fire, building evacuation, natural
or man-made disaster, act of state, armed conflict, act of terrorism, riot or labor disruption.
|
Potential Actions
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Based on the Value of the Morgan Stanley MAP Trend Index
In the event that the Strategy
Sponsor determines that a Disruption Event has occurred, the Strategy Sponsor may in its discretion:
|
·
|
substitute the relevant ETF with a replacement instrument, provided
that such replacement is similarly representative of the existing Index Component;
|
|
·
|
make such determinations or adjustments to the terms of the Strategy
Methodology or the Index Components as it deems necessary including sourcing data from alternative providers;
|
|
·
|
defer, or direct the Strategy Calculation Agent to defer, the availability
of the Strategy until the next Strategy Business Day on which there is no Disruption Event;
|
|
·
|
reallocate all or a portion of the Strategy exposure to cash or cash
equivalents; or
|
|
·
|
instruct the Strategy Calculation Agent to cease to calculate and make
available the Strategy permanently.
|
Index Component Adjustments
Any adjustments
required for Index Components will be made in accordance with the standard exchange methodology. Examples of adjustments include
change of units, close price determination or change in expiration schedule or first delivery dates.
Increased Costs
If at any time following the
Strategy Live Date, due to the adoption of or any change in any applicable law or regulation or any event outside of its control,
the Strategy Sponsor determines in good faith that a party would incur an increased cost in effecting transactions in the Index
Components to reflect the notional exposure to the Strategy performance, the Strategy Sponsor retains the right to make any adjustments
to the strategy methodology so that the Strategy performance takes account of such increased costs.
Adjustment Procedures, Notification
and Consultation Process
If any modification or adjustment
is made to the calculation of the Strategy under the Rules, the Strategy Sponsor will make such modifications or adjustments based
on market conditions and other relevant factors, as in the judgment of the Strategy Sponsor, are necessary to ensure that the Strategy
continues to reflect, as closely as possible, the underlying economic interest it is designed to represent.
Wherever practicable, any adjustments
to the calculation of the Strategy, other than a pre-determined rebalancing, will be announced to the relevant interested parties
or investors. Such announcement will be made in a timely fashion and, when reasonably possible, prior to the date in which the
changes are due to become effective.
If the Strategy Sponsor determines
in its discretion that a consultation with the relevant interested parties or investors is appropriate, it will inform them of
the procedures applicable to the consultation.
Errors
The Strategy Sponsor reserves the
right to make adjustments to the Strategy Level to correct any erroneous calculation or publication of the Strategy Level.
The Strategy Sponsor will determine whether such error
M
organ
S
tanley
F
inance
LLC
Dual Directional Market-Linked Notes due June 28, 2024
Based on the Value of the Morgan Stanley MAP Trend Index
requires a change in the composition or calculation of the Strategy
and, if so, the procedures outlined above will apply.