Risk Factors

RISK FACTORS

The Plan may be suitable for you if:

• You are a Professional Investor

• You are looking for pre-defined returns that are dependent on the performance of the FTSE 100, S&P 500 and the Hang Seng China Enterprise Index

• You wish to protect your initial capital against adverse movements in the aforementioned indices to a certain level

• You are prepared to risk losing some or all of your investment should any of the aforementioned indices fall by more than 50% on Expiry of the Note

• You understand that the payment of the Accrued Return and the initial capital depends on the performance of the worst performing index

• You are willing to invest for the full five-year term, although you understand that the Note can terminate early, at the earliest after two years from the Start Date

• You would like returns to be subject to Capital Gains Tax, although this may be subject to change

• You understand that you are exposed to Morgan Stanley credit risk and should this institution fail, or default on their obligations, you may lose some or all of their initial investment

The Plan may not be suitable if:

• you are a Retail Client, and would like the rights afforded to a Retail Client including recourse to the Financial Services Compensation Scheme or the Financial Ombudsman

• You are not prepared to put your capital at risk

• You are not able to risk receiving back less than your initial investment

• You are looking for regular income

• You do not agree to the fee structure outlined in the Terms and Conditions

• You do not understand the structure and the associated risks

• You do not want to be exposed to Morgan Stanley credit risk

Important information to consider

All investors must read this section before considering any investment into the Altus Step- own Kick-Out Note and ensure that all risk factors are fully understood.

MARKET RISK – Equity indices can be highly volatile and if ANY of the indices should fall to zero on maturity then the investor will lose all their initial investment.

WORST OF PROFILE – The Accrued Return and Capital Protection Barrier depend on the worst performing index. For the Accrued Return to be paid and the Note to mature early, ALL three indices must satisfy the Kick-Out Barrier. If the worst performing index is less than the Kick-Out Barrier then the Note will not redeem early. For 100% of the capital to be paid back at maturity ALL three indices must NOT have fallen by more than 50%. If the worst performing index on Expiry is BELOW the Capital Protection Barrier then an amount less than the investor’s initial investment will be returned.

CREDIT & COUNTERPARTY RISK – Your money will be used to buy a note issued by Morgan Stanley & Co. International PLC, rated A by Standard and Poor’s. The purchase of the Note is essentially a loan to Morgan Stanley that they are obliged to repay to you at maturity. In the event of Morgan Stanley going into liquidation, you may lose all or part of your initial investment. Morgan Stanley has a credit rating of A from Standard & Poor’s at the time of publication. Standard and Poor’s rate companies from AAA (most Secure/Best) to D (Most Risky/Worst). Based on Morgan Stanley’s current rating, Altus Financial Products believe that Morgan Stanley is likely to fulfil its financial obligation and pay out the returns on early redemption or at maturity, if any, but this is not guaranteed.

TAX – HMRC at present views this structure as being subject to Capital Gains Tax. It is, however, recommended you take tax advice from an adviser and remain aware that HMRC may change its view on the structure and the tax treatment of returns. Altus Financial Products does not give tax advice.

CAPITAL AT RISK – The Altus Step-Down Kick-Out Note puts all your capital at risk. 100% of initial investment is returned at maturity if: the FTSE 100, S&P 500 and the HSCEI ALL close at or above 50% of their Initial Levels observed on the Expiry Date. If ANY index falls by more than 50% at Expiry, the investor will suffer the respective loss linked to the worst performing index on the Expiry Date. The investor in this case will receive back an amount in GBP which is less than their Initial Investment. If the worst performing index falls to zero on maturity then an investor will lose all their initial investment.

CAPPED PERFORMANCE – The return on your investment is pre-defined. If all the indices grow more than the expected Accrued Return, the investor’s return is capped to the exit return level. The investor may receive a lesser return than they would have received from an investment directly linked to the positive performance on the underlying indices.

LIQUIDITY – Investors should be aware that this investment has a maximum possible term of five years and that they should expect to have their capital tied up for this period unless the product redeems early if Kick-Out conditions are met. Morgan Stanley & Co. International plc, an affiliate of the Issuer of the Notes, will use reasonable efforts to provide daily indicative secondary market prices for the Notes. If the Note is sold back to the issuer prior to early redemption or maturity, the amount an investor receives back may be less than the initial capital invested.

MARKET PRICE – The value of this investment is complex and depends on many market parameters. The following parameters are the most important: the volatility of the underlying indices, the rate of interest of the payoff currency (GBP rates), the rate of interest of the domestic currencies in which the underlying indices are based and the correlation between the underlying indices. This Note does not include returns from dividend income or participation in corporate actions, as would be the case if directly invested in the underlying indices.

VALUATION – Morgan Stanley & Co. International plc, which is an affiliate of the Issuer of the Notes, is the calculation agent for the investment.

PROFESSIONAL INVESTORS – Professional Investors have no recourse to the Financial Services Compensation Scheme or the Financial Ombudsman. They lose all rights that are afforded to Retail Clients and no Retail Client should opt to become an Elective Professional Investor without consulting their Financial Adviser.

Please refer to the Brochure and the Terms & Conditions for full details.