Registered numb
er: 34161590
Registered off
ice:
Luna Aren
a
Herikerberg
weg 238
1101
CM
Amsterdam
The Nether
lands
MORGAN STANLEY B.V.
Report and financial statements
31 December 2021
MORGAN STANLEY B.V.
CONTENTS
PAGE
ANNUAL REPOR
T
Directors’
rep
ort
1
Directors’
resp
onsibility
statement
11
ANNUAL ACCOUN
TS
Statement of c
omprehensive
income
12
Statement of ch
anges in equity
13
Statement of f
inancial position
14
Statement of ca
sh flows
15
Notes to the fin
ancial statements
16
OTHER INFORMA
TION
Additional inf
ormation
69
Independen
t auditors’
report
70
MORGAN STANLEY B.V.
DIRECTORS’
REPORT
1
The Director
s present
their report
and financial
statements (which
comp
ri
se
the
statement
of
com
prehensive
income,
th
e
statement
of
changes
in
equity,
th
e
statement
of
fin
ancial
position
,
the
statement
of
cash
flows,
and
the
related
n
otes,
1
to
27)
for
Morgan
Stanley
B.V.
(the
“Company
”)
for
the
year
end
ed
31
December
20
21.
RESULTS
AND
D
IVIDENDS
The profit f
or the year, af
ter tax,
was
€
2
,129,
000
(20
20
:
€
3,023,000
).
During th
e year,
no
dividends were
paid
or
proposed
(20
20
:
€
15,000,000
).
PRINCIPAL AC
TIVITY
The
p
rincipal
activity
of
the
Com
pany
is
the
issuance
of
financial
instruments
including
notes,
certificates
and warr
ants
(“
structured notes
”)
and
the hedging
of
the obligations arising
pursuant
to
such issuances.
The Company
was
incorporated under Dutch l
aw
on
6 September 2001 and
has
its
statutory seat
in
Amsterdam,
T
he
Neth
erlands.
The
business
o
ffice
of
the
Compan
y
is
at
Lu
na
Arena,
Herikerb
ergweg
238,
1101
CM, Amsterdam, T
he Netherlands.
The
Compan
y’s
ultimate
par
ent
undertaking
and
controlling
en
tity
is
Morgan
Stanley,
which,
together
with
the Compan
y and Morgan
Stanley’s
oth
er subsidiary
undertakings, form
the
“Morgan
Stanley
Group”.
FUTURE OUTLOO
K
There
have
not
been
any
significan
t
changes
in
the
Company’s
principal
activity
in
the
year
under
review
and
no
significant
change
in
the
Company’s
p
rincipal ac
tivity
is
expected.
BUSINESS REVI
EW
Exposure
to
risk
factors
and
the
cur
rent
business
environment
in
which
it
operates
may
impac
t
business
results of the Com
pany’s operations.
Risk facto
rs
Risk is an inh
erent par
t of the Company
’s bu
siness activity. The
Compan
y seeks to
identify, assess, monito
r
and
m
anage
each
of
th
e
various
ty
pes
of
risk
involved
in
its
business
activities,
in
accord
ance
with
defin
ed
policies and p
rocedures.
The
Mo
rgan
Stanley
Group Risk
Appetite
Statem
ent
articulates
the
aggregate
level
and
type
of
risk th
at
the
Group is willing
to accept in order
to execute its business strategy
.
The
Mo
rgan
Stan
ley
Group
has
an
established
Risk
Manag
ement
Framework,
to
supp
ort th
e
identification
,
monitoring an
d management of risk.
The
primary
risk
areas
for
the
Compan
y in
clude
Market,
Credit,
Liq
uidity
and
Operational
Risks
wh
ich
are
discussed in the Risk M
anag
ement section
.
Business environm
ent
During the cour
se
of
2021,
the Compa
ny
has been impacted
by
factors
in
the global environm
ent
in
which
it
operates,
each
of
which
introduces risks an
d unce
rtainties that may
adversely
affect the results
of
op
erations
of
the
Company.
The
continued
prevalen
ce
of
COVID-19
th
rough
2
021
created
on
going
challenges
for
businesses, howev
er the global econo
my which had contrac
ted in 2020 began to recover
.
MORGAN STANLEY B.V.
DIRECTORS’
REPORT
2
BUSINESS REVI
EW (CONTINU
ED)
Business environm
ent (co
ntinued)
COVID-
19
Although the
gl
obal ec
onomy
has
begun
to
recover
f
rom
the COVID-19
pandemic,
as
many
health
and
s
afety
restrictions
have
been
lifted
and
vaccine
distribu
tion co
ntinues
to
increase,
cer
tain
adverse co
nsequen
ces of
the
pandem
ic
continue
to
impact
the
glob
al
economy
and
may
p
ersist
f
or
some
time
.
These
inclu
de
labou
r
shortages
and
d
isruptions
of
global
sup
ply
chains.
Th
e
growth
in
economic
activ
ity
and
demand
for
good
s
and
services,
alo
ngside
labour
shortag
es
and
supply
chain
co
mplications,
has
also
con
tributed
to
rising
inflationary
p
ressures.
Should
these
ongoing
e
ffects
of
the
p
andemic
continue
for
an
extended
period
or
worsen, the Co
mpany could experien
ce reduced client activ
ity and demand for products and
services.
Morgan Stanley
and
the
Company continue
to
be fully
oper
ational
an
d,
recognising
th
at
local conditi
on
s
vary
for offices around the world and that
th
e trajectory of the
virus continues to
b
e uncertain, employees are able
to
work
fro
m
home
and
in
offices
as
deemed
necessary.
If
signif
icant
portions
of
the
wo
rkforce,
in
cluding
key
personnel, are
unable to
work effectively
because o
f illness, go
vernment
actions, or
other restrictio
ns in
connection
with
the pandemic,
th
e impact
o
f the
pand
emic on
the Company’s business
co
uld be
exacerbated.
The
extent
to
wh
ich
th
e
consequences
of
the
COVID
-1
9
p
andemic
affect
s
the
Company’s
b
usiness,
results
of o
perations an
d financial
condition
and
ability to
take
capital actions,
will dep
end
on fu
ture developm
ents
that
r
emain
u
ncertain.
This
in
clud
es
the
rate
of
distribution
and
administration
of
vac
cines
glob
ally,
the
severity and
du
ration
of any
resurg
ence
of COVID-19 variants,
future acti
o
ns
taken by
gov
ernmental
authorities,
central
banks
and
o
ther
third
party
service
providers.
Moreover,
the
effects
o
f
the
COVID
-
19
pandemic
may heighten many of the
other risks described
in the Directors’ Repo
rt.
Escalation of Wa
r in Ukraine
The Company has
limited direct
exp
osure to
Russia and Ukraine.
Th
ere may
be negative ef
f
ects to
the global
economy
due
to
the
curren
t
disruption
to
th
e
financial
mar
kets,
global
trade
payment
systems
a
nd
capital
flows as
well as
from
the impact
of
sanctions. The
extent
to which
the impac
t to the
global eco
nomy affects
the
Com
pany
will
depend
on
fu
ture
dev
elopments
th
at
are
high
ly
uncer
tain
and
cannot
be
pred
icted.
The
Company will c
ontinue to closely mo
nito
r events and their poten
tial impact.
Replacement of London Interbank Offered Rate (
“L
IBOR”)
and replacement or reform of other interest
rat
e
benchmarks
The
Com
pany
contin
ues
to
implement
its
Mo
rgan
Stanley
-wide
transition
plan
for
IBOR
ex
posures.
As
of
31
Dec
ember
2021,
the
Company’
s
exposure
to
LIBOR
-refer
enced
co
ntracts
comprised
one
ex
ternally
-
issued GBP-link
ed stru
ctured note,
which m
atures during 2022.
This str
uctured note
is not significan
t to the
Company.
See note
26
for further d
etail.
Overview
of
20
21
The
issued
structur
ed
notes
expose
the
Com
pany
to
the
risk
of
ch
anges
in
market
pr
ices
of
th
e
under
lying
securities,
interest
rate
risk
and,
where
d
enominated
in
currencies
other
than
Euros,
the
risk
of
changes
in
rates
of
exchan
ge b
etween
the
Eur
o
and
the o
ther
relev
ant
currencies.
The
Comp
any
uses
the
co
ntracts
that
it
purchases
from
other
Mo
rgan
Stanley
Group
undertakings
to
hedge
the
market
price,
interest
rate
an
d
foreign cu
rrency risks associate
d with the
issuance
of
the structu
red notes.
The
statement
of
comprehensive
income
for
the
year
is
set
out
on
page
12
.
The
Company
reported
a
pr
ofit
before
income
tax
of
€
2,
825
,000 for
the year
ended
31
Dec
ember 202
1, compar
ed
to
a
profit befo
re inco
me
tax
of
€
4,031,00
0
for
the
prior
year.
The
decrease
in
profit
before
income
tax
is
driven
b
y a
d
ecrease
in
the
Company’s sh
are of business revenu
es
.
Other
revenu
e
of
€3,848
,000
for
the
year ended
31
December
20
2
1
primarily
comprises
man
agement
re
ch
arges
of
€
2
,8
25
,000
and
net
foreign
exchange
gains
of
€
1,023,000
compar
ed
to
€
5,1
09,000
of
managemen
t
re
ch
arges
received
in
the
prior
yea
r.
The
d
ecrease
is
in
line
with
the
d
ecrease
in
profit
befo
re
tax.
MORGAN STANLEY B.V.
DIRECTORS’
REPORT
3
BUSINESS REVIEW (
CONTINUED)
Overview
of
2021 (continued)
The
Comp
any
has
reco
gnised
a
net
expense
of
€
79
,
521
,
0
00
in
‘Net
trading
ex
pense
’
compared
to
a
net
expense
of
€
57,448,000
for
the
prior
year,
with
a
correspond
ing
net
income
of
€
79
,521,000
recogn
ised
in
‘Net
income
on
other financial instruments held
at
fair
value’
(20
20
: net income
of
€
57,448,000).
T
h
is
is
due
to
fair
value
changes
attributable
to
market
movements
on
the secu
rities un
derlying
structured no
tes hedged
by
derivatives classified
as
trading f
inancial instrumen
ts.
The statement o
f financial
position for the Com
pany is set o
ut on pag
e 1
4
. The Comp
any’s total assets at 31
December 202
1 are
€
9,793,864,
000, an
in
crease
of
€
1,365,702
,000
or
16
% when compared to 31 December
2020
. Total liabilities of €
9,762,
272
,000 rep
resent a
n
in
crease of €
1,363,
573
,000 or
16
% when
compared
to
total
liabilities
at
3
1
December
2
0
20
.
These
movem
ents
are
primarily
attributable
t
o
the
value
of
issued
structured notes and the relate
d hedging instruments held at
31 December 202
1. Structured notes reflected in
‘Debt
and
other
borrowings’
in
creased
by
15
%
compared
to
31
December
20
20
.
This
is
a
r
esult
of
new
issuances
and
fair
value
movements
in
the
yea
r
partially
bein
g
o
ffset
by
maturities.
The
net
in
crease
in
the
value of the relate
d hedging instruments is pr
imarily the result of
the n
et issuances and
market movem
ents.
The
performance
of
the
Company
is
inclu
ded
in
the
resu
lts
o
f
the
Morgan
Stanley
Group.
The
Comp
any
’s
Directors believe that
pr
oviding further performance indicators
fo
r the
Comp
any itself
wo
uld not enhance an
understand
ing of the development, p
erformance or position of
the business of the Com
pany.
The risk managemen
t section below sets
out
the Company's and
the Morgan Stanley Group's policies for the
managemen
t
of
liquidity and cash flow
risk and
other significant b
usiness risks.
Risk mana
gement
Risk
is
an
inh
erent p
art
of
the
Company’s
business activity
. The Com
pany
seeks
to
iden
tify, assess, monitor
and
manage
each
of
the
various
typ
es
of
risk
in
volved
in
its
b
usiness
activ
ities,
in
accord
ance
with
de
fin
ed
policies and pro
cedures. The Company
ha
s leveraged the risk managem
ent policy framework
of
the Morgan
Stanley
Group.
The
risk
managemen
t
policy
framework
includes
escalation
to
the
Company’
s
Bo
ard
of
Directors
an
d
to
appro
priate
senior
managemen
t
personnel
as
well
as
o
versight
through
th
e
Company’s
Boar
d
of
Directors.
Set
out
below
is
an
overview
of
the
Company’s
policies
for
the
management
of
fi
nancial
risk
and
other
significant business risks. More detailed
qualitative and quantitative disclosures about the
Company
’s
managemen
t
of
and
ex
posure
to
fin
ancial risks ar
e included
in
n
ote
20
to
the finan
cial statements.
Market risk
Market
risk
refers
to
the r
isk that
a
change
in
the
level
of
one
or
more
market p
rices,
rates, spreads,
indices,
implied
vo
latilities,
correlations
or
other
market
factors,
such
as
market
liquidity,
will
result
in
losses
for
a
position
or
portfolio.
The Compan
y man
ages the mark
et risk associated
with it
s tradin
g activities
at
a
legal entit
y tradin
g division
and
at
an
individual
product
level.
Sound market
risk management
is
an
integral
part
of
the
Compan
y’s
culture.
Th
e C
o
mpany
is
r
esponsible for
ensuring
that
market
risk
exposures
are
well-man
aged
and
mon
itored.
The
Company
also
ensures
transparency
of
material market risks,
monitors compliance with
established
limits,
and escalates
risk
concentratio
ns
to
appropr
iate senior man
agement.
The
market
risk
m
anagement
policies
and
procedures
for
the
Compan
y
are
con
sistent
with
those
of
the
Morgan
Stanley
Group
and
include
escalation
to
the
Company’
s
Board
of
Directors
and
appropriate
senior
managemen
t personnel.
It
is
the policy
and objective
of
the Com
pany not
to
be
exposed
to
net m
arket risk.
MORGAN STANLEY B.V.
DIRECTORS’
REPORT
4
BUSINESS REVI
EW (CONTINU
ED)
Risk mana
gement (continued)
Credit risk
Credit
r
isk
r
efers
to
the risk
of
loss arising
when a
borr
ower,
cou
nterparty
or
issuer d
oes
not
m
eet
its
finan
cial
obligations
to
the Compan
y. Credit risk
includes coun
try risk, which
is
fu
rther describ
ed below.
Credit
risk
management
policies
and
pr
ocedures
for
the
Company
are
consistent
with
those
of
the
Morgan
Stanley
Group
and
include
escalation
to
the
Company’s
Board
of
Directors
and
appropriate
senio
r
managemen
t personnel.
Credit risk exposure
is
managed
on
a global basis and
in
consideration
of
each
significant legal entity within
the Morgan Stanley
Group. The credit risk management
policies and procedures establish the framewo
rk for
identifying
, measuring, monitoring and
controlling
credit
risk
whilst
ensurin
g transparency
of
material credit
risks,
compliance
with
established
limits
and
escalating
risk
co
ncentration
s
to
appropriate
senior
managemen
t.
Additional
information
on
the primary
credit exposur
es, credit risk manag
ement and
mitigation, exposure
to
credit risk,
including th
e maximum exposur
e
to
credit r
isk
by
cr
edit rating
is
p
resented
in
note 20.
Country
risk expo
sure
Country
risk
expo
sure
is
th
e
risk
that
even
ts
in,
or
affecting,
a
foreign
country
mig
ht
adversely
affec
t
the
Company.
“For
eign
coun
try”
mea
ns an
y coun
try oth
er
than The
Netherland
s. So
vereign
risk,
by
contrast,
is
the
risk
that
a
go
vernment
will
be
u
nwilling
or
un
able
to
meet
its
debt
oblig
ations,
or
renege
on
the
debt
it
guarantees.
Sovereign
risk
is
sing
le-name
r
isk
for
a
sovereign
governm
ent,
its
ag
encies
and
guaranteed
entities.
The
Com
pany
enters
into
the
majo
rity
of
its
financial
asset
tr
ansactions
with
oth
er
Mo
rgan
Stanley
Gro
up
undertak
ings,
p
rimarily
in
Luxembourg
,
the
United
Kingdom
(“UK”)
and
the
United
States
of
America
(“
US
A”)
.
Both
the
Comp
any
and
th
e
other
Morgan
Stanley
Group
undertak
ings
are
wholly
-owned
subsidiaries
of
the
sam
e
u
ltimate parent
entity, Morgan Stanl
ey
.
As
a result
of
the
implicit support that
would
be
provid
ed
by
Morgan
Stanley,
th
e
Company’
s
coun
try
risk
is
consider
ed
a
component
of
the
Mo
rgan
Stanley
Grou
p’s
credit r
isk.
Country risk
exposure
is
measured
in
accordance with
the
Morgan
Stan
ley
Group’s
internal
risk
man
agement
standards
and in
cludes o
bligations f
rom sov
ereign gov
ernments, co
rporations,
clearing
houses and
fin
ancial
institutions.
The
Morgan
Stanley
Group
actively
manages
country
risk
exposure
through
a
co
mprehensive
risk
managem
ent
framework
that
combines
credit
and
market
fun
damentals
and
allows
the
Mor
gan
Stanley
Group
to
effectively
identify, monitor and
limit country
risk.
The Morgan Stanley
Group’s
o
bligor credit evaluation process
may also identify indirect e
x
posures whereby
an
obligor
has
v
ulnerability
or
exposure
to
another
country
or
jurisdictio
n.
Examples
of
indirect
exposures
include
mutual
f
unds
that
invest
in
a
single
country,
o
ffshore
companies
whose
assets
reside
in
another
country
to
that
of
the
offshore jurisdiction
and
finance company
subsidiaries
of
corporations.
Indirect
exposures
identified thr
ough the cred
it evaluation pro
cess may result
in
a reclassificatio
n of cou
ntry of risk.
Stress
testing
is
one
of
th
e
Mor
gan
Stanley
Gro
up’s
pr
incipal
risk
managem
ent
tools,
used
to
identify
and
assess the
imp
act
of
sever
e stresses
on
its
portfolios. A number
of
different
scenarios are
used
to
measu
re the
impact
on
credit risks
and
market risks
stemming
from neg
ative econom
ic and
political
scenarios, in
cluding
possible
contag
ion
ef
fects
where
appr
opriate.
The
results
of
th
e
stress
tests
m
ay
result
in
the
am
endment
of
limits
or
exposure
mitigation.
MORGAN STANLEY B.V.
DIRECTORS’
REPORT
5
BUSINESS REVI
EW (CONTINU
ED)
Risk mana
gement (continued)
Liquidity risk
Liquidity
risk
re
fers
to
the
risk
that
the
Company
will
be
unable
to
finance
its
operations
due
to
a
loss
of
access
to
the capital markets
or
difficulty
in
liquidating
its
ass
ets. Liquidity risk
en
compasses the
Com
pany’s
ability
(
or
perce
ived
ab
ility)
to
meet
its
fi
nancial
o
bligations
with
out
experiencing
significant
bu
siness
disruption
or
reputation
al
d
amage
that
may
threaten
the
Company’s
viability
as
a
going
concern
as
well
as
the associated funding risks triggered
by
th
e market
or
idiosyncratic
stress events that may
cause unexpected
changes
in
funding n
eeds
or
an
inab
ility
to
r
aise new funding.
The
primary go
al
of
the
Morgan
Stanley
Group’s
liqu
idity risk m
anagement
framework
is
to
ensure
that
the
Morgan
Stanley
Group,
including
the
Comp
any,
has
access
to
adequate
fund
ing
across
a
wide
range
of
market
conditions
and
tim
e
horizons.
The
framework
is
designed
to
enable
the
Mo
rgan
Stan
ley
Gr
oup
to
fulfil
its
financial
obligations
and
su
pport
the
execution
of
the
Company’s
bu
siness
strategies.
The
framewor
k
is
further
described
in
no
te
20
.
The C
ompany
co
ntinues
to
actively manage
its
capital
an
d liquidity
position
to
ensur
e
ad
equate resources
ar
e
available
to
support
its
activ
ities,
to
enab
le
it
to
with
stand market
stresses.
The
Company
hedges
all
of
its
fin
ancial
liabilities
with
f
inancial
assets
entered
in
to
with
other
Morg
an
Stanley
Grou
p
undertakings,
wh
ere
bo
th
the
Company
and
other
Morg
an
Stanley
Gr
oup
undertakings
are
wholly-o
wned subsidiaries
of
the same parent,
Morgan Stanley.
Operational
risk
Operational
risk refers
to
the ris
k
of
loss,
or
of
da
m
age
to
the
Company’s
reputation, resulting
from
inadequate
or
failed processes
or
systems, from
human factors
or
from external
ev
ents (e.g.
fraud
,
theft, legal
and
compliance
risks,
cyber-attacks
or
damage
to
physical
assets).
Operation
al
risk
relates
to
the
following
risk
event
ca
tegories
as
def
ined
by
Basel
Capital
Standar
ds:
internal
fraud;
external
fraud;
employment
practices
and
workplace
safety;
clients,
pro
ducts
and
business
practices;
business
disrup
tion
and
system
failure; dam
age
to
physical
assets; and execu
tion, delivery
and process man
agemen
t.
The Company
may incur
operational risk
across the f
ull scope
of
its
business
activities.
The
Com
pany
has
established
an
oper
ational
risk
framework
to
id
entify
mea
sure,
monitor
and
control
r
isk
across
the
Company.
This
framework
is
consistent
with
the
framework
established
by
the
Morgan
Stan
ley
Group
and
includes
escalation
to
the
Company’s
Board
of
Directors
and
appropriate
senior
management
personnel.
The
framewo
rk
is
con
tinually
evolving
to
reflect
ch
anges
in
th
e
Com
pany
and
to
respo
nd
to
the
changing r
egulatory
and business environmen
t.
The C
ompany
h
as
imp
lemented operational risk
data and
assessment systems
to
m
onitor and
an
alyse internal
and
external
oper
ational
r
isk
even
ts,
to
assess
b
usiness
env
ironment
and
internal
contr
ol
fac
tors
and
to
perform scenario analysis.
The collect
ed
d
ata elements
are incorporated
in
the
operation
al ri
sk capital model.
The
m
odel
encomp
asses
bo
th q
uantitative
and
qualitativ
e
elements.
Internal
loss
d
ata
and
scenario
analy
sis
results are direc
t inputs
to
the
capital mo
del, while
external o
perational
incidents, bu
siness env
ironment
and
internal co
ntrol factors
are evaluated
as
part
of
the scenario analysis p
rocess.
In
additio
n,
the
Company
employs
a
variety
of
risk
processes
an
d
m
itigants
to
man
age
its
op
erational
risk
exposures.
These
include
a go
vernance
framework,
a
comprehen
sive
risk
management
program
and
insurance.
Oper
ational
risks and
associated
risk exp
osures ar
e asse
ssed
relative
to
the
risk
tolerance
established
by
the
Board and
are prioritised
accordingly.
MORGAN STANLEY B.V.
DIRECTORS’
REPORT
6
BUSINESS REVI
EW (CONTINU
ED)
Risk mana
gement (continued)
Operational
risk (continued)
The
breadth
and
variety
of
operational
r
isk
are
such
that
th
e typ
es
of
mitigating
activities
ar
e
wide-ranging
.
Examples
of
such
activ
ities
include
continuous
en
hancement
of
defences
against
cy
ber-attacks;
use
of
legal
agreements and
contracts
to
transfer and
/
or
limit
operation
al
risk exposures;
due
diligence; implemen
tation
of
enhanced
policies
and
procedures;
exception
management p
rocessing
controls;
and seg
regation
of
duties.
The
Oper
ational
Risk
Ma
nagement
Framework
requires,
amo
ng
other
things,
policies
and
procedu
res
to
record
pr
operly
and
ver
ify
a
large
number
of
tran
sactions
and
events,
however
at
times,
these
po
licies
and
procedures
m
ay
not
be
fully
effective.
The
trading
risk
man
agement
strateg
ies
and
techniques
seek to
balance
our ability to profi
t from trad
ing positions with our expo
sure to potential lo
sses
.
Primary
responsibility
for
the
management
of
operational
risk
is
with
the
business
segments,
the
con
trol
groups and
the business man
agers ther
ein. Th
e business manag
ers maintain
processes and
controls d
esigned
to
identify,
assess,
manage,
m
itigate
and
report
o
perational
risk.
Each
of
the
business
segm
ents
has
a
designated
oper
ational
risk
coordinator.
The
operational
risk
coord
inator
r
egularly
reviews
operation
al
r
isk
issues and reports
to
the
Company’s
senior management within
each
business. Each
control group also has a
designated
operational
r
isk co
ordinator
and
a
forum
for discussing
operation
al
risk matter
s with
the
Company’s
senior management. Oversight
of
operational risk
is
provided
by
t
he
Operational R
isk
Oversight
Committee,
regional
risk
committees
and
senior
m
anagement.
In
the
ev
ent
of
a
m
erger;
join
t
venture;
divestiture; reorganisation
;
or
creation
of
a new legal
en
tity,
a new
p
roduct
or
a business
ac
tivity, operational
risks are
co
n
sidered, and
any necessary chan
ges
in
pro
cesses
or
controls are
implemented.
T
he
Op
erational
Risk
Department
provides in
dependent
oversight
of
operational
risk
manag
ement
and
assesses mea
sures
and
monito
rs o
perational
risk
again
st toleran
ce.
The
Operation
al
Risk
Departmen
t wo
rks
with
the
business
divisions
and
control
groups
to
help
ensure
a
transpar
ent,
consistent
an
d
comprehen
sive
framework
for managing
operational risk with
in
each
area and
across the Com
pany.
The
Operatio
nal
Risk
Depa
rtment
scop
e
includes
o
versight
of
techn
ology
risk,
cybersecurity
risk
,
information secur
ity risk, the fraud
risk management and prev
ention programm
e and third party
risk
managemen
t
(supp
lier
and
r
isk
ov
ersight
an
d
assessment)
programme.
Furthermore,
the
Op
erational
Risk
Department
supports
the
collection
and
repor
ting
of
operational
risk
incidents
an
d
the
ex
ecution
of
operational
risk assessments; provides the infrastru
cture needed for risk measurement
and risk management;
and
ensur
es
o
ngoing
validatio
n
and
ver
ification
of
th
e
Company’s
adv
anced
measurement
ap
proach
for
operational
risk capital.
The
Fu
sion
Resilience
Centre’s
mission
is
to
understand,
prepare
for,
respond
to,
r
ecover
an
d
lear
n
from
operational threa
ts and incidents that impact the Morgan Stanley Group, from cyber and fraud to technology
incidents,
climate
related
events,
terror
at
tack,
geopo
litical
un
rest
and
pandemics
.
The
Company
Business
Continuity
and
Disaster
r
ecovery
program
s
ar
e
design
ed
to
p
rovide
assurance
of
business
con
tinuity
in
the
event of disruption
s impacting the Company’s people, technology
, facilities and third pa
rties, and to comply
with
regulato
ry
requirements.
The
key
elemen
ts
of
these
p
rograms
includ
e
cr
isis
m
anagemen
t,
business
continuity p
lanning, disaster recov
ery, testing verificatio
n, and process impr
ovement. Business un
its within
the Morgan Stanley Group ma
in
tain business
co
ntinuity plans,
including
identifying
processes and
strateg
ies
to con
tinue bu
siness critical
processes dur
ing a
business co
ntinuity
inciden
t. The
business units
also test
the
documented
preparation
to
provide
a
reasonab
le
expectation
t
hat,
du
ring
a
bu
siness
continuity
incident,
the
business unit
will
be
ab
le to
co
ntinu
e its
critical business processes and limit
the impact of
t
he incident to
th
e
Morgan Stanley Group and its clients. Technical recovery pl
an
s are maintained for critical techn
ology assets
and
d
etail
the
steps
to
be
implem
ented
to
reco
ver
from
a
disruption
impacting
the
assets’
pr
imary
location.
Disaster recovery
testing is performed to
validate the recovery capab
ility of these critical techno
logy assets
.
MORGAN STANLEY B.V.
DIRECTORS’
REPORT
7
BUSINESS REVI
EW (CON
TINUED)
Risk mana
gement (continued)
Operational
risk (continued)
The
Compan
y
maintains
a
prog
ramme
that
oversees
o
ur
cyber
and
information
security
r
isks.
Our
cybersecurity
and
inform
ation
secu
rity
policies
are
designed
to
protect
the
Com
pany’s
i
n
formation
assets
against
un
authorised
disclosure,
modification
or
misuse
and
are
also
designed
to
address
reg
ulatory
requirements. These
policies
and
procedur
es
cover a
broad
range
of
ar
eas,
includi
ng:
id
entification
of
intern
al
and
external threats,
access
control, d
ata secu
rity protective co
ntrols, detec
tion
of
malicio
us
or
unau
thorised
activity, incid
ent response
and recovery
planning.
In
co
nnection
with
its
ongoing
o
perations,
the
Company
utilises
th
ird
party
supp
liers,
which
it
anticipates
that such
usage
will
continue
a
n
d may
increase
in
t
h
e future.
These services include,
for
e
x
ample, outsourced
processing
and suppor
t functions
and con
sulting and
other professional
services. Th
e
Company
’s
risk-b
ased
approach
to
m
anaging exposure
to
these services includes the exec
ution
of
due
diligence, implementatio
n
of
service
level
and
other
contr
actual
agreements,
consider
ation
of
operation
al
risk
and
ongoing
monitoring
of
third
party
supp
liers’
performance.
T
he
Company
maintains
a
third
party
risk
progr
amme
with
appr
opriate
governance,
pol
icies,
proce
dures,
and
technology
th
at
suppo
rts
alignment
with
our
risk
tolerance
and
is
designed
to
meet
regulato
ry
requirem
ents.
The
p
rogram
includes
governance,
policies,
p
rocedures,
and
enabling. The
thir
d-party risk
pro
gramme includes
the adoption o
f
appropriate risk
management controls and
practices throu
ghout the third
-party m
anagement lifecy
cle to manage r
isk of service failur
e, risk of data loss
and reputation
al risk, among others.
Legal, regu
latory and co
mpliance risk
Legal,
regulatory
and
co
mpliance
risk
includes
the
risk
of
legal
or
regulatory
sanctions,
material
financial
loss;
inclu
ding
fines,
penalties,
judgemen
ts,
damages
and
/
or
settlemen
ts,
limitations
on
our
business,
or
loss
to
reputation
wh
ich
the
Company
may
suffer
as
a
r
esult
of
a
fa
ilure
to
comply
with
laws,
regu
lations,
rules,
related
self-
regulatory
o
rganisation
standards
and
cod
es
of
conduct
ap
plicable
to
our
business
activities. This
risk
also
includes
co
ntractual
and
comm
ercial
risk,
su
ch
as
the
risk
that
a
counterparty’s
performan
ce
obligations
will
be
un
enforceable.
It
also
includes
complian
ce
with
Anti-Money
Launder
ing,
anti-corruption
and
terrorist
f
inancing
rules
and
regulation
s. The
Company
is
generally
subject
to
exten
sive
regulation
in
the different
jurisdictions
in
which
it
con
ducts its business.
The Company, principally through
the Morgan Stanley
Group’s
Legal and Compliance Division, has
established proced
ures based
on
legal and regulatory requirements
on
a worldwide basis that are designed
to
facilitate
comp
liance
with
applicable
statutor
y
and
reg
ulatory
requirem
ents
and
to
require
that
the
C
o
mpany’s
policies relating
to
business co
nduct,
ethics and prac
tices are followed
globally.
In
add
ition,
the
Compan
y
has
established
proced
ures
to
mitigate
the
risk
that
a
coun
terparty’s
per
formance
obligations
will
be
un
enforceable,
inclu
ding
con
sideration
of
co
unterparty
legal
authority
and
cap
acity,
adequacy
of
legal
do
cumentation,
the
p
ermissibility
of
a
transaction
under
applicab
le
law
and
wh
ether
applicable
bankruptcy
or
in
solvency
laws
lim
it
or
alter
contractual
rem
edies. The
heightened
legal
and
regulatory focus
on
the
financial
serv
ices
in
dustry presents
a continuing
bu
siness
ch
allenge
fo
r
the
Company.
Cyber
and
information
security risk man
agement
The Company maintain
s a program that oversees its cyber and information secu
rity risks. Cybersecurity and
information
s
ecurity
policies,
procedures
and
technologies
are
designed
to
protect
the
Company’s
information
assets
against
u
nauthorised
disclosur
e, mo
dification
or
misuse
and
ar
e also
designed
to
address
regulatory
r
equirements.
Th
ese
policies
and procedures
cover
a
bro
ad
range
of
area
s,
including:
identification
of
inter
nal
and
external
th
reats,
access
co
ntrol,
data
security,
protectiv
e
controls,
detec
tion
of
malicious
o
r
unauthorised ac
tivity, incident response an
d recovery planning.
A
cyber attack,
informatio
n
o
r
security b
r
each
or
a
technology failure
could adversely
affect
Morgan
Stanle
y’s
ability
to
con
duct
business,
man
age
exp
osure
to ris
k or
result
in
disclosu
re
or
misuse
of
con
fidential
or
proprietary
informatio
n
and
o
therwise
adversely
imp
act
results
of
operations,
liquidity
and
financial
condition, as well as cau
se reputation
al har
m.
MORGAN STANLEY B.V.
DIRECTORS’
REPORT
8
BUSINESS REVI
EW (CONTINU
ED)
Risk mana
gement (continued)
Cyber
and
information
security risk man
agement
(continued)
Morgan Stanley maintain
a s
ig
nificant amount of personal information on customers, clients,
em
ployees and
certain
counterparties
that
Mor
gan
Stanley
are
required
to
p
rotect
und
er
v
arious
state,
federal
and
international
data protection and privacy
laws.
These
laws
may
be
in
co
n
flict
with
o
ne
another,
or
courts
and
regulators
may
interpret
them
in
ways
that
Morgan Stan
ley had not anticipated o
r that adversely affects its business.
Cybersecurity
risks
for
f
inancial
in
stitutions
hav
e
significantly
increased
in
recent
years
in
par
t
becau
se
o
f
the
proliferation
of
new
technologies,
the
use o
f
the internet,
mobile
telecommunications
and
cloud
technolog
ies
to
conduct
financial
transactions,
and
the
increased
sophisticatio
n
and
activities
o
f
organised
crime, hackers,
terrorists and oth
er external extremist parties, inclu
ding foreign state acto
rs, in some
circumstances as a m
eans to promo
te political ends.
In addition
to the
growing sophistication
of certain
par
ties,
th
e
co
mmoditisation of
cyber tools
which are
able
to
be
wea
ponised
by
less
sop
histicated
actor
s
has
led
to
an
increase
in
th
e
exploitation
o
f
technolog
ical
vulnerab
ilities. Further,
foreign state actors
hav
e become more
soph
isticated over time,
increasing the risk
o
f
such
an
attack.
Any
of
these
p
arties
may
also
attem
pt
to
f
r
audulently
induce
employ
ees,
customers,
clients,
vendors or o
ther third parties or users of
Morgan Stanley systems.
Cybersecurity
risks
may
also
derive
from
human
error,
fraud
or
malice
on
the
part
of
employ
ees
or
third
parties, includ
ing third party
pro
viders, or may
result from
accidental techno
logical failure. These risks may
be
heightened
by
the
COVID
-19
pandemic,
which
has
caused
the
majority
of
employees
to
wo
rk
remotely
and access Mor
gan Stanley secure
networks through
their home networks.
There is
no
gu
arantee
th
at
the
m
easures
Morgan Stanley
takes
will provide a
bso
lute
secu
rity
or recoverability
given
the
techniques
used
in
cy
ber
-attacks
are
complex
and
frequen
tly
change,
and
m
ay
no
t
b
e
able
to
be
anticipated.
Like
other
financial
serv
ices
firms,
Mor
gan
Stanley,
its
third
party
providers,
and
its
clients
continu
e
to
be
the
subject
of
unauthorised
access
attacks,
mi
shandling
or
m
isuse
of
informatio
n,
computer
viruses
o
r
malware, and
cyber-
attacks.
Such
events could
cau
se interruptions
or
malfuncti
ons
in Morgan
Stanley’s,
its clients’,
employees’,
partners’, vendors’,
counterparties’ or
third
parties’ operations,
as
well
as the
unauthorised
release,
gath
ering,
monitoring, misuse, loss
or destruction of
confidential,
pro
prietary and
other information
of
Mo
rgan Stanley,
its employees, its customers or
of other third parties. Any
o
f t
h
ese events could result
in reputational damage
with
Morg
an
Stan
ley’s
clients
and
the
market,
client
dissatisfaction,
ad
ditional
costs
to
Morg
an
Stanley
to
maintain and upd
ate its operational and security systems and infrastructure, regulatory investigations,
litigation
o
r
enforcemen
t,
or
regulato
ry
fines
or
penalties,
any
of
which
could
adversely
affect
Morgan
Stanley’s business, fin
ancial condition
or results of operations
.
Given Morgan Stanley’s global footprint and the
hig
h volume of transactions processed, the
large number of
clients, partners, vendors
an
d counterparties
with
which
it does business,
and the increasing
sophistication of
cyber
attacks,
information or
security
breach
could occu
r and p
ersist for
an exten
ded period
of time
withou
t
detection.
Morgan
Stan
ley
expects
that
an
y
investigatio
n
of
a
cyb
er attack
would
be
inherently
unpredictable
an
d
that
it
would
tak
e
time
bef
ore
the
completion
of
any
in
vestigation
a
nd
before
there
is
availability
of
full
and
reliable
information
.
Dur
ing
such
time
Morgan
Stanley
would
not
necessarily
know
th
e
extent
of
the
harm
or
how
best
to
rem
ediate
it,
and
certain
errors
or
actions
could
be
repeated
or
compounded
before
they
are
discovered
and remediated, all
or
any of which
would further increase the costs
an
d consequences of a cyber
attack.
MORGAN STANLEY B.V.
DIRECTORS’
REPORT
9
BUSINESS REVI
EW (CONTINU
ED)
Risk mana
gement (continued)
Cyber
and
information
security risk man
agement
(continued)
While man
y of
Mo
rgan
Stanley’s ag
reements
with p
artners
and
third
party ven
dors inclu
de indemn
ification
provisions,
Mo
rgan
Stan
ley
may
not
b
e
able
to
recover
suff
iciently,
or
at
all,
under
such
provision
s
to
adequately
offset
any losses
it
may
incur.
In addition,
althou
gh
Morgan
Stanley
main
tains
insurance
coverage
that
may, subject
to
policy
terms
and
conditions,
cover
certain
aspects
o
f
cyber
and
information
secur
ity
risks,
such insuran
ce coverage may be in
sufficient to cover all losses.
Morgan
Stan
ley
continues
to
make
investmen
ts
with
a
v
iew
toward
maintaining
and
enhancing
its
cybersecurity
posture.
Th
e
c
ost
of
managing
cyber
and
information
security
risks
and
attacks
alo
ng
with
complying
with
new,
in
creasingly
expansive,
and
evolving
regulato
ry
requi
rem
ents
could
adver
sely
affect
the results of o
perations and business.
Culture, values
and
conduct
of
emp
loyees
Employees
of
the Morg
an Stanley
Group
are
accountable
for conducting
them
selves in
accordance
with
the
Morgan
Stanley
Group’s
core
values
Put
Cl
ients
First,
Do
the
Right
Thing,
Lead
with
Excep
tional
Ideas,
Commit to
Diversity
and
Inclusion
and
Give
Back. The
Morgan
Stanley
Group’s
core values
drive
a shar
ed
set o
f
behav
iours
and
attrib
utes that
h
elp
employ
ees
make
dec
isions
consistent
with
the
exp
ectatio
ns
of
our
clients, shareholders, regulators,
Boar
d of
Dir
ectors and t
he public. The Mo
rgan Stanley Group
is committed
to
reinforcing
and
confirm
ing
adherence
to
the
co
re
values
through
o
ur
gover
nance
framewor
k,
tone
from
the top,
management oversight, risk management
and controls, and
a three
lines of
defen
ce structure
(business, contr
ol functions such as Risk Man
agement an
d Compliance, and Intern
al Audit).
The Morgan Stanley Group’
s Board is responsible for overseeing the Morgan Stanley Group’
s pra
ctice
s and
procedures
relating
to
cu
lture,
values
and
conduct.
The
Mo
rgan
Stanley
Group’s
Culture,
Values
and
Conduct
Committee,
along
with
the
Comp
liance
and
Conduct
Risk
Comm
ittee,
are
the
senior
managemen
t
committees
that
ov
ersee
the
Morgan
Stanley-
wide
cu
lture,
valu
es
and
conduct
pr
ogram,
r
eport
regularly
to
the
Morgan
Stanley Grou
p Board; and complemen
t ongoing business and r
egion
-spec
ific culture initiatives.
A
fu
ndamental
building
block
of
th
is
progr
am
is
the
Morgan
Stanley
Group’s
Cod
e
o
f
Cond
uct,
w
hich
establishes
standar
ds
for
emp
loyee
conduct
th
at
further
r
einforce
the
Morgan
Stanley
Group’s
co
mmitment
to
integ
rity
an
d
ethical
conduct.
Ev
ery
n
ew
hire
and
every
emp
loyee
,
annually,
is
req
uired
to
attest
to
their
understand
ing
of
and
ad
herence
to
the
Cod
e
of
Con
duct.
Morgan
Stanley’s
Glo
bal
Conduct
Risk
Managemen
t
Policy
also
sets
out
a
consistent
global
framework
for
managing
conduct
r
isk
(i.e.,
the
risk
arising from misconduct
by employees or
contingen
t workers)
and conduct risk incidents
at Morgan
Stan
ley.
Morgan Stanley’s
rem
uneration
p
olicies
an
d practices
ensure that
there is
an alignment between
reward, risk,
culture
and
conduct.
Conduct,
culture,
and
core
v
alues
are
considered
in
the
em
ployee
annual
performan
ce
evaluation process. The
p
erforman
ce review process
also
includes
ev
aluation of employee
con
duct related to
risk
management
practices
and
the
Morgan
Stanley
Group’s
expectatio
ns.
The
Morg
an
Stan
ley
Group
also
has
several mutually
reinforcing processes
to identify e
m
ployee conduct
th
at
may hav
e
an impact
on
employment status, cu
rrent year comp
ensation and
/ or prior year
compensation.
MORGAN STANLEY B.V.
DIRECTORS’
REPORT
10
BUSINESS REVI
EW (CONTINU
ED)
Going concer
n
Business
risks
associated
with
the
unce
rtain
market
and
economic
condition
s
ar
e
being
actively
monitored
and managed by the
Company. Retaining sufficien
t capital and liquidity to withstand these mark
et pressures
remains
cen
tral
to
the
Company
’s
strategy
.
I
n
particu
lar,
the
Company’s
cap
ital
and
liquidity
is
deemed
sufficient
to
exceed
regu
latory
min
imums
u
nder
bo
th
a
no
rmal
an
d
in
a
stressed
market
environment,
including
the
current
and
potential
stresses
of
the
war
in
Ukraine
and
the
COVID
-19
pandemic
for
the
foreseeable future. The
existing and
potential effects
of the w
ar
in
Ukraine and
o
f COVID-19 on
the business
of the Company have been considered as part of
th
e going concern analysis, including impact on operational
capacity, access
to
liquid
ity
and capital,
contractual obligations,
asset
valu
ations a
n
d
other c
r
itical
acco
unting
judgemen
ts and key sources of estimation
uncertainty.
Taking
all
of
these
factors
into
consideration
,
the
Directors
believ
e
it
is
reason
able
to
assume
that
the
Company
will
hav
e
access
to
adequate
resources
to
co
ntinue
in
op
erational
existence
for
the
foreseeab
le
future.
Accordingly,
they
continue
to
adopt
th
e
going
co
ncern
basis
in
prep
aring
th
e
annual
repor
ts
and
financial statemen
ts.
DIRECTORS
The
follo
wing
Directors
h
eld
office
th
roughout
the
year
and
to
the
date
of
approval
of
this
repo
rt
(except
where oth
erwise shown)
:
A. Doppenber
g
H. Herrmann
S. Ibanez
P.J.G. de Reus
TMF Managem
ent B.V.
EVENTS AFTER
THE REP
ORTING DATE
Following
Russia’s
invasion
of
Ukrain
e
on
24
Februar
y
2022,
the
European
and
g
lobal
fin
ancial
mar
kets
have
been
and
are
expected
to
continue
to
be
significan
tly
impacted
in
2022.
However,
the
Company
has
limited
direct
exposure
to
Russia
and
Uk
raine.
The
Comp
any
will
continue
to
clo
sely
monitor
even
ts
and
their poten
tial impact.
AUDIT COMMI
TTEE
The
Company
qu
alifies
as
an
organisation
of
public
interest
pursuant
to
Dutch
and
EU
law
a
nd
has
established
its
own
aud
it
committee
wh
ich
complies
with
the
applicable
corporate
governance
ru
les
and
composition
requirements
as
d
etailed
in
the Articles
of
Association
of
th
e Company.
AUDITOR
Deloitte Acco
untants
B.V.
have
expressed
their
willing
ness
to
con
tinue
in
of
fice
as
auditor
of
th
e Comp
any
and a reso
luti
on
to
re
-appoint them will
be
pr
oposed
at
the forthco
ming annual
general meeting.
Approved
by
the
Board and
signed
on
its
b
ehalf
by:
28 April
2022
A. Doppenber
g
H. Herrmann
S. Ibanez
P.J.G. de Reus
TMF Managemen
t B.V.
MORGAN STANLEY B.V.
DIRECTORS’
RESPONSIBILITY STATEMENT
11
The
Directors
are respo
nsible fo
r prep
aring th
e financial
statements
of
the
Company
in
compliance
with
the
European
Single
Electronic
Format
Regulatory
Technical
Standard
(
“
ESEF
RTS
”
).
In
preparing
the
Company’s
financial
statemen
ts
in
compliance
with
ESEF
RTS,
the
Direc
tors
are
required
to
prepare
the
financial statemen
ts
in
a v
al
id
xHTML fo
rmat.
T
he
Directors, th
e names
of
whom ar
e set out below,
confirm
to
the
best
of
their knowledge:
-
the
financial statements
have
been
prepared
in
acco
rdance
with
International
Financial
Reporting
Standards
(“IFRSs”)
as
issued
by
the
Intern
ational
Acco
unting
Standards
Boar
d
(“IASB”)
and
as
endorsed
by
the
EU
and
giv
e a
tru
e
and
f
air
view
of
the
assets,
liabilities,
fin
ancial
positi
on
an
d
profit
or
loss
of
the Company
; and
-
the
man
agement
report
represented
by
the
Directors’
report
in
cludes
a
fair
review
of
the
development
and
perfo
rmance
of
the
business
and
the
position
of
the
Company
together
with
a
description
of
the
principal
risks and unce
rtainties that the Com
pany faces.
Approved
by
the
Board and
signed
on
its
b
ehalf
by:
28 April
2022
A. Doppenber
g
H. Herrmann
S. Ibanez
P.J.G. de Reus
TMF Managemen
t B.V.
MORGAN STANLEY B.V.
STATEMENT
OF
COMPREHENSIVE INCOME
Year ended 31 December 2021
12
Note
20
21
€’000
2020
€’000