PROSPECTUS Dated April 12, 2024 |
Pricing Supplement No. 2,944 to |
PRODUCT SUPPLEMENT Dated November 16, 2023 |
Registration Statement Nos. 333-275587; 333-275587-01 |
|
Dated July 17, 2024 |
|
Rule 424(b)(2) |
Morgan
Stanley Finance LLC
STRUCTURED INVESTMENTS
Opportunities
in U.S. Equities
|
$500,000
Autocallable Contingent Coupon Equity-Linked
Notes due July 21, 2025
Linked to the Common Stock of Enphase
Energy, Inc.
Fully and Unconditionally Guaranteed
by Morgan Stanley
Principal at Risk Securities
The notes are unsecured obligations of Morgan Stanley Finance LLC
(“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley. The notes do not provide for the regular payment
of interest. Instead, the notes will pay a coupon on a payment date but only if the
observation closing level of the common stock of Enphase Energy, Inc. (which we refer to as the underlier) on the related observation
date is greater than or equal to 55% of the initial underlier level. If, on the other hand, the observation closing level of
the underlier on any observation date is less than 55% of the initial underlier level, you will not receive a coupon on the applicable
payment date. The notes will mature on the stated maturity date (July 21, 2025, subject to postponement),
unless automatically called on any observation date commencing in October 2024 to and including July 2025. Your notes will be automatically
called if the observation closing level of the underlier on any such observation date is greater than or equal to the initial underlier
level. If your notes are automatically called, you will receive a payment on the related payment date equal to the face amount of your
notes plus a coupon (as described below).
Observation dates are October 17,
2024, January 17, 2025, April 17, 2025, and July 17, 2025, subject to postponement. If on any observation date the observation closing
level of the underlier is greater than or equal to 55% of the initial underlier level, you will receive on the applicable payment date
a coupon for each $1,000 face amount of your notes equal to the product of (a) the quotient of the number of months from
the immediately preceding observation date (or the trade date (July 17, 2024), in the case of the first observation date) to such observation
date divided by 12 times (b) $265.00 (the potential for a per annum return of 26.50%).
All payments are subject to our
credit risk. If we default on our obligations, you could lose some or all of your investment. These notes are not secured obligations
and you will not have any security interest in, or otherwise have any access to, any underlying reference asset or assets.
The amount that
you will be paid on your notes at maturity, if they have not been automatically called, in addition to the final coupon, if any, is based
on the underlier return, which is the percentage increase or decrease in the final underlier level from the initial underlier level. On
the stated maturity date, for each $1,000 face amount of your notes, you will receive an amount in cash equal to:
| ● | if the underlier return is greater than or equal to -45%
(the final underlier level is greater than or equal to 55% of the initial underlier level), $1,000 plus a coupon calculated
as described above; or |
| ● | if the underlier return is less than -45% (the final
underlier level is less than 55% of the initial underlier level), the sum of (i) $1,000 plus (ii) the product
of (a) $1,000 times (b) the underlier return. Under these circumstances, you will lose more than 45%, and possibly all,
of your investment, and you will receive no final coupon. |
You should read the additional disclosure herein so that you may better
understand the terms and risks of your investment.
The estimated value on the trade date is $978.30 per note. See
“Estimated Value” on page 2.
|
Price
to public |
Agent’s
commissions(1) |
Proceeds
to us(2) |
Per note |
$1,000 |
$10 |
$990 |
Total |
$500,000 |
$5,000 |
$495,000 |
(1) Morgan Stanley & Co. LLC (“MS & Co.”) will
sell all of the notes that it purchases from us to an unaffiliated dealer, which will receive a fixed sales commission of 1% for each
note they sell. For more information, see “Additional Information About the Notes—Supplemental information regarding plan
of distribution; conflicts of interest.”
(2) See “Additional Information
About the Notes—Use of proceeds and hedging” beginning on page 24.
The notes involve
risks not associated with an investment in ordinary debt securities. See “Risk Factors” beginning on page 11.
The Securities and Exchange Commission
and state securities regulators have not approved or disapproved these notes, or determined if this document or the accompanying product
supplement and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The notes are not deposits or savings
accounts and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are
they obligations of, or guaranteed by, a bank.
You should read this document together
with the related product supplement and prospectus, each of which can be accessed via the hyperlinks below. When you read the accompanying
product supplement, please note that all references in such supplement to the prospectus dated November 16, 2023, or to any sections therein,
should refer instead to the accompanying prospectus dated April 12, 2024 or to the corresponding sections of such prospectus, as applicable.
Please also see “Final Terms” on page 3 and “Additional Information About the Notes” on page 24.
MORGAN
STANLEY
About Your Prospectus
The notes are notes issued as part of MSFL’s Series A Global Medium-Term
Notes program. This prospectus includes this pricing supplement and the accompanying documents listed below. This pricing supplement constitutes
a supplement to the documents listed below and should be read in conjunction with such documents:
● Prospectus dated April 12, 2024
● Product Supplement dated November 16, 2023
When you read the accompanying product supplement, please note that
all references in such supplement to the prospectus dated November 16, 2023, or to any sections therein, should refer instead to the accompanying
prospectus dated April 12, 2024 or to the corresponding sections of such prospectus, as applicable. The information in this pricing supplement
supersedes any conflicting information in the documents listed above. In addition, some of the terms or features described in the listed
documents may not apply to your notes.
|
ESTIMATED VALUE
The Original Issue Price of each note is $1,000. This price includes
costs associated with issuing, selling, structuring and hedging the notes, which are borne by you, and, consequently, the estimated value
of the notes on the Trade Date is less than $1,000. We estimate that the value of each note on the Trade Date is $978.30.
What goes into the estimated value on the Trade Date?
In valuing the notes on the Trade Date, we take into account that the
notes comprise both a debt component and a performance-based component linked to the Underlier. The estimated value of the notes is determined
using our own pricing and valuation models, market inputs and assumptions relating to the Underlier, instruments based on the Underlier,
volatility and other factors including current and expected interest rates, as well as an interest rate related to our secondary market
credit spread, which is the implied interest rate at which our conventional fixed rate debt trades in the secondary market.
What determines the economic terms of the notes?
In determining the economic terms of the notes, including the Coupon,
the Coupon Trigger Level and the Trigger Knock-Out Level, we use an internal funding rate, which is likely to be lower than our secondary
market credit spreads and therefore advantageous to us. If the issuing, selling, structuring and hedging costs borne by you were lower
or if the internal funding rate were higher, one or more of the economic terms of the notes would be more favorable to you.
What is the relationship between the estimated value on the Trade
Date and the secondary market price of the notes?
The price at which MS & Co. purchases the notes in the secondary
market, absent changes in market conditions, including those related to the Underlier, may vary from, and be lower than, the estimated
value on the Trade Date, because the secondary market price takes into account our secondary market credit spread as well as the bid-offer
spread that MS & Co. would charge in a secondary market transaction of this type and other factors. However, because the costs associated
with issuing, selling, structuring and hedging the notes are not fully deducted upon issuance, for a period of up to 3 months following
the issue date, to the extent that MS & Co. may buy or sell the notes in the secondary market, absent changes in market conditions,
including those related to the Underlier, and to our secondary market credit spreads, it would do so based on values higher than the estimated
value. We expect that those higher values will also be reflected in your brokerage account statements.
MS & Co. may, but is not obligated to, make a market in the notes,
and, if it once chooses to make a market, may cease doing so at any time.
SUMMARY INFORMATION
The Autocallable Contingent Coupon Equity-Linked Notes Linked to
the Common Stock of Enphase Energy, Inc., which we refer to as the notes, are unsecured obligations of MSFL and are fully and unconditionally
guaranteed by Morgan Stanley. The notes do not provide for the regular payment of interest, do not guarantee any return of principal at
maturity and have the terms described in the accompanying product supplement and prospectus, as supplemented or modified by this document.
The notes are notes issued as part of MSFL’s Series A Global Medium-Term Notes program.
References to “we,” “us” and “our”
refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
|
Final Terms
Capitalized terms used but not defined herein have the meanings assigned
to them in the accompanying product supplement and prospectus. All references to “Call Observation Dates,” “Cash Settlement
Amount,” “Closing Level,” “Determination Date,” “Face Amount,” “Final Underlier Level,”
“Initial Underlier Level,” “Observation Closing Level,” “Original Issue Price,” “Stated Maturity
Date,” “Trade Date,” “Trigger Knock-Out Level” and “Underlier” herein shall be deemed to refer
to “determination dates,” “payment at maturity,” “closing price,” “valuation date,” “stated
principal amount,” “final share price,” “initial share price,” “determination closing price,”
“issue price,” “maturity date,” “pricing date,” “trigger level” and “underlying
share” respectively, as used in the accompanying product supplement.
If the terms described herein are inconsistent with those described
in the accompanying product supplement or prospectus, the terms described herein shall control.
Issuer: Morgan Stanley Finance LLC
Guarantor: Morgan Stanley
Underlier: The common stock of Enphase Energy, Inc. (Bloomberg
symbol: “ENPH UQ”)
Notes: The accompanying product supplement refers to the notes
as the “auto-callable securities.”
Specified currency: U.S. dollars (“$”)
Face Amount: Each note will have a Face Amount of $1,000; $500,000
in the aggregate for all the notes; the aggregate Face Amount of notes may be increased if the Issuer, at its sole option, decides to
sell an additional amount of the notes on a date subsequent to the date hereof.
Denominations: $1,000
and integral multiples thereof
Early Redemption: If
a Redemption Event occurs, the notes will be automatically redeemed for an Early Redemption Payment on the related Call Payment Date.
No further payments will be made on the notes once they have been redeemed.
Redemption Event: A Redemption
Event will occur if, on any Call Observation Date, the Observation Closing Level of the Underlier is greater than or equal to the
Initial Underlier Level.
Early Redemption Payment: The Early Redemption Payment will be
an amount in cash equal to the sum of (i) the Face Amount for each note you hold plus (ii) the Coupon with respect to the
related Coupon Observation Date.
Cash Settlement Amount (on the Stated Maturity Date): If your
notes are not automatically called, for each $1,000 Face Amount of notes, we will pay you on the Stated Maturity Date an amount in cash
equal to:
| · | if the Final Underlier Level is greater than or equal to the Trigger Knock-Out Level, $1,000 (in addition to the Coupon otherwise
payable); or |
| · | if the Final Underlier Level is less than the Trigger Knock-Out Level, the sum of (i) $1,000 plus (ii) the product
of (a) $1,000 times (b) the Underlier Return. |
You will lose a significant portion
or all of your investment at maturity if the Final Underlier Level is less than the Trigger Knock-Out Level. Any payment of the Cash Settlement
Amount is subject to the credit risk of Morgan Stanley.
Initial Underlier Level: $111.15
Final Underlier Level: The Closing Level of one share of the
Underlier times the Adjustment Factor, each as determined by the Calculation Agent on the Determination Date, except in the limited
circumstances described under “Description of Auto-Callable Securities—Auto-Callable Securities Linked to Underlying Shares—Postponement
of Determination Dates” on page S-64 of the accompanying product supplement.
Underlier Return: The quotient of (i) the Final Underlier
Level minus the Initial Underlier Level divided by (ii) the Initial Underlier Level, expressed as a percentage
Trigger Knock-Out Level: $61.1325, which is 55% of the Initial
Underlier Level
Coupon Observation Dates: October 17, 2024, January 17, 2025,
April 17, 2025, and July 17, 2025, subject to postponement as described under “Description of Auto-Callable Securities—Auto-Callable
Securities Linked to Underlying Shares—Postponement of Determination Dates” on page S-64 of the accompanying product supplement.
Call Observation Dates: Each Coupon Observation Date commencing
October 2024 to and including July 2025, subject to postponement as referenced under “—Coupon Observation Dates” above.
Coupon Payment Dates: The second scheduled Business Day
after the corresponding Coupon Observation Date, subject to postponement as described under “—Postponement of Coupon Payment
Dates (including the Maturity Date) and Call Payment Dates” below. The Coupon, if any, with respect to the final Coupon Observation
Date will be paid on the Stated Maturity Date.
Call Payment Dates: The second scheduled Business Day after
the corresponding Call Observation Date, subject to postponement as described under “—Postponement of Coupon Payment Dates
(including the Maturity Date) and Call Payment Dates” below.
Coupon: Subject to any earlier automatic redemption, on
each Coupon Payment Date, for each $1,000 Face Amount of your notes, we will pay you:
| · | if the Observation Closing Level of the Underlier on the related Coupon Observation
Date is greater than or equal to the Coupon Trigger Level, the product of (i) the quotient of the number of months
from the immediately preceding Coupon Observation Date (or the Trade Date, in the case of the first Coupon Observation Date) to such Coupon
Observation Date divided by 12 times (ii) $265.00 (the potential for a per annum return of 26.50%); or |
| · | if the Observation Closing Level of the Underlier on the related Coupon Observation
Date is less than the Coupon Trigger Level, $0. |
Coupon Trigger Level: $61.1325, which is 55% of the Initial Underlier
Level
Trade Date: July 17, 2024
Original Issue Date (Settlement Date): July 24, 2024 (5 Business
Days after the Trade Date)
Determination Date: The final Coupon Observation Date, July 17,
2025, subject to postponement as described in the accompanying product supplement on page S-64 under “Description of Auto-Callable
Securities—Auto-Callable Securities Linked to Underlying Shares—Postponement of Determination Dates.”
Stated Maturity Date: July 21, 2025 (2 Business Days after the
Determination Date), subject to postponement as described below.
Postponement of Coupon Payment Dates (including the Maturity Date)
and Call Payment Dates: If any scheduled Coupon Observation Date (including the Determination Date) or Call Observation Date is not
a Trading Day or if a Market Disruption Event occurs on any such day so that any Coupon Observation Date or Call Observation Date as postponed
falls less than two Business Days prior to the relevant scheduled Coupon Payment Date (including the Stated Maturity Date) or Call Payment
Date, as
applicable, the Coupon Payment Date (or the Stated Maturity Date) or
Call Payment Date will be postponed to the second Business Day following that Coupon Observation Date or Call Observation Date as postponed,
and no adjustment will be made to any payment made on that postponed date.
Observation Closing Level: The Closing Level of one share of
the Underlier on any Call Observation Date or Coupon Observation Date, as applicable, times the Adjustment Factor on such Call
Observation Date or Coupon Observation Date, as applicable
Closing Level: See “Description of Auto-Callable Securities—Auto-Callable
Securities Linked to Underlying Shares—Some Definitions—closing price” on page S-57 of the accompanying product supplement
Adjustment Factor: 1.0, subject to adjustment in the event of
certain corporate events affecting the Underlier. See “—Antidilution Adjustments” below.
Business Day: As described under “Description of Auto-Callable
Securities—Some Definitions—business day” on page S-48 of the accompanying product supplement
Trading Day: As described under “Description of Auto-Callable
Securities—Some Definitions—trading day” on page S-50 of the accompanying product supplement
Record Date: The Record Date for each Coupon Payment Date shall
be the date one Business Day prior to such scheduled Coupon Payment Date; provided, however, that any Coupon payable at maturity
(or upon Early Redemption) shall be payable to the person to whom the Cash Settlement Amount or Early Redemption Payment, as the case
may be, shall be payable.
Market disruption event: See “Description of Auto-Callable
Securities—Auto-Callable Securities Linked to Underlying Shares—Some Definitions—market disruption event” on page
S-59 of the accompanying product supplement.
Antidilution adjustments: See “Description of Auto-Callable
Securities—Auto-Callable Securities Linked to Underlying Shares—Antidilution Adjustments” on page S-65 of the accompanying
product supplement.
The following replaces in its entirety the portion of the section
entitled “Antidilution Adjustments” in the accompanying product supplement from the start of paragraph 5 to the end of such
section.
5. If (i) there occurs any reclassification or change of the Underlier,
including, without limitation, as a result of the issuance of any tracking stock by Enphase Energy, Inc., (ii) Enphase Energy, Inc. or
any surviving entity or subsequent surviving entity of Enphase Energy, Inc. (the “successor corporation”) has been subject
to a merger, combination or consolidation and is not the surviving entity, (iii) any statutory exchange of securities of Enphase Energy,
Inc. or any successor corporation with another corporation occurs (other than pursuant to clause (ii) above), (iv) Enphase Energy, Inc.
is liquidated, (v) Enphase Energy, Inc. issues to all of its shareholders equity securities of an issuer other than Enphase Energy, Inc.
(other than in a transaction described in clause (ii), (iii) or (iv) above) (a “spin-off event”) or (vi) a tender or exchange
offer or going-private transaction is consummated for all the outstanding shares of the Underlier (any such event in clauses (i) through
(vi), a “Reorganization Event”), the method of determining whether a Redemption Event has occurred and the amount payable
upon a Call Payment Date or at maturity for each $1,000 Face Amount of notes will be as follows:
| · | Upon any Call Observation Date following the effective date of a Reorganization Event and prior to the Determination Date: If the
Exchange Property Value (as defined below) is greater than or equal to the Initial Underlier Level, the notes will be automatically redeemed
for an Early Redemption Payment. |
| · | Upon the Determination date, if the notes have not previously been automatically redeemed: You will receive for each $1,000 Face Amount
of notes that you hold a Cash Settlement Amount equal to: |
| o | If the Exchange Property Value on the Determination Date is greater than or equal to the Trigger Knock-Out Level: $1,000 (in addition
to the Coupon otherwise payable) |
| o | If the Exchange Property Value on the Determination Date is less than the Trigger Knock-Out Level: (i) $1,000 plus (ii)
the product of (a) $1,000 times (b) the Underlier Return. For |
purposes of calculating the Underlier Return, the “Final
Underlier Level” will be deemed to equal the Exchange Property Value on the Determination Date.
Following the effective date of a Reorganization Event, the Coupon will
be payable for each Coupon Observation Date on which the Exchange Property Value is greater than or equal to the Coupon Trigger Level.
In the event Exchange Property consists of securities, those securities
will, in turn, be subject to the antidilution adjustments set forth in paragraphs 1 through 5.
For purposes of determining whether or not the Exchange Property Value
is less than the Initial Underlier Level, less than the Coupon Trigger Level or less than the Trigger Knock-Out Level, “Exchange
Property Value” means (x) for any cash received in any Reorganization Event, the value, as determined by the Calculation Agent,
as of the date of receipt, of such cash received for one share of the Underlier, as adjusted by the Adjustment Factor at the time of such
Reorganization Event, (y) for any property other than cash or securities received in any such Reorganization Event, the market value,
as determined by the Calculation Agent in its sole discretion, as of the date of receipt, of such Exchange Property received for one share
of the Underlier, as adjusted by the Adjustment Factor at the time of such Reorganization Event and (z) for any security received in any
such Reorganization Event, an amount equal to the closing price, as of the day on which the Exchange Property Value is determined, per
share of such security multiplied by the quantity of such security received for each share of the Underlier, as adjusted by the Adjustment
Factor at the time of such Reorganization Event.
For purposes of paragraph 5 above, in the case of a consummated tender
or exchange offer or going-private transaction involving consideration of particular types, Exchange Property shall be deemed to include
the amount of cash or other property delivered by the offeror in the tender or exchange offer (in an amount determined on the basis of
the rate of exchange in such tender or exchange offer or going-private transaction). In the event of a tender or exchange offer or a going-private
transaction with respect to Exchange Property in which an offeree may elect to receive cash or other property, Exchange Property shall
be deemed to include the kind and amount of cash and other property received by offerees who elect to receive cash.
Following the occurrence of any Reorganization Event referred to in
paragraph 5 above, all references in this offering document and in the related product supplement with respect to the notes to “the
Underlier” shall be deemed to refer to the Exchange Property and references to a “share” or “shares” of
the Underlier shall be deemed to refer to the applicable unit or units of such Exchange Property, unless the context otherwise requires.
No adjustment to the Adjustment Factor will be required unless such
adjustment would require a change of at least 0.1% in the Adjustment Factor then in effect. The Adjustment Factor resulting from any of
the adjustments specified above will be rounded to the nearest one hundred-thousandth, with five one-millionths rounded upward. Adjustments
to the Adjustment Factor will be made up to the close of business on the Determination Date.
No adjustments to the Adjustment Factor or method of calculating the
Adjustment Factor will be required other than those specified above. The adjustments specified above do not cover all events that could
affect the Closing Level or the Final Underlier Level of the Underlier, including, without limitation, a partial tender or exchange offer
for the Underlier.
The Calculation Agent shall be solely responsible for the determination
and calculation of any adjustments to the Adjustment Factor or method of calculating the Adjustment Factor and of any related determinations
and calculations with respect to any distributions of stock, other securities or other property or assets (including cash) in connection
with any corporate event described in paragraphs 1 through 5 above, and its determinations and calculations with respect thereto shall
be conclusive in the absence of manifest error.
The Calculation Agent will provide information as to any adjustments
to the Adjustment Factor or to the method of calculating the amount payable at maturity of the notes made pursuant to paragraph 5 above
upon written request by any investor in the notes.
Trustee: The Bank of New York Mellon
Calculation Agent: MS & Co.
Issuer Notice To Registered Security Holders, the Trustee and the
Depositary: In the event that the Stated Maturity Date is postponed due to postponement of the Determination Date, the Issuer
shall give notice of such postponement and, once it has been determined, of the date to which the Stated Maturity Date has been rescheduled
(i) to each registered holder of the notes by mailing notice of such postponement by first class mail, postage prepaid, to such registered
holder’s last address as it shall appear upon the registry books, (ii) to the Trustee by facsimile confirmed by mailing such notice
to the Trustee by first class mail, postage prepaid, at its New York office and (iii) to The Depository Trust Company (the “depositary”)
by telephone or facsimile, confirmed by mailing such notice to the depositary by first class mail, postage prepaid. Any notice that is
mailed to a registered holder of the notes in the manner herein provided shall be conclusively presumed to have been duly given to such
registered holder, whether or not such registered holder receives the notice. The Issuer shall give such notice as promptly as possible,
and in no case later than (i) with respect to notice of postponement of the Stated Maturity Date, the Business Day immediately preceding
the scheduled Stated Maturity Date and (ii) with respect to notice of the date to which the Stated Maturity Date has been rescheduled,
the Business Day immediately following the actual Determination Date for determining the Final Underlier Level.
In the event that the notes are subject to early redemption, the issuer
shall, (i) on the Business Day following the applicable Call Observation Date, give notice of the early redemption of the notes and the
applicable Cash Settlement Amount, including specifying the payment date of the applicable amount due upon the early redemption, (x) to
each registered holder of the notes by mailing notice of such early redemption by first class mail, postage prepaid, to such registered
holder’s last address as it shall appear upon the registry books, (y) to the Trustee by facsimile, confirmed by mailing such notice
to the Trustee by first class mail, postage prepaid, at its New York office, and (z) to the depositary by telephone or facsimile confirmed
by mailing such notice to the depositary by first class mail, postage prepaid and (ii) on or prior to the Call Payment Date, deliver the
aggregate cash amount due with respect to the notes to the Trustee for delivery to the depositary, as holder of the notes. Any notice
that is mailed to a registered holder of the notes in the manner herein provided shall be conclusively presumed to have been duly given
to such registered holder, whether or not such registered holder receives the notice.
The Issuer shall, or shall cause the Calculation Agent to, (i) provide
written notice to the Trustee, on which notice the Trustee may conclusively rely, and to the depositary of the amount of cash to be delivered
as Coupon, if any, with respect to each note on or prior to 10:30 a.m. (New York City time) on the Business Day preceding each Coupon
Payment Date, and (ii) deliver the aggregate cash amount due, if any, with respect to the Coupon to the Trustee for delivery to the depositary,
as holder of the securities, on the applicable Coupon Payment Date.
The Issuer shall, or shall cause the Calculation Agent to, (i) provide
written notice to the Trustee and to the depositary of the amount of cash, if any, to be delivered with respect to each Face Amount of
notes, on or prior to 10:30 a.m. (New York City time) on the Business Day preceding the Stated Maturity Date, and (ii) deliver the aggregate
cash amount due with respect to the notes, if any, to the Trustee for delivery to the depositary, as holder of the notes, on the Stated
Maturity Date.
CUSIP no.: 61776ME50
ISIN: US61776ME503
HYPOTHETICAL
EXAMPLES
The following examples are provided
for purposes of illustration only. They should not be taken as an indication or prediction of future investment results and are intended
merely to illustrate (i) the impact that the various hypothetical Observation Closing Levels of the Underlier on a Coupon Observation
Date could have on the Coupon payable, if any, on the related Coupon Payment Date and (ii) the impact that various hypothetical Observation
Closing Levels of the Underlier on the Determination Date could have on the Cash Settlement Amount payable on the Stated Maturity Date,
assuming all other variables remain constant.
The examples below are based on
a range of Observation Closing Levels of the Underlier that are entirely hypothetical; no one can predict what the level of the Underlier
will be on any day during the term of the notes, and no one can predict what the Observation Closing Level of the Underlier will be on
any Coupon Observation Date, any Call Observation Date or the Determination Date. The Underlier has at times experienced periods of high
volatility — meaning that the level of the Underlier has changed considerably in relatively short periods — and its performance
cannot be predicted for any future period.
The information in the following
examples reflects hypothetical rates of return on the notes assuming that they are purchased on the Original Issue Date at the Face Amount
and held to a Call Payment Date or the Stated Maturity Date, as applicable. The value of the notes at any time after the Trade Date will
vary based on many economic and market factors, including interest rates, the volatility of the Underlier, our creditworthiness and changes
in market conditions, and cannot be predicted with accuracy. Any sale prior to the Stated Maturity Date could result in a substantial
loss to you.
Key
Terms and Assumptions |
|
Face
Amount: |
$1,000 |
Coupon: |
the product of (i) the quotient of the number of months from
the immediately preceding Coupon Observation Date (or the Trade Date, in the case of the first Coupon Observation Date) to such Coupon
Observation Date divided by 12 times (ii) $265.00 (the potential for a per annum return of 26.50%) |
Coupon
Trigger Level: |
55% of the Initial Underlier Level |
Trigger
Knock-Out Level: |
55% of the Initial Underlier Level |
·
Neither a market disruption event nor a non-Trading Day occurs on an originally scheduled Coupon
Observation Date or Call Observation Date or the original scheduled Determination Date.
· Notes purchased on the Original Issue Date at the Face Amount and held to a Call Payment Date
or the Stated Maturity Date, as applicable.
|
The actual performance of the Underlier over the term of the notes,
the actual Observation Closing Level on any Call Observation Date or Coupon Observation Date, as well as the Coupon payable, if any, on
each Coupon Payment Date, may bear little relation to the hypothetical examples shown below or to the historical levels of the Underlier
shown elsewhere in this document. For information about the historical levels of the Underlier during recent periods, see “The Underlier”
below.
Hypothetical Coupon Payments
The examples below show the hypothetical performance of the Underlier
as well as the hypothetical Coupons, if any, that we would pay on each Coupon Payment Date with respect to each $1,000 Face Amount of
your notes if the hypothetical Observation Closing Level of the Underlier on the applicable Coupon Observation Date was the percentage
of the Initial Underlier Level shown.
Example 1
Hypothetical Coupon Observation Date |
Hypothetical Observation Closing Level of the Underlier (as Percentage of Initial Underlier Level) |
Hypothetical Coupon |
First |
80% |
$66.25 |
Second |
40% |
$0 |
Third |
90% |
$66.25 |
Final |
45% |
$0 |
Total Hypothetical Coupons |
$132.50 |
In Example 1, the hypothetical Observation Closing Level of the Underlier
is greater than the Coupon Trigger Level on some of the hypothetical Coupon Observation Dates but less than the Coupon Trigger
Level on each of the other hypothetical Coupon Observation Dates. Because the hypothetical Observation Closing Level of the Underlier
on each of the first and third hypothetical Coupon Observation Dates is greater than or equal to the Coupon Trigger Level,
the total of the hypothetical Coupons in Example 1 is $132.50. Because the hypothetical Observation Closing Level of the Underlier on
each of the other hypothetical Coupon Observation Dates is less than the Coupon Trigger Level, no further Coupons will be paid,
including at maturity.
Example 2
Hypothetical Coupon Observation Date |
Hypothetical Observation Closing Level of the Underlier (as Percentage of Initial Underlier Level) |
Hypothetical Coupon |
First |
45% |
$0 |
Second |
40% |
$0 |
Third |
50% |
$0 |
Final |
45% |
$0 |
Total Hypothetical Coupons |
$0 |
In Example 2, because the hypothetical Observation Closing Level of
the Underlier on each Coupon Observation Date is less than the Coupon Trigger Level, you will not receive a Coupon payment on any
applicable hypothetical Coupon Payment Date. Since this occurs on every hypothetical Coupon Observation Date, you will not receive
any Coupon over the term of the notes. Therefore, the total of the hypothetical Coupons in Example 2 is $0.
Example 3
Hypothetical Coupon Observation Date |
Hypothetical Observation Closing Level of the Underlier (as Percentage of Initial Underlier Level) |
Hypothetical Coupon |
First |
120% |
$66.25 |
Total Hypothetical Coupons |
$66.25 |
In Example 3, the hypothetical Observation Closing Level of the Underlier
is greater than the Initial Underlier Level on the first hypothetical Coupon Observation Date. Because the hypothetical Observation
Closing Level of the Underlier is greater than or equal to the Initial Underlier Level on the first hypothetical Coupon Observation
Date (which is also the first hypothetical Call Observation Date), your notes will be automatically called. Therefore, on the corresponding
hypothetical call payment date, in addition to the hypothetical Coupon of $66.25, you will receive an amount in cash equal to $1,000 for
each $1,000 Face Amount of your notes. No further payments will be made
on the notes once they have been called.
If the notes are not automatically called following any Call
Observation Date (i.e., the Observation Closing Level of the Underlier on each of the Call Observation Dates is less than the
Initial Underlier Level), the Cash Settlement Amount we would deliver for each $1,000 Face Amount of your notes on the Stated Maturity
Date will depend on the performance of the Underlier on the Determination Date, as shown in the table below. The table below assumes that
the notes have not been automatically called following any Call Observation Date and reflects hypothetical Cash Settlement
Amounts that you could receive on the Stated Maturity Date. The levels in the left column of the table below represent hypothetical Final
Underlier Levels and are expressed as percentages of the Initial Underlier Level. The amounts in the right column represent the hypothetical
Cash Settlement Amount, based on the corresponding hypothetical Final Underlier Level (expressed as a percentage of the Initial Underlier
Level), and are expressed as percentages of the Face Amount of notes (rounded to the nearest one-thousandth of a percent). Thus, a hypothetical
Cash Settlement Amount of 100% means that the value of the cash payment that we would deliver for each $1,000 Face Amount of notes on
the Stated Maturity Date would equal 100% of the Face Amount of notes, based on the corresponding hypothetical Final Underlier Level (expressed
as a percentage of the Initial Underlier Level) and the assumptions noted above. The numbers appearing in the table and chart below may
have been rounded for ease of analysis.
Hypothetical Final Underlier Level |
Hypothetical Cash Settlement Amount at Maturity if the Notes Have Not Been Automatically Called Following a Call Observation Date |
(as Percentage of Initial Underlier Level) |
(as Percentage of Face Amount) |
200.000% |
100.000%* |
175.000% |
100.000%* |
150.000% |
100.000%* |
125.000% |
100.000%* |
100.000% |
100.000%* |
95.000% |
100.000%* |
80.000% |
100.000%* |
70.000% |
100.000%* |
60.000% |
100.000%* |
55.000% |
100.000%* |
54.999% |
54.999% |
50.000% |
50.000% |
25.000% |
25.000% |
0.000% |
0.000% |
*Does not include the final Coupon
If, for example, the notes have not been automatically called following
any Call Observation Date and the Final Underlier Level were determined to be 25.000% of the Initial Underlier Level, the Cash Settlement
Amount would be 25.000% of the Face Amount of notes, as shown in the table above. As a result, if you purchased your notes on the Original
Issue Date at the Face Amount and held them to the Stated Maturity Date, you would lose 75.000% of your investment.
If you purchased your notes at a premium to the Face Amount, you would
lose a correspondingly higher percentage of your investment.
If the Final Underlier Level were determined to be 200.000% of the Initial
Underlier Level, the Cash Settlement Amount would be capped at 100.000% of each $1,000 Face Amount of notes, as shown in the table above.
As a result, if you purchased the notes on the Original Issue Date at the Face Amount and held them to the Stated Maturity Date, the Cash
Settlement Amount would be capped and you would not benefit from any increase in the Final Underlier Level above the Initial Underlier
Level.
RISK FACTORS
This section describes the material risks relating to the notes. For further discussion of these and other risks, you should read the section entitled “Risk Factors” in the accompanying product supplement and prospectus. We also urge you to consult your investment, legal, tax, accounting and other advisers in connection with your investment in the notes. |
RISKS RELATING TO AN INVESTMENT IN THE NOTES
The Notes Do Not Guarantee The Return Of Any
Of Your Principal
The terms of the notes differ from those of ordinary debt securities
in that the notes do not guarantee any return of principal at maturity. If the notes are not automatically called prior to maturity and
the Final Underlier Level has declined below the Trigger Knock-Out Level of 55% of the Initial Underlier Level, you will receive for each
note that you hold a Cash Settlement Amount that is significantly less than the Face Amount of each note by an amount proportionate to
the full decline in the level of the Underlier from the Initial Underlier Level, and you will lose a significant portion or all of your
investment. As there is no minimum Cash Settlement Amount on the notes, you could lose your entire initial investment.
Also, the market price of your notes prior to the Stated Maturity Date
may be significantly lower than the purchase price you pay for your notes. Consequently, if you sell your notes before the Stated Maturity
Date, you may receive significantly less than the amount of your investment in the notes.
The Return On Your Notes May Change Significantly
Despite Only A Small Incremental Change In The Level Of The Underlier
If your notes have not been automatically called and the Final Underlier
Level is less than the Trigger Knock-Out Level, you will receive significantly less than the Face Amount of your notes and you could lose
up to all of your investment in the notes. This means that while a decrease in the Final Underlier Level to the Trigger Knock-Out Level
will not result in a loss of principal on the notes, a decrease in the Final Underlier Level to less than the Trigger Knock-Out Level
will result in a loss of a significant portion of the Face Amount of the notes, despite only a small incremental change in the level of
the Underlier.
The Notes Do Not Provide For The Regular Payment
Of Interest
The terms of the notes differ from those of ordinary debt securities
in that they do not provide for the regular payment of interest. Instead, the notes will pay a Coupon on a Coupon Payment Date but only
if the Observation Closing Level of the Underlier is greater than or equal to 55% of the Initial Underlier Level, which we refer
to as the Coupon Trigger Level, on the related Coupon Observation Date. If, on the other hand, the Observation Closing Level of the Underlier
is lower than the Coupon Trigger Level on the relevant Coupon Observation Date, we will pay no Coupon on the applicable Coupon Payment
Date. It is possible that the Observation Closing Level of the Underlier will remain below the Coupon Trigger Level for extended periods
of time or even throughout the entire term of the notes so that you will receive few or no Coupons. If you do not earn sufficient Coupons
over the term of the notes, the overall return on the notes may be less than the amount that would be paid on a conventional debt security
of ours of comparable maturity.
You Will Not Participate In Any Appreciation
Of The Underlier
You will not participate
in any appreciation of the Underlier, which could be significant. The return on the notes will be limited to the Coupons, if any, that
are paid with respect to each Coupon Observation Date on which the Observation Closing Level of the Underlier is greater than or equal
to the Coupon Trigger Level. Accordingly, the amount payable on your notes may be significantly less than it would have been had you invested
directly in the Underlier.
The Automatic Call Feature
May Limit The Term Of Your Investment To As Short As Approximately Three Months, And You May Not Be Able To Reinvest At Comparable Terms
Or Returns
The term of your
investment in the notes may be shortened due to the automatic call feature of the notes. If the notes are redeemed prior to maturity,
you will receive no further payments on the notes, may be
forced to invest
in a lower interest rate environment and may not be able to reinvest at comparable terms or returns.
If You Purchase Your Notes At A Premium To The
Face Amount, The Return On Your Investment Will Be Lower Than The Return On Notes Purchased At The Face Amount, And The Impact Of Certain
Key Terms Of The Notes Will Be Negatively Affected
The Cash Settlement Amount will not be adjusted based on the issue price
you pay for the notes. If you purchase notes at a price that differs from the Face Amount of notes, then the return on your investment
in such notes held to a Call Payment Date or the Stated Maturity Date, as applicable, will differ from, and may be substantially less
than, the return on notes purchased at the Face Amount. If you purchase your notes at a premium to the Face Amount and hold them to a
Call Payment Date or the Stated Maturity Date, as applicable, the return on your investment in the notes will be lower than it would have
been had you purchased the notes at the Face Amount or at a discount to the Face Amount. In addition, the impact of the Trigger Knock-Out
Level and the Coupon on the return on your investment will depend upon the price you pay for your notes relative to the Face Amount. For
example, if you purchase your notes at a premium to the Face Amount and the Final Underlier Level is less than the Trigger Knock-Out Level,
you will incur a greater percentage loss on your investment in the notes than would have been the case for notes purchased at the Face
Amount or at a discount to the Face Amount. Additionally, the Coupon payment, if any, would represent a lower percentage return relative
to your initial investment than it would have had you purchased the notes at the Face Amount or at a discount to the Face Amount.
The Market Price Will Be Influenced By Many Unpredictable
Factors
Several factors, many of which are beyond our control, will influence
the value of the notes in the secondary market and the price at which MS & Co. may be willing to purchase or sell the notes in the
secondary market, including: the level of the Underlier, volatility (frequency and magnitude of changes in value) of the Underlier and
dividend yield of the Underlier, interest and yield rates, time remaining to maturity, geopolitical conditions and economic, financial,
political and regulatory or judicial events that affect the Underlier or equities markets generally and which may affect the Final Underlier
Level of the Underlier, the occurrence of certain events affecting the Underlier that may or may not require an adjustment to the Adjustment
Factor and any actual or anticipated changes in our credit ratings or credit spreads. The level of the Underlier may be, and has been,
volatile, and we can give you no assurance that the volatility will lessen. See “The Underlier” below. You may receive less,
and possibly significantly less, than the Face Amount per note if you try to sell your notes prior to maturity.
The Notes
Are Subject To Our Credit Risk, And Any Actual Or Anticipated Changes To Our Credit Ratings Or Credit Spreads May Adversely Affect The
Market Value Of The Notes
You are dependent on our ability
to pay all amounts due on the notes upon an automatic call or at maturity, and therefore you are subject to our credit risk. If we default
on our obligations under the notes, your investment would be at risk and you could lose some or all of your investment. As a result, the
market value of the notes prior to maturity will be affected by changes in the market’s view of our creditworthiness. Any actual
or anticipated decline in our credit ratings or increase in the credit spreads charged by the market for taking our credit risk is likely
to adversely affect the market value of the notes.
As A Finance
Subsidiary, MSFL Has No Independent Operations And Will Have No Independent Assets
As a finance
subsidiary, MSFL has no independent operations beyond the issuance and administration of its securities and will have no independent assets
available for distributions to holders of the notes if they make claims in respect of such notes in a bankruptcy, resolution or similar
proceeding. Accordingly, any recoveries by such holders will be limited to those available under the related guarantee by Morgan Stanley
and that guarantee will rank pari passu with all other unsecured, unsubordinated obligations of Morgan Stanley. Holders will have
recourse only to a single claim against Morgan Stanley and its assets under the guarantee. Holders of the notes should accordingly assume
that in any such proceedings they could not have any priority over and should be treated pari passu with the claims of other unsecured,
unsubordinated creditors of Morgan Stanley, including holders of Morgan Stanley-issued securities.
The Coupon, If Any, Is Based On The Observation
Closing Level Of The Underlier On Only The Related Coupon Observation Date
Whether the Coupon will be paid on any Coupon Payment Date will be based
on the Observation Closing Level of the Underlier on the relevant Coupon Observation Date. As a result, you will not know whether you
will receive the Coupon on any Coupon Payment Date until the applicable Coupon Observation Date. Moreover, because the Coupon is based
solely on the level of the Underlier on a specific Coupon Observation Date, if the Observation Closing Level of the Underlier on such
Coupon Observation Date is below the Coupon Trigger Level, you will receive no Coupon with respect to such Coupon Observation Date, even
if the level of the Underlier was at or above the Coupon Trigger Level on other days during the term of the notes.
Investing In The Notes Is Not Equivalent To Investing
In The Underlier
Investing in the notes is not equivalent to investing in the Underlier.
Investors in the notes will not have voting rights or rights to receive dividends or other distributions or any other rights with respect
to the Underlier. As a result, any return on the notes will not reflect the return you would realize if you actually owned shares of the
Underlier and received the dividends paid or distributions made on them.
The Rate We Are Willing To Pay For Securities
Of This Type, Maturity And Issuance Size Is Likely To Be Lower Than The Rate Implied By Our Secondary Market Credit Spreads And Advantageous
To Us. Both The Lower Rate And The Inclusion Of Costs Associated With Issuing, Selling, Structuring And Hedging The Notes In The Original
Issue Price Reduce The Economic Terms Of The Notes, Cause The Estimated Value Of The Notes To Be Less Than The Original Issue Price And
Will Adversely Affect Secondary Market Prices
Assuming no change in market conditions or any other relevant factors,
the prices, if any, at which dealers, including MS & Co., may be willing to purchase the notes in secondary market transactions will
likely be significantly lower than the Original Issue Price, because secondary market prices will exclude the issuing, selling, structuring
and hedging-related costs that are included in the Original Issue Price and borne by you and because the secondary market prices will
reflect our secondary market credit spreads and the bid-offer spread that any dealer would charge in a secondary market transaction of
this type as well as other factors.
The inclusion of the costs of issuing, selling, structuring and hedging
the notes, including a fee payable by our affiliate MS & Co. for the use of the electronic platform of iCapital Markets LLC, which
is a broker-dealer in which an affiliate of Goldman Sachs & Co. LLC, a dealer participating in the distribution of the notes, holds
an indirect minority equity interest, in the Original Issue Price and the lower rate we are willing to pay as issuer make the economic
terms of the notes less favorable to you than they otherwise would be.
However, because the costs associated with issuing, selling, structuring
and hedging the notes are not fully deducted upon issuance, for a period of up to 3 months following the issue date, to the extent that
MS & Co. may buy or sell the notes in the secondary market, absent changes in market conditions, including those related to the Underlier,
and to our secondary market credit spreads, it would do so based on values higher than the estimated value, and we expect that those higher
values will also be reflected in your brokerage account statements.
The Estimated Value Of The Notes Is Determined
By Reference To Our Pricing And Valuation Models, Which May Differ From Those Of Other Dealers And Is Not A Maximum Or Minimum Secondary
Market Price
These pricing and valuation models are proprietary and rely in part
on subjective views of certain market inputs and certain assumptions about future events, which may prove to be incorrect. As a result,
because there is no market-standard way to value these types of securities, our models may yield a higher estimated value of the notes
than those generated by others, including other dealers in the market, if they attempted to value the notes. In addition, the estimated
value on the Trade Date does not represent a minimum or maximum price at which dealers, including MS & Co., would be willing to purchase
your notes in the secondary market (if any exists) at any time. The value of your notes at any time after the date hereof will vary based
on many factors that cannot be predicted with accuracy,
including our creditworthiness and changes in market conditions. See
also “The Market Price Will Be Influenced By Many Unpredictable Factors” above.
The Notes Will Not Be Listed On Any Securities
Exchange And Secondary Trading May Be Limited
The notes will not be listed on any securities exchange. Therefore,
there may be little or no secondary market for the notes. MS & Co. may, but is not obligated to, make a market in the notes and, if
it once chooses to make a market, may cease doing so at any time. When it does make a market, it will generally do so for transactions
of routine secondary market size at prices based on its estimate of the current value of the notes, taking into account its bid/offer
spread, our credit spreads, market volatility, the notional size of the proposed sale, the cost of unwinding any related hedging positions,
the time remaining to maturity and the likelihood that it will be able to resell the notes. Even if there is a secondary market, it may
not provide enough liquidity to allow you to trade or sell the notes easily. Since other broker-dealers may not participate significantly
in the secondary market for the notes, the price at which you may be able to trade your notes is likely to depend on the price, if any,
at which MS & Co. is willing to transact. If, at any time, MS & Co. were to cease making a market in the notes, it is likely that
there would be no secondary market for the notes. Accordingly, you should be willing to hold your notes to maturity.
The Calculation Agent, Which Is A Subsidiary
Of Morgan Stanley And An Affiliate Of MSFL, Will Make Determinations With Respect To The Notes
As calculation agent, MS & Co. will determine the Initial Underlier
Level, the Coupon Trigger Level, the Trigger Knock-Out Level, whether the Coupon will be paid on each Coupon Payment Date, whether the
notes will be called following a Call Observation Date and the Final Underlier Level and will calculate the Cash Settlement Amount you
receive at maturity, if any. Moreover, certain determinations made by MS & Co. in its capacity as calculation agent, may require it
to exercise discretion and make subjective judgments, such as with respect to the occurrence or non-occurrence of market disruption events,
any adjustments to the Adjustment Factor or calculation of the Final Underlier Level in the event of a market disruption event. These
potentially subjective determinations may adversely affect the amount payable on the notes, if any. For further information regarding
these types of determinations, see “Description of Auto-Callable Securities—Auto-Callable Securities Linked to Underlying
Shares” and “—Calculation Agent and Calculations” in the accompanying product supplement. In addition, MS &
Co. has determined the estimated value of the notes on the Trade Date.
Hedging And Trading Activity By Our Affiliates
Could Potentially Adversely Affect The Value Of The Notes
One or more of our affiliates and/or third-party dealers expect to carry
out hedging activities related to the notes (and possibly to other instruments linked to the Underlier), including trading in the Underlier
as well as in other instruments related to the Underlier. As a result, these entities may be unwinding or adjusting hedge positions during
the term of the notes, and the hedging strategy may involve greater and more frequent dynamic adjustments to the hedge as the Determination
Date approaches. Some of our affiliates also trade the Underlier and other financial instruments related to the Underlier on a regular
basis as part of their general broker-dealer and other businesses. Any of these hedging or trading activities on or prior to the Trade
Date could potentially increase the Initial Underlier Level, and, therefore, could increase (i) the level at or above which the Underlier
must close on a Call Observation Date so that the notes are redeemed prior to the Stated Maturity Date for the Early Redemption Payment,
(ii) the Coupon Trigger Level, which is the level at or above which the Underlier must close on each Coupon Observation Date in order
for investors to earn a Coupon and (iii) the Trigger Knock-Out Level, which is the level at or above which the Underlier must close on
the Determination Date so that investors do not suffer a significant loss on their initial investment in the notes. Additionally, such
hedging or trading activities during the term of the notes, including on the Determination Date, could adversely affect the level of the
Underlier on the Determination Date, and, accordingly, the Cash Settlement Amount an investor will receive at maturity, if any. Furthermore,
if the dealer from which you purchase notes is to conduct trading and hedging activities for us in connection with the notes, that dealer
may profit in connection with such trading and hedging activities and such profit, if any, will be in addition to the compensation that
the dealer receives for the sale of the notes to you. You should be aware that the potential to earn a profit in connection with hedging
activities may create a further incentive for the dealer to sell the notes to you, in addition to the compensation they would receive
for the sale of the notes.
We May Sell An Additional Aggregate Face Amount
Of Notes At A Different Issue Price
At our sole option, we may decide to sell an additional aggregate Face
Amount of notes subsequent to the date hereof. The issue price of the notes in the subsequent sale may differ substantially (higher or
lower) from the issue price you paid as provided on the cover of this document.
The U.S. Federal Income Tax Consequences Of An
Investment In The Notes Are Uncertain
There is no direct legal authority
as to the proper treatment of the notes for U.S. federal income tax purposes, and, therefore, significant aspects of the tax treatment
of the notes are uncertain.
Please read the discussion under
“Tax Considerations” in this document concerning the U.S. federal income tax consequences of an investment in the notes. We
intend to treat a note for U.S. federal income tax purposes as a single financial contract that provides for a coupon that will be treated
as gross income to you at the time received or accrued, in accordance with your regular method of tax accounting. Under this treatment,
the ordinary income treatment of the coupon payments, in conjunction with the capital loss treatment of any loss recognized upon the sale,
exchange or settlement of the notes, could result in adverse tax consequences to holders of the notes because the deductibility of capital
losses is subject to limitations. We do not plan to request a ruling from the Internal Revenue Service (the “IRS”) regarding
the tax treatment of the notes, and the IRS or a court may not agree with the tax treatment described herein. If the IRS were successful
in asserting an alternative treatment for the notes, the timing and character of income or loss on the notes might differ significantly
from the tax treatment described herein. For example, under one possible treatment, the IRS could seek to recharacterize the notes as
debt instruments. In that event, U.S. Holders (as defined below) would be required to accrue into income original issue discount on the
notes every year at a “comparable yield” determined at the time of issuance (as adjusted based on the difference, if any,
between the actual and the projected amount of any contingent payments on the notes) and recognize all income and gain in respect of the
notes as ordinary income. The risk that financial instruments providing for buffers, triggers or similar downside protection features,
such as the notes, would be recharacterized as debt is greater than the risk of recharacterization for comparable financial instruments
that do not have such features. Moreover, future legislation, Treasury regulations or IRS guidance could adversely affect the U.S. federal
tax consequences of an investment in the notes, possibly retroactively.
Non-U.S. Holders (as defined
below) should note that we currently intend to withhold on any coupon paid to Non-U.S. Holders generally at a rate of 30%, or at a reduced
rate specified by an applicable income tax treaty under an “other income” or similar provision, and will not be required to
pay any additional amounts with respect to amounts withheld.
Both U.S. and Non-U.S. Holders
should consult their tax advisers regarding the U.S. federal income tax consequences of an investment in the notes, including possible
alternative treatments, as well as tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
RISKS RELATING TO THE UNDERLIER
We Are
Not Affiliated With Enphase Energy, Inc.
Enphase Energy, Inc. is not an
affiliate of ours and is not involved with this offering in any way. Consequently, we have no ability to control the actions of Enphase
Energy, Inc., including any corporate actions of the type that would require the Calculation Agent to adjust the payout to you at maturity.
Enphase Energy, Inc. has no obligation to consider your interests as an investor in the notes in taking any corporate actions that might
affect the value of your notes. None of the money you pay for the notes will go to Enphase Energy, Inc.
We May
Engage In Business With Or Involving Enphase Energy, Inc. Without Regard To Your Interests
We or our affiliates may presently
or from time to time engage in business with Enphase Energy, Inc. without regard to your interests, including extending loans to, or making
equity investments in, Enphase
Energy, Inc. or its affiliates
or subsidiaries or providing advisory services to Enphase Energy, Inc., such as merger and acquisition advisory services. In
the course of our business, we or our affiliates may acquire non-public information about Enphase Energy, Inc. Neither we nor any
of our affiliates undertakes to disclose any such information to you. In addition, we or our affiliates from time to time have
published and in the future may publish research reports with respect to the Underlier. These research reports may or may not
recommend that investors buy or hold the Underlier.
The Antidilution
Adjustments The Calculation Agent Is Required To Make Do Not Cover Every Corporate Event That Could Affect The Underlier
MS & Co., as Calculation Agent,
will adjust the Adjustment Factor for certain corporate events affecting the Underlier, such as stock splits, stock dividends and extraordinary
dividends, and for certain other corporate actions involving the Underlier. However, the Calculation Agent will not make an
adjustment for every corporate event or every distribution that could affect the Underlier. In addition, no adjustments will be
made for regular cash dividends, which are expected to reduce the price of the Underlier by the amount of such dividends. If an event
occurs that does not require the Calculation Agent to adjust the Adjustment Factor, such as a regular cash dividend, the market price
of the notes and your return on the notes may be materially and adversely affected. The determination by the Calculation Agent to adjust,
or not to adjust, an Adjustment Factor may materially and adversely affect the market price of the notes. For example, if the record date
for a regular cash dividend were to occur on or shortly before a Coupon Observation Date, this may decrease the Observation Closing Level
of the Underlier to be less than the Coupon Trigger Level (resulting in no Coupon being paid with respect to such date) or the Final Underlier
Level to be less than the Trigger Knock-Out Level (resulting in a loss of a significant portion of all of your investment in the notes),
materially and adversely affecting your return.
Past Performance is No Guide to Future Performance
The actual performance of the Underlier over the term of the notes,
as well as the amount payable at maturity, may bear little relation to the historical Closing Levels of the Underlier or to the hypothetical
return examples set forth herein. We cannot predict the future performance of the Underlier.
THE UNDERLIER
Enphase Energy, Inc. is an energy
technology company that manages solar generation, storage and communication. The Underlier is registered under the Exchange Act. Companies
with securities registered under the Exchange Act are required to file periodically certain financial and other information specified
by the Securities and Exchange Commission (the “Commission”). Information provided to or filed with the Commission can be
accessed through a website maintained by the Commission. The address of the Commission’s website is www.sec.gov. Information provided
to or filed with the Commission by Enphase Energy, Inc. pursuant to the Exchange Act can be located by reference to Commission file number
001-35480. In addition, information regarding Enphase Energy, Inc. may be obtained from other publicly available sources. Neither the
issuer nor the agent makes any representation that such publicly available information regarding the Underlier is accurate or complete.
Information as of market close on July
17, 2024:
Bloomberg Ticker Symbol: |
ENPH UQ |
Current Stock Price: |
$111.15 |
52 Weeks Ago: |
$189.67 |
52 Week High (on 7/17/2023): |
$189.67 |
52 Week Low (on 11/9/2023): |
$75.56 |
The following graph sets forth the daily Closing Levels of the Underlier
for each quarter in the period from January 1, 2019 through July 17, 2024, adjusted for corporate events, if applicable. The Closing Level
of the Underlier on July 17, 2024 was $111.15. We obtained the information in the graph below from Bloomberg Financial Markets without
independent verification. The Underlier has at times experienced periods of high volatility. The actual performance of the Underlier over
the term of the notes, as well as the amount payable at maturity, may bear little relation to the historical Closing Levels of the Underlier
or to the hypothetical return examples set forth herein. We cannot predict the future performance of the Underlier. You should not take
the historical levels of the Underlier as an indication of its future performance, and no assurance can be given as to the Closing Level
of the Underlier on any Coupon Observation Date, including the Determination Date.
Historical Daily Closing Levels of common stock
of Enphase Energy, Inc.
January 1, 2019 to July 17, 2024
|
![](https://www.sec.gov/Archives/edgar/data/1666268/000095010324010272/image_001.gif)
TAX CONSIDERATIONS
Prospective investors should note that the discussion
under the section called “United States Federal Taxation” in the accompanying product supplement does not apply to the notes
issued under this document and is superseded by the following discussion.
The following is a general discussion of the material U.S.
federal income tax consequences and certain estate tax consequences of the ownership and disposition of the notes. This discussion applies
only to investors in the notes who:
·
purchase the notes in the original offering; and
·
hold the notes as capital assets within the meaning of Section 1221 of
the Internal Revenue Code of 1986, as amended (the “Code”).
This discussion does not describe all of the tax consequences
that may be relevant to a holder in light of the holder’s particular circumstances or to holders subject to special rules, such
as:
·
certain financial institutions;
·
insurance companies;
·
dealers and certain traders in notes or commodities;
·
investors holding the notes as part of a “straddle,” wash sale,
conversion transaction, integrated transaction or constructive sale transaction;
·
U.S. Holders (as defined below) whose functional currency is not the U.S.
dollar;
·
partnerships or other entities classified as partnerships for U.S. federal
income tax purposes;
·
regulated investment companies;
·
real estate investment trusts; or
·
tax-exempt entities, including “individual retirement accounts”
or “Roth IRAs” as defined in Section 408 or 408A of the Code, respectively.
If an entity that is classified as a partnership for U.S.
federal income tax purposes holds the notes, the U.S. federal income tax treatment of a partner will generally depend on the status of
the partner and the activities of the partnership. If you are a partnership holding the notes or a partner in such a partnership, you
should consult your tax adviser as to the particular U.S. federal tax consequences of holding and disposing of the notes to you.
As the law applicable to the U.S. federal income taxation
of instruments such as the notes is technical and complex, the discussion below necessarily represents only a general summary. The effect
of any applicable state, local or non-U.S. tax laws is not discussed, nor are any alternative minimum tax consequences or consequences
resulting from the Medicare tax on investment income. Moreover, the discussion below does not address the consequences to taxpayers subject
to special tax accounting rules under Section 451(b) of the Code.
This discussion is based on the Code, administrative pronouncements,
judicial decisions and final, temporary and proposed Treasury regulations, all as of the date hereof, changes to any of which subsequent
to the date hereof may affect the tax consequences described herein. Persons considering the purchase of the notes should consult their
tax advisers with regard to the application of the U.S. federal income tax laws to their particular situations as well as any tax consequences
arising under the laws of any state, local or non-U.S. taxing jurisdiction.
General
Due to the absence of statutory, judicial or administrative
authorities that directly address the treatment of the notes or instruments that are similar to the notes for U.S. federal income tax
purposes, no assurance can be given that the IRS or a court will agree with the tax treatment described herein. We intend to treat a note
for U.S. federal income tax purposes as a single financial contract that provides for a coupon that will be treated as gross income to
you at the time received or accrued in accordance with your regular
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method of tax accounting. In the opinion of our counsel,
Davis Polk & Wardwell LLP, this treatment of the notes is reasonable under current law; however, there are other reasonable treatments
that the IRS or a court may adopt, in which case the timing and character of any income or loss on the notes could be materially affected.
You should consult your tax adviser regarding all aspects
of the U.S. federal tax consequences of an investment in the notes (including possible alternative treatments of the notes). Unless otherwise
stated, the following discussion is based on the treatment of each note as described in the previous paragraph.
Tax Consequences to U.S. Holders
This section applies to you only if you are a U.S. Holder.
As used herein, the term “U.S. Holder” means a beneficial owner of a note that is, for U.S. federal income tax purposes:
·
a citizen or individual resident of the United States;
·
a corporation, or other entity taxable as a corporation, created or organized
in or under the laws of the United States, any state thereof or the District of Columbia; or
·
an estate or trust the income of which is subject to U.S. federal income
taxation regardless of its source.
Tax Treatment of the Notes
Assuming the treatment of the notes as set forth above is
respected, the following U.S. federal income tax consequences should result.
Tax Basis. A U.S. Holder’s
tax basis in the notes should equal the amount paid by the U.S. Holder to acquire the notes.
Tax Treatment of Coupon Payments.
Any coupon payment on the notes should be taxable as ordinary income to a U.S. Holder at the time received or accrued, in accordance with
the U.S. Holder’s regular method of accounting for U.S. federal income tax purposes.
Sale, Exchange or Settlement
of the Notes. Upon a sale, exchange or settlement of the notes, a U.S. Holder should recognize gain or loss equal to the difference
between the amount realized on the sale, exchange or settlement and the U.S. Holder’s tax basis in the notes sold, exchanged or
settled. For this purpose, the amount realized does not include any coupon paid at settlement and may not include sale proceeds attributable
to an accrued coupon, which may be treated in the same manner as a coupon payment. In general, any such gain or loss recognized should
be short-term capital gain or loss. The ordinary income treatment of the coupon payments, in conjunction with the capital loss treatment
of any loss recognized upon the sale, exchange or settlement of the notes, could result in adverse tax consequences to holders of the
notes because the deductibility of capital losses is subject to limitations.
Possible Alternative Tax Treatments of an Investment
in the Notes
Due to the absence of authorities that directly address
the proper tax treatment of the notes, no assurance can be given that the IRS will accept, or that a court will uphold, the treatment
described above. In particular, the IRS could seek to analyze the U.S. federal income tax consequences of owning the notes under Treasury
regulations governing contingent payment debt instruments (the “Contingent Debt Regulations”). If the IRS were successful
in asserting that the Contingent Debt Regulations applied to the notes, the timing and character of income thereon would be significantly
affected. Among other things, a U.S. Holder would be required to accrue into income original issue discount on the notes every year at
a “comparable yield” determined at the time of their issuance, adjusted upward or downward to reflect the difference, if any,
between the actual and the projected amount of any contingent payments on the notes. Furthermore, any gain realized by a U.S. Holder at
maturity or upon a sale, exchange or other disposition of the notes would be treated as ordinary income, and any loss realized would be
treated as ordinary loss to the extent of the U.S. Holder’s prior accruals of original issue discount and as capital loss thereafter.
The risk that financial instruments providing for buffers, triggers or similar downside protection features, such as the notes, would
be recharacterized as debt is greater than the risk of
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recharacterization for comparable financial instruments
that do not have such features.
We do not plan to request a ruling from the IRS regarding
the treatment of the notes. Other alternative federal income tax treatments of the notes are possible, which, if applied, could significantly
affect the timing and character of the income or loss with respect to the notes. In addition, the U.S. Treasury Department and the IRS
have requested comments on various issues regarding the U.S. federal income tax treatment of “prepaid forward contracts” and
similar financial instruments and have indicated that such transactions may be the subject of future regulations or other guidance. Furthermore,
members of Congress have proposed legislative changes to the tax treatment of derivative contracts. Any legislation, Treasury regulations
or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment
in the notes, possibly with retroactive effect. U.S. Holders should consult their tax advisers regarding the U.S. federal income tax consequences
of an investment in the notes, including possible alternative treatments and potential changes in applicable law.
Backup Withholding and Information Reporting
Backup withholding may apply in respect of payments on the
notes and the payment of proceeds from a sale, exchange or other disposition of the notes, unless a U.S. Holder provides proof of an applicable
exemption or a correct taxpayer identification number and otherwise complies with applicable requirements of the backup withholding rules.
The amounts withheld under the backup withholding rules are not an additional tax and may be refunded, or credited against the U.S. Holder’s
U.S. federal income tax liability, provided that the required information is timely furnished to the IRS. In addition, information returns
will be filed with the IRS in connection with payments on the notes and the payment of proceeds from a sale, exchange or other disposition
of the notes, unless the U.S. Holder provides proof of an applicable exemption from the information reporting rules.
Tax Consequences to Non-U.S. Holders
This section applies to you only if you are a Non-U.S. Holder.
As used herein, the term “Non-U.S. Holder” means a beneficial owner of a note that is for U.S. federal income tax purposes:
·
an individual who is classified as a nonresident alien;
·
a foreign corporation; or
·
a foreign estate or trust.
The term “Non-U.S. Holder” does not include
any of the following holders:
·
a holder who is an individual present in the United States for 183 days or more in the taxable year of disposition and who is not
otherwise a resident of the United States for U.S. federal income tax purposes;
·
certain former citizens or residents of the United States; or
·
a holder for whom income or gain in respect of the notes is effectively connected with the conduct of a trade or business in the
United States.
Such holders should consult their tax advisers regarding
the U.S. federal income tax consequences of an investment in the notes.
Although significant aspects of the tax treatment of each
note are uncertain, we intend to withhold on any coupon paid to a Non-U.S. Holder generally at a rate of 30% or at a reduced rate specified
by an applicable income tax treaty under an “other income” or similar provision. We will not be required to pay any additional
amounts with respect to amounts withheld. In order to claim an exemption from, or a reduction in, the 30% withholding tax, a Non-U.S.
Holder of the notes must comply with certification requirements to establish that it is not a U.S. person and is eligible for such an
exemption or reduction under an applicable tax treaty. If you are a Non-U.S. Holder, you should consult your tax adviser regarding the
tax treatment of the notes, including the possibility of obtaining a refund of any withholding tax and the certification requirement described
above.
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Section 871(m) Withholding Tax on Dividend Equivalents
Section 871(m) of the Code and Treasury regulations promulgated
thereunder (“Section 871(m)”) generally impose a 30% (or a lower applicable treaty rate) withholding tax on dividend equivalents
paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments linked to U.S. equities or indices that include
U.S. equities (each, an “Underlying Security”). Subject to certain exceptions, Section 871(m) generally applies to notes that
substantially replicate the economic performance of one or more Underlying Securities, as determined based on tests set forth in the applicable
Treasury regulations (a “Specified Security”). However, pursuant to an IRS notice, Section 871(m) will not apply to notes
issued before January 1, 2027 that do not have a delta of one with respect to any Underlying Security. Based on our determination that
the notes do not have a delta of one with respect to any Underlying Security, our counsel is of the opinion that the notes should not
be Specified Securities and, therefore, should not be subject to Section 871(m).
Our determination is not binding on the IRS, and the IRS
may disagree with this determination. Section 871(m) is complex and its application may depend on your particular circumstances, including
whether you enter into other transactions with respect to an Underlying Security. If Section 871(m) withholding is required, we will not
be required to pay any additional amounts with respect to the amounts so withheld. You should consult your tax adviser regarding the potential
application of Section 871(m) to the notes.
U.S. Federal Estate Tax
Individual Non-U.S. Holders and entities the property of
which is potentially includible in such an individual’s gross estate for U.S. federal estate tax purposes (for example, a trust
funded by such an individual and with respect to which the individual has retained certain interests or powers) should note that, absent
an applicable treaty exemption, the notes may be treated as U.S.-situs property subject to U.S. federal estate tax. Prospective investors
that are non-U.S. individuals, or are entities of the type described above, should consult their tax advisers regarding the U.S. federal
estate tax consequences of an investment in the notes.
Backup Withholding and Information Reporting
Information returns will be filed with the IRS in connection
with any coupon payment and may be filed with the IRS in connection with the payment at maturity on the notes and the payment of proceeds
from a sale, exchange or other disposition. A Non-U.S. Holder may be subject to backup withholding in respect of amounts paid to the Non-U.S.
Holder, unless such Non-U.S. Holder complies with certification procedures to establish that it is not a U.S. person for U.S. federal
income tax purposes or otherwise establishes an exemption. The amount of any backup withholding from a payment to a Non-U.S. Holder will
be allowed as a credit against the Non-U.S. Holder’s U.S. federal income tax liability and may entitle the Non-U.S. Holder to a
refund, provided that the required information is timely furnished to the IRS.
FATCA
Legislation commonly referred to as “FATCA”
generally imposes a withholding tax of 30% on payments to certain non-U.S. entities (including financial intermediaries) with respect
to certain financial instruments, unless various U.S. information reporting and due diligence requirements have been satisfied. An intergovernmental
agreement between the United States and the non-U.S. entity’s jurisdiction may modify these requirements. FATCA generally applies
to certain financial instruments that are treated as paying U.S.-source interest or other U.S.-source “fixed or determinable annual
or periodical” income (“FDAP income”). Withholding (if applicable) applies to payments of U.S.-source FDAP income and
to payments of gross proceeds of the disposition (including upon retirement) of certain financial instruments treated as providing for
U.S.-source interest or dividends. Under proposed regulations (the preamble to which specifies that taxpayers are permitted to rely on
them pending finalization), no withholding will apply on payments of gross proceeds (other than amounts treated as FDAP income). While
the treatment of the notes is unclear, you should assume that any coupon payment with respect to the notes will be subject to the FATCA
rules. If withholding applies to the notes, we will not be required to pay any additional amounts with respect to amounts withheld. Both
U.S. and Non-U.S. Holders should consult their tax
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advisers regarding the potential application of FATCA to
the notes.
The discussion in the preceding paragraphs, insofar as
it purports to describe provisions of U.S. federal income tax laws or legal conclusions with respect thereto, constitutes the full opinion
of Davis Polk & Wardwell LLP regarding the material U.S. federal tax consequences of an investment in the notes.
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ADDITIONAL INFORMATION
ABOUT THE NOTES
No dividends: The notes will not pay dividends.
No listing: The notes will not be listed on any securities exchange.
No redemption: The notes will not be subject to any redemption
right.
Purchase at amount other than Face
Amount: The amount we will pay you on a Call Payment Date or the Stated Maturity Date, as applicable,
for your notes will not be adjusted based on the issue price you pay for your notes, so if you acquire notes at a premium (or discount)
to the Face Amount and hold them to a Call Payment Date or the Stated Maturity Date, it could affect your investment in a number of ways.
The return on your investment in such notes will be lower (or higher) than it would have been had you purchased the notes at the Face
Amount. Also, if notes are not automatically redeemed early and the Final Underlier Level is less than the Trigger Knock-Out Level, you
will incur a greater (or lesser) percentage loss on your investment than would be the case if you had purchased the notes at the Face
Amount. Additionally, the Coupon payment, if any, would represent a lower (or higher) percentage return than it would have had you purchased
the notes at the Face Amount. See “Risk Factors—If You Purchase Your Notes At A Premium To The Face Amount, The Return On
Your Investment Will Be Lower Than The Return On Notes Purchased At The Face Amount, And The Impact Of Certain Key Terms Of The Notes
Will Be Negatively Affected” beginning on page 13 of this document.
Use of proceeds and hedging: The proceeds from the sale of the
notes will be used by us for general corporate purposes. We will receive, in aggregate, $1,000 per note issued. The costs of the notes
borne by you and described on page 2 comprise the cost of issuing, structuring and hedging the notes.
On or prior to the Trade Date, we will hedge our anticipated exposure
in connection with the notes, by entering into hedging transactions with our affiliates and/or third party dealers. We expect our hedging
counterparties to take positions in the Underlier, futures and options contracts on the Underlier, or positions in any other available
securities or instruments that they may wish to use in connection with such hedging. Such purchase activity could increase the level of
the Underlier on the Trade Date, and therefore increase (i) the level at or above which the Underlier must close on a Call Observation
Date so that the notes are redeemed prior to the Stated Maturity Date for the applicable Early Redemption Payment, (ii) the Coupon Trigger
Level, which is the level at or above which the Underlier must close on each Coupon Observation Date in order for investors to earn a
Coupon and (iii) the Trigger Knock-Out Level, which is the level at or above which the Underlier must close on the Determination Date
so that investors do not suffer a significant loss on their initial investment in the notes. In addition, through our affiliates, we are
likely to modify our hedge position throughout the term of the notes, including on the Determination Date, by purchasing and selling the
Underlier, futures or options contracts on the Underlier or positions in any other available securities or instruments that we may wish
to use in connection with such hedging activities. As a result, these entities may be unwinding or adjusting hedge positions during the
term of the notes, and the hedging strategy may involve greater and more frequent dynamic adjustments to the hedge as the Determination
Date approaches. We cannot give any assurance that our hedging activities will not affect the level of the Underlier, and, therefore,
adversely affect the value of the notes or the payment you will receive at maturity, if any. For further information on our use of proceeds
and hedging, see “Use of Proceeds and Hedging” in the accompanying product supplement.
Additional considerations: 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.
Supplemental information regarding plan of distribution; conflicts
of interest: We have agreed to sell to MS & Co., and MS & Co. has agreed to purchase from us, the aggregate face amount of
the offered notes specified on the cover of this pricing supplement. MS & Co. proposes initially to offer the notes to an unaffiliated
securities dealer at the price to public set forth on the cover of this pricing supplement less a concession of 1% of the face amount.
MS & Co., the agent for this offering, is our affiliate. Because MS & Co. is both our affiliate and a member of the Financial
Industry Regulatory Authority, Inc. (“FINRA”), the underwriting arrangements for this offering must comply with the requirements
of FINRA Rule 5121 regarding a FINRA member firm’s distribution of the securities of an
affiliate and related conflicts of interest. In accordance with FINRA
Rule 5121, MS & Co. may not make sales in offerings of the notes to any of its discretionary accounts without the prior written approval
of the customer.
MS & Co. is an affiliate of MSFL and a wholly owned subsidiary of
Morgan Stanley, and it and other affiliates of ours expect to make a profit by selling, structuring and, when applicable, hedging the
notes.
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 a FINRA member
firm’s distribution of the notes of an affiliate and related conflicts of interest. MS & Co. or any of our other affiliates
may not make sales in this offering to any discretionary account. See “Plan of Distribution (Conflicts of Interest)” and “Use
of Proceeds and Hedging” in the accompanying product supplement.
Settlement: We expect to deliver the notes against payment for
the notes on the Original Issue Date, which will be the fifth scheduled Business Day following the Trade Date. Under Rule 15c6-1 of the
Securities Exchange Act of 1934, as amended, trades in the secondary market generally are required to settle in one Business Day, unless
the parties to a trade expressly agree otherwise. Accordingly, if the Original Issue Date is more than one Business Day after the Trade
Date, purchasers who wish to transact in the notes more than one Business Day prior to the Original Issue Date will be required to specify
alternative settlement arrangements to prevent a failed settlement.
WHERE YOU CAN
FIND MORE INFORMATION
MSFL and Morgan Stanley have filed a registration statement (including
a prospectus, as supplemented by the product supplement) 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 and any other documents
relating to this offering that MSFL and Morgan Stanley have filed with the SEC for more complete information about MSFL, Morgan Stanley
and this offering. When you read the accompanying product supplement, please note that all references in such supplement to the prospectus
dated November 16, 2023, or to any sections therein, should refer instead to the accompanying prospectus dated April 12, 2024 or to the
corresponding sections of such prospectus, as applicable. You may get these documents without cost by visiting EDGAR on the SEC web site
at www.sec.gov. Alternatively, MSFL and/or Morgan Stanley will arrange to send you the product supplement and prospectus 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:
Prospectus dated April 12, 2024
Product Supplement dated November 16, 2023
Terms used but not defined in this document are defined in the product
supplement or in the prospectus.
VALIDITY OF
THE NOTES
In the opinion of Davis Polk & Wardwell LLP, as special counsel
to MSFL and Morgan Stanley, when the notes offered by this pricing supplement have been executed and issued by MSFL, authenticated by
the trustee pursuant to the MSFL Senior Debt Indenture (as defined in the accompanying prospectus) and delivered against payment as contemplated
herein, such notes will be valid and binding obligations of MSFL and the related guarantee will be a valid and binding obligation of Morgan
Stanley, enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’
rights generally, concepts of reasonableness and equitable principles of general applicability (including, without limitation, concepts
of good faith, fair dealing and the lack of bad faith), provided that such counsel expresses no opinion as to (i) the effect of
fraudulent conveyance, fraudulent transfer or similar provision of applicable law on the conclusions expressed above and (ii) any provision
of the MSFL Senior Debt Indenture that purports to avoid the effect of fraudulent conveyance, fraudulent transfer or similar provision
of applicable law by limiting the amount of Morgan Stanley’s obligation under the related guarantee. This opinion is given as of
the date hereof and is limited to the laws of the State of New York, the General Corporation Law of the State of Delaware and the Delaware
Limited Liability Company Act. In addition, this opinion is subject to customary assumptions about the trustee’s authorization,
execution and delivery of the MSFL Senior Debt Indenture and its authentication of the notes and the validity, binding nature and enforceability
of the MSFL Senior Debt Indenture with respect to the trustee, all as stated in the letter of such counsel dated February 26, 2024, which
is Exhibit 5-a to Post-Effective Amendment No. 2 to the Registration Statement on Form S-3 filed by Morgan Stanley on February 26, 2024.
Exhibit
107
The
pricing supplement to which this Exhibit is attached is a final prospectus for the related offering. The maximum aggregate offering price
of the related offering is $500,000.
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