CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities Offered
|
|
Maximum Aggregate Offering Price
|
|
Amount of Registration Fee
|
Market-Linked Notes due 2026
|
|
$5,592,500
|
|
$725.91
|
May 2020
Pricing Supplement No. 4,182
Registration Statement Nos. 333-221595; 333-221595-01
Dated May 29, 2020
Filed pursuant to Rule 424(b)(2)
Morgan
Stanley Finance LLC
Structured Investments
Opportunities in Equities, Bonds and Alternative
Investments
Market-Linked Notes due June 3, 2026
Based on the Value of the Morgan Stanley ETF-MAP
2 Index
Fully and Unconditionally Guaranteed by Morgan
Stanley
The notes are unsecured obligations of Morgan Stanley Finance
LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley. The notes will pay no interest and will
have the terms described in the accompanying product supplement and prospectus, as supplemented and modified by this document.
At maturity, we will pay per note the stated principal amount of $10 plus a supplemental redemption amount, if any, based
on the value of the underlying index on the determination date. The Morgan Stanley ETF-MAP 2 Index employs a rules-based quantitative
strategy, which uses modern portfolio theory principles and the related concept of efficient frontier to attempt to maximize returns
for a given level of risk, as described more fully below. The underlying index is comprised of three sub-indices. The potential
components of each sub-index consist of U.S.-listed exchange-traded funds (ETFs), representing U.S. and non-U.S. equities, fixed
income securities, commodities and real estate, and the Morgan Stanley Two Year Treasury Index. Each sub-index is calculated on
an excess return basis, and therefore the respective level of each sub-index is determined by the weighted return of the optimized
portfolio of index components for such sub-index reduced by the return on an equivalent cash investment receiving the Federal
Funds rate. Each sub-index is rebalanced once per month according to a pre-determined schedule. Each sub-index is rebalanced using
the same methodology, but at different times of each month. Each monthly rebalancing for a sub-index is based on the index methodology,
which seeks to determine the asset portfolio that had the maximum historical return with 5% annualized volatility during the prior
63-business day period. There is also a daily adjustment to the allocation between the asset portfolio and cash component based
on the overall volatility of the asset portfolio. A servicing cost of 0.50% per annum, calculated on a daily basis, is deducted
when calculating the level of the index. For more information, see “Underlying Index” beginning on page 12. An investment
linked to the index involves risks. See “Risk Factors – There are risks related to the index” beginning on page
6. These long-dated notes are for investors who are concerned about principal risk but seek exposure to a multiple asset-linked
index, who are willing to accept that the underlying index’s volatility target feature may reduce upside performance in
bullish markets, and who are willing to forgo current income in exchange for the repayment of principal at maturity plus the potential
to receive a supplemental redemption amount, if any. The notes are notes issued as part of MSFL’s Series A Global Medium-Term
Notes program.
All payments are subject to our credit risk. If we default
on our obligations, you could lose some or all of your investment. These securities 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.
FINAL TERMS
|
Issuer:
|
Morgan Stanley Finance LLC
|
Guarantor:
|
Morgan Stanley
|
Issue price:
|
$10 per note (see “Commissions and issue price” below)
|
Stated principal amount:
|
$10 per note
|
Aggregate principal amount:
|
$5,592,500
|
Pricing date:
|
May 29, 2020
|
Original issue date:
|
June 3, 2020 (3 business days after the pricing date)
|
Maturity date:
|
June 3, 2026
|
Interest:
|
None
|
Underlying index:
|
Morgan Stanley ETF-MAP 2 Index
|
Payment at maturity:
|
The payment due at maturity per $10 stated principal
amount will equal:
$10 + supplemental redemption amount, if
any.
The payment due at maturity will not be less than
$10 per note regardless of the performance of the underlying index.
|
Supplemental redemption amount:
|
(i) $10 times (ii) the index percent change times (iii) the participation rate, provided that the supplemental redemption amount will not be less than $0.
|
Participation rate:
|
100%
|
Maximum payment at maturity:
|
None
|
Index percent change:
|
(final index value – initial index value) / initial index value
|
Initial index value:
|
1,163.87, which is the index closing value on the pricing date
|
Final index value:
|
The index closing value on the determination date
|
Determination date:
|
May 29, 2026, subject to postponement for non-index business days and certain market disruption events
|
CUSIP:
|
61771C136
|
ISIN:
|
US61771C1365
|
Listing:
|
The notes will not be listed on any securities exchange.
|
Agent:
|
Morgan Stanley & Co. LLC (“MS & Co.”), an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley. See “Supplemental information regarding plan of distribution; conflicts of interest.”
|
Estimated value on the pricing date:
|
$9.611 per note. See “Investment Summary” beginning on page 2.
|
Commissions and issue price:
|
Price to public
|
Agent’s commissions and fees
|
Proceeds to us(3)
|
Per note
|
$10
|
$0.30(1)
|
$9.65
|
|
|
$0.05(2)
|
|
Total
|
$5,592,500
|
$195,737.50
|
$5,396,762.50
|
|
(1)
|
Selected dealers, including Morgan Stanley Wealth Management (an affiliate of the agent), and their financial advisors will
collectively receive from the agent, MS & Co., a fixed sales commission of $0.30 for each note they sell. See “Supplemental
information regarding plan of distribution; conflicts of interest.” For additional information, see “Plan of Distribution
(Conflicts of Interest)” in the accompanying product supplement for equity-linked notes.
|
|
(2)
|
Reflects a structuring fee payable to Morgan Stanley Wealth Management by the agent or its affiliates of $0.05 for each
note.
|
|
(3)
|
See “Use of proceeds and hedging” on page 20.
|
The notes involve risks not
associated with an investment in ordinary debt securities. See “Risk Factors” beginning on page 6.
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. Please also see “Additional Terms of the
Notes” and “Additional Information About the Notes” at the end of this document.
As used in this document, “we,” “us”
and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Product
Supplement for Equity-Linked Notes dated November 16, 2017 Prospectus
dated November 16, 2017
Morgan
Stanley Finance LLC
Market-Linked
Notes due June 3, 2026
Based
on the Value of the Morgan Stanley ETF-MAP 2 Index
Investment Summary
Market-Linked Notes
The
Market-Linked Notes due June 3, 2026 Based on the Value of the Morgan Stanley ETF-MAP 2 Index (the “notes”) offer
100% participation in any positive performance of the underlying index. The notes provide investors:
|
§
|
an opportunity to gain exposure to the Morgan Stanley ETF-MAP 2 Index
|
|
§
|
the repayment of principal at maturity, subject to our credit risk
|
|
§
|
100% participation in any appreciation of the underlying index over the term of the notes
|
|
§
|
no exposure to any decline of the underlying index if the notes are held to maturity
|
At
maturity, if the underlying index has depreciated or has not appreciated at all, you will receive the stated principal amount
of $10 per note, without any positive return on your investment. All payments on the notes, including the repayment of principal
at maturity, are subject to our credit risk.
Maturity:
|
6 years
|
Participation
rate:
|
100%
|
Interest:
|
None
|
The Morgan Stanley ETF-MAP 2 Index
The Morgan Stanley ETF-MAP 2 Index has been developed by
and is calculated, published and rebalanced by Morgan Stanley & Co. LLC (the “underlying index publisher”). ETF-MAP
stands for “Exchange-Traded Fund – Multi-Asset Portfolio.” The underlying index employs a rules-based quantitative
strategy, which uses modern portfolio theory principles and the related concept of efficient frontier to attempt to maximize returns
for a given level of risk. The index is comprised of three sub-indices (each, a “Sub-Index” and together, the “Sub-Indices”).
The potential components of each Sub-Index consist of U.S.-listed exchange traded funds (“ETFs”), representing U.S.
and non-U.S. equities, fixed income securities, commodities and real estate, and the Morgan Stanley Two Year Treasury Index (collectively,
the “Index Components”).
In general, the construction of the asset portfolio for each
Sub-Index is based on the principles of modern portfolio theory and the efficient frontier. The fundamental premise of modern portfolio
theory is that the weighting of assets in an investment portfolio should be based not only on the individual risk and return characteristics
of each asset but also on each asset’s relationship, in terms of correlation, volatility and return, to the other portfolio
components. The efficient frontier represents a set of portfolios constructed using modern portfolio theory concepts, each of which
has a different risk and return profile. An investor choosing a portfolio from the “efficient frontier” should, the
theory says, be maximizing returns for the chosen level of risk.
Each Sub-Index is calculated on an excess return basis, and therefore
the respective level of each Sub-Index is determined by the weighted return of the optimized portfolio of Index Components for
such Sub-Index (each, an “Asset Portfolio”) reduced by the return on an equivalent cash investment receiving the Federal
Funds rate. The level of the index, which is published in respect of each day on which the New York Stock Exchange is open for
trading, tracks the average daily return of the Sub-Indices.
Each Sub-Index is rebalanced once per month according to a pre-determined
schedule (the “Monthly Rebalancing”). Each Sub-Index is rebalanced using the same methodology, but at different times
of each month. The Monthly Rebalancing for each Sub-Index will occur over a period of several trading days (each such trading day,
a “Rebalancing Date”). During each Monthly Rebalancing for a Sub-Index, the index methodology determines the optimal
weightings of each component in the Asset Portfolio for such Sub-Index by analyzing historical returns and volatility for each
Index Component and the historical correlation between each pair of components. In particular, the index methodology seeks to determine
the Asset Portfolio for such Sub-Index that had the maximum historical return with 5% annualized volatility during the prior 63-trading-day
period. The exposure of each Sub-Index to each market sector and the weighting of each Index Component are subject to limits as
outlined below. In addition, there is a “Daily Allocation” for each Sub-Index, based on a 5% volatility target (the
“Volatility Target”) between its respective Asset Portfolio and cash. Accordingly, the exposure of each Sub-Index to
its respective Asset Portfolio will be monitored and adjusted so that it generally equals the Volatility Target divided by the
Realized Volatility (as defined below) of the Asset Portfolio for the relevant Sub-Index. The amount of the reduction in the exposure
to the Asset
Morgan Stanley Finance LLC
Market-Linked Notes due June 3, 2026
Based on the Value of the Morgan Stanley ETF-MAP 2 Index
Portfolio for any Sub-Index will be allocated to cash. For each
Sub-Index, the sum of allocations to its respective Asset Portfolio and cash will not exceed 100%.
A
servicing cost of 0.50% per annum, calculated on a daily basis, is deducted when calculating the performance of the underlying
index. Please see “Underlying Index” beginning on page 12 for more information about the underlying index.
The original issue price of each note is $10. 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 pricing date is less than $10. We estimate that the value of each note on the pricing date is $9.611.
What goes into the estimated value on the pricing date?
In valuing the notes on the pricing date, we take into account
that the notes comprise both a debt component and a performance-based component linked to the underlying index. The estimated value
of the notes is determined using our own pricing and valuation models, market inputs and assumptions relating to the underlying
index, instruments based on the underlying index, 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
participation rate, 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
pricing 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 underlying index, may vary from, and be lower than,
the estimated value on the pricing 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 6 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 underlying index, 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.
Morgan Stanley Finance LLC
Market-Linked Notes due June 3, 2026
Based on the Value of the Morgan Stanley ETF-MAP 2 Index
Key Investment Rationale
Market-Linked Notes offer investors exposure
to the performance of the underlying index and provide for the repayment of principal at maturity. They are for investors who
are concerned about principal risk but seek exposure to a multiple asset-linked index, who are willing to accept that the underlying
index’s volatility target feature may reduce upside performance in bullish markets, and who are willing to forgo current
income in exchange for the repayment of principal at maturity plus the potential to receive a supplemental redemption amount,
if any, based on the performance of the underlying index.
The underlying index employs a rules-based
quantitative strategy, which uses modern portfolio theory principles and the related concept of efficient frontier to attempt
to maximize returns for a given level of risk. The index is comprised of three Sub-Indices. The potential components of each Sub-Index
consist of U.S.-listed exchange-traded funds (ETFs), representing U.S. and non-U.S. equities, fixed income securities, commodities
and real estate, and the Morgan Stanley Two Year Treasury Index. Each Sub-Index is calculated on an excess return basis, and therefore
the respective level of each Sub-Index is determined by the weighted return of the optimized portfolio of index components for
such Sub-Index reduced by the return on an equivalent cash investment receiving the Federal Funds rate.
Repayment
of Principal
|
The notes offer investors 100% upside exposure to the performance of the underlying
index, while providing for the repayment of principal in full at maturity, subject to our credit risk.
|
Exposure to the Morgan Stanley ETF-MAP 2 Index
|
The Morgan Stanley ETF-MAP 2 Index attempts to maximize returns for a given level of risk. ETF-MAP
2 stands for “Exchange Traded Fund – Multi-Asset Portfolio.” The underlying index is comprised of
three Sub-Indices. The potential components of each Sub-Index consist of U.S.-listed exchange-traded funds (ETFs),
representing U.S. and non-U.S. equities, fixed income securities, commodities and real estate, and the Morgan Stanley Two Year
Treasury Index.
|
Upside Scenario
|
The underlying index increases in value, and, at maturity, the notes pay
the stated principal amount of $10 plus 100% of the appreciation of the underlying index. There is no limitation
on the appreciation potential.
|
Par
Scenario
|
The underlying index declines or does not appreciate in value, and, at maturity, the notes pay
only the stated principal amount of $10.
|
Morgan Stanley Finance LLC
Market-Linked Notes due June 3, 2026
Based on the Value of the Morgan Stanley ETF-MAP 2 Index
Hypothetical Payout on the Notes
At
maturity, for each $10 stated principal amount of notes that you hold, you will receive the stated principal amount of $10 plus
a supplemental redemption amount, if any. The supplemental redemption amount will be calculated on the determination date
as follows:
(i) $10 times (ii) the index
percent change times (iii) the participation rate of 100%.
The
payment due at maturity will not be less than $10 per note regardless of the performance of the underlying index.
The table below illustrates the payment at
maturity for each note for a hypothetical range of index percent change and does not cover the complete range of possible payouts
at maturity. The table assumes a hypothetical initial index value of 1,000. The actual initial index value is set forth on the
cover of this document.
Index percent change
|
Final index value
|
Stated principal amount
|
Supplemental redemption amount
|
Payment at maturity
|
Return on $10 note
|
50%
|
1,500
|
$10
|
$5.00
|
$15.00
|
50.00%
|
40%
|
1,400
|
$10
|
$4.00
|
$14.00
|
40.00%
|
30%
|
1,300
|
$10
|
$3.00
|
$13.00
|
30.00%
|
20%
|
1,200
|
$10
|
$2.00
|
$12.00
|
20.00%
|
10%
|
1,100
|
$10
|
$1.00
|
$11.00
|
10.00%
|
0%
|
1,000
|
$10
|
$0
|
$10
|
0.00%
|
–10%
|
900
|
$10
|
$0
|
$10
|
0.00%
|
–20%
|
800
|
$10
|
$0
|
$10
|
0.00%
|
–30%
|
700
|
$10
|
$0
|
$10
|
0.00%
|
–40%
|
600
|
$10
|
$0
|
$10
|
0.00%
|
–50%
|
500
|
$10
|
$0
|
$10
|
0.00%
|
–60%
|
400
|
$10
|
$0
|
$10
|
0.00%
|
–70%
|
300
|
$10
|
$0
|
$10
|
0.00%
|
Morgan Stanley Finance LLC
Market-Linked Notes due June 3, 2026
Based on the Value of the Morgan Stanley ETF-MAP 2 Index
Risk Factors
The following is a non-exhaustive list
of certain key risk factors for investors in the notes. For further discussion of these and other risks you should read the section
entitled “Risk Factors” in the accompanying product supplement and the accompanying prospectus. You should also consult
with your investment, legal, tax, accounting and other advisers in connection with your investment in the notes.
|
§
|
The notes do not pay interest and may not pay more than the stated principal amount at maturity. If the index percent
change is less than or equal to 0%, you will receive only the stated principal amount of $10 for each note you hold at maturity.
As the notes do not pay any interest, if the underlying index does not appreciate sufficiently over the term of the notes, the
overall return on the notes (the effective yield to maturity) may be less than the amount that would be paid on a conventional
debt security of ours of comparable maturity. The notes have been designed for investors who are willing to forgo market floating
interest rates in exchange for a supplemental redemption amount, if any, based on the performance of the underlying index.
|
|
§
|
The market price of the notes will be influenced by many unpredictable factors. Several
factors 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 value of the underlying index at any time, the volatility (frequency and
magnitude of changes in value) of the underlying index, dividend rate on the exchange traded funds (“ETFs”) underlying
the index, interest and yield rates in the market, time remaining until the notes mature,
geopolitical conditions and economic, financial, political, regulatory or judicial events that
affect the underlying index or equities markets generally and which may affect the final index value of the underlying index and
any actual or anticipated changes in our credit ratings or credit spreads. Generally, the longer the time remaining to maturity,
the more the market price of the notes will be affected by the other factors described above. The value of the underlying index
may be, and has recently been, volatile, and we can give you no assurance that the volatility will lessen. See “Hypothetical
Retrospective and Historical Information” below. You may receive less, and possibly significantly less, than the stated principal
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 at
maturity and therefore you are subject to our credit risk. The notes are not guaranteed by any other entity. 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 MSFL securities if they make claims in respect of such securities 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
securities issued by MSFL should accordingly assume that in any such proceedings they would 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 amount payable on the notes is not linked to the value of the underlying index at any time other than the determination
date. The final index value will be based on the index closing value on the determination date, subject to postponement for
non-index business days and certain market disruption events. Even if the value of the underlying index appreciates prior to the
determination date but then drops
|
Morgan Stanley Finance LLC
Market-Linked Notes due June 3, 2026
Based on the Value of the Morgan Stanley ETF-MAP 2 Index
by the determination date, the payment
at maturity will be less, and may be significantly less, than it would have been had the payment at maturity been linked to the
value of the underlying index prior to such drop. Although the actual value of the underlying index on the stated maturity date
or at other times during the term of the notes may be higher than the final index value, the payment at maturity will be based
solely on the index closing value on the determination date.
|
§
|
There are risks associated with the underlying index.
|
|
§
|
Low volatility in the underlying index is not synonymous with low risk in an investment linked to the underlying index.
For example, even if the volatility of the underlying index was in line with the Volatility Target, the underlying index may
decrease over time, which may result in a zero return on the notes.
|
|
§
|
The level of the underlying index can go down as well as up. Please see “Hypothetical Retrospective and Historical
Information” below.
|
|
§
|
Each Sub-Index of the underlying index’s portfolio of Index Components is varied and represents a number of different
asset classes in a number of different sectors. Investors should be experienced with respect to, and be able to evaluate and understand
the risks of (either alone or with the investor’s investment, legal, tax, accounting and other advisors), investments the
values of which are derived from different asset classes and sectors.
|
|
§
|
Each Sub-Index of the underlying index at any time may be composed of a very limited number of ETFs. The components
of each Sub-Index’s Asset Portfolio are varied and will be selected from the index Components according to the index methodology.
Therefore, at any time, the Sub-Indices of the index may be composed of a very limited number of ETFs, and investors could be exposed
to the risks associated with a concentrated investment in that limited number of ETFs. In addition, if the trading of one or more
of such ETFs is disrupted, it is likely that the calculation agent will determine that a market disruption event with respect to
the notes has occurred and thus postpone the determination date or, if such market disruption event is continuing, determine the
level of the underlying index at its discretion. Investors’ interests may be adversely affected by such determination.
|
|
§
|
The value of the underlying index and any instrument linked to the underlying index may increase or decrease due to a number
of factors, many of which are beyond the underlying index publisher’s control. The nature and weighting of the Index
Components can vary significantly, and no assurance can be given as to the underlying index’s allocations of the Sub-Indices
to any Index Component at any time.
|
|
§
|
While each Sub-Index, and therefore, the underlying index, has a Volatility Target of 5%, there can be no guarantee, even
if each Sub-Index’s allocation to its respective Asset Portfolio is adjusted as frequently as is permitted (i.e., daily),
that the realized volatility of the underlying index will not be less than or greater than 5%. In fact, the historical volatility
of the underlying index, based on simulated returns, has generally been between 4% and 6%.
|
|
§
|
There can be no assurance that the actual volatility of the underlying index will be lower than the volatility of any or
all of the Index Components.
|
|
§
|
The volatility target feature of the underlying index may dampen its performance in bullish markets. The underlying
index is designed to achieve a Volatility Target of 5% regardless of the direction of price movements in the market. Therefore,
in bullish markets, if the Realized Volatility is higher than the Volatility Target, the adjustments to the respective Asset Portfolios
of the Sub-Indices through Monthly Rebalancing or Daily Allocation might dampen the performance of the underlying index.
|
|
§
|
The future performance of the underlying index may bear little or no relation to the historical or hypothetical retrospective
performance of the underlying index. Among other things, the trading prices of the Index Components and the dividends paid
on the Index Components will impact the level and the volatility of the underlying index. It is impossible to predict whether the
level of the underlying index will rise or fall.
|
Morgan Stanley Finance LLC
Market-Linked Notes due June 3, 2026
Based on the Value of the Morgan Stanley ETF-MAP 2 Index
|
§
|
The underlying index was established on June 16, 2014 and therefore has a limited history. As such, performance for
periods prior to the establishment of the underlying index has been retrospectively simulated by the underlying index publisher
on a hypothetical basis. A retrospective simulation means that no actual investment which allowed a tracking of the performance
of the underlying index existed at any time during the period of the retrospective simulation. The methodology and the underlying
index used for the calculation and retrospective simulation of the underlying index has been developed with the advantage of hindsight.
In reality, it is not possible to invest with the advantage of hindsight and therefore this historical performance is purely theoretical
and may not be indicative of future performance. In addition, the
Morgan Stanley Two Year Treasury Index and certain ETFs included in the Index Components existed for only a portion of period
for which the underlying index publisher calculates hypothetical retrospective values. For any period during which data for the
Morgan Stanley Two Year Treasury Index or one or more ETFs did not exist, the historical simulation is based on (i)
the value of the Morgan Stanley Two Year Treasury Index based on simulated historical performance and (ii) the value of
each ETF’s benchmark index less the relevant ETF’s current expense ratio. Investors should be aware that no actual
investment which allowed a tracking of the performance of the underlying index was possible at any time prior to June 16, 2014.
Such data must be considered illustrative only. The historical data may not reflect future performance and no assurance can
be given as to the level of the underlying index at any time.
|
|
§
|
As the underlying index is new and has limited actual historical performance, any investment in the underlying index may
involve greater risk than an investment in an index with longer actual historical performance and a proven track record.
|
|
§
|
The underlying index is calculated on an excess return basis. The level of the underlying index tracks
the average daily return of the Sub-Indices. The level of each Sub-Index is calculated as the excess of the weighted return
of the Asset Portfolio for such Sub-Index over an equivalent cash investment receiving
the Federal Funds rate. As a result, the level of each Sub-Index, and therefore the level
of the index, reflects a deduction of the Federal Funds rate that would apply to such a cash investment, and is less than
the average return on the weighted Asset Portfolios of the Sub-Indices. Changes in
the Federal Funds rate will affect the value of the underlying index. In particular, an increase in the Federal Funds rate will
negatively affect the value of the underlying index.
|
|
§
|
The underlying index contains embedded costs. As described in more detail under “Underlying Index” below,
the underlying index contains an embedded servicing cost of 0.50% per annum. Such cost is deducted when calculating the level of
the index and will thus reduce the return of the index.
|
|
§
|
An investment in the notes involves risks associated with emerging markets equities and bonds, currency exchange rates and
commodities. ETFs representing foreign equities (including emerging markets equities) can constitute up to 70% of the underlying
index. The underlying index can also consist of certain ETFs representing emerging markets bonds. Therefore, an investment in the
notes involve risks associated with the securities markets in those foreign markets and emerging markets countries, including but
not limited to risks of volatility in those markets, governmental intervention in those markets and cross-shareholdings in companies
in certain countries. The prices of securities issued in foreign markets may be affected by political, economic, financial and
social factors in those countries, or global regions, including changes in government, economic and fiscal policies and currency
exchange laws. In addition, because the price of an ETF representing foreign securities is generally related to the U.S. dollar
value of securities underlying the index tracked by such ETF, an investment in the notes involve currency exchange rate risk with
respect to each of the currencies in which such securities trade. Exchange rate movements for a particular currency are volatile
and are the result of numerous factors including the supply of, and the demand for, those currencies, as well as relevant government
policy, intervention or actions, but are also influenced significantly from time to time by political or economic developments,
and by macroeconomic factors and speculative actions related to the relevant region.
|
In addition, potential underlying
index components also include ETFs representing commodities and thus investors are exposed to risks associated with commodities.
Investments linked to the prices of commodities are subject to sharp fluctuations in the prices of commodities over short periods
of time for a
Morgan Stanley Finance LLC
Market-Linked Notes due June 3, 2026
Based on the Value of the Morgan Stanley ETF-MAP 2 Index
variety of factors, including: changes
in supply and demand relationships; weather; climatic events; the occurrence of natural disasters; wars; political and civil upheavals;
acts of terrorism; trade, fiscal, monetary, and exchange control programs; domestic and foreign political and economic events and
policies; disease; pestilence; technological developments; changes in interest rates; and trading activities in commodities and
related contracts. These factors may affect the prices of commodities and therefore of the underlying index and the notes, in varying
and potentially inconsistent ways.
|
§
|
The Morgan Stanley Two Year Treasury Index can produce negative returns, which may
have an adverse effect on the level of the respective Sub-Indices, and consequently, the level of the index.
The Index methodology for the Morgan Stanley Two Year Treasury Index was developed based on historical data and conditions, and
there can be no assurances that the methodology can generate positive performance in the future. Therefore, the past performance
of the Morgan Stanley Two Year Treasury Index, whether actual or retrospectively calculated, is not a reliable indication of future
performance. Poor performance by the Morgan Stanley Two Year Treasury Index will have a negative effect on the performance of the
respective Sub-Indices, and consequently on the performance of the index.
|
|
§
|
If the underlying index is discontinued and no successor index is available, at maturity, Morgan Stanley will pay an alternative
supplemental redemption amount, if any, in lieu of the supplemental redemption amount. If MS & Co., as the underlying index
publisher, discontinues publication of the underlying index and, as the calculation agent, determines in its sole discretion that
no successor index is available, no supplemental redemption amount will be paid on the notes. Instead, on the date of such determination,
the calculation agent will determine, in good faith and in a commercially reasonable manner, an alternative supplemental redemption
amount, which will equal its estimate of the value, if any, of the investors’ forgone opportunity to receive any supplemental
redemption amount, determined by reference to the calculation agent’s pricing models, inputs, assumptions about future market
conditions including, without limitation, the volatility of the ETF-MAP 2 Index and its components and current and expected interest
rates. The alternative supplemental redemption amount, if any, will be paid at maturity in addition to the stated principal
amount of the notes. As a result, investors will have no more exposure to the underlying index once the calculation agent determines
that no successor index is available to replace the discontinued underlying index, but will not receive the alternative supplemental
redemption amount until the maturity date. See “Additional Information About the Notes—Discontinuance of the underlying
index” below.
|
|
§
|
MS & Co., which is a subsidiary of Morgan Stanley and an affiliate of MSFL, is both the calculation agent and the underlying
index publisher, and will make determinations with respect to the notes and the underlying index. As calculation agent, MS
& Co. will determine the initial index value and the final index value, and will calculate the amount of cash you will receive
at maturity. Determinations made by MS & Co. in its capacity as calculation agent, including with respect to the occurrence
or non-occurrence of market disruption events and the selection of a successor index or calculation of the alternative supplemental
redemption amount in the event of a discontinuance of the underlying index or a market disruption
event, may adversely affect the payout to you at maturity.
|
MS & Co. is also the underlying
index publisher and retains the final discretion as to the manner in which the underlying index is calculated and constructed.
The underlying index publisher may change the methodology of the underlying index or discontinue the publication of the underlying
index without prior notice, and such changes or discontinuance may affect the value of the underlying index. The underlying index
publisher’s calculations and determinations in relation to the underlying index shall be binding in the absence of manifest
error.
In performing its duties as the
calculation agent of the notes and the underlying index publisher, MS & Co. may have interests adverse to your interests, which
may affect the value of the underlying index and the value of the notes.
|
§
|
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
|
Morgan Stanley Finance LLC
Market-Linked Notes due June 3, 2026
Based on the Value of the Morgan Stanley ETF-MAP 2 Index
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 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 6 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 underlying index, 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 pricing 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 of this document 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 of the notes will be influenced
by many unpredictable factors” above.
|
|
§
|
Adjustments to the underlying index could adversely affect the value of the notes. MS & Co., as the underlying index
publisher, can add, delete or substitute the Index Components, and can make other methodological changes required by certain events
relating to the Index Components. Any of these actions could adversely affect the value of the notes. The underlying index publisher
may also discontinue or suspend calculation or publication of the underlying index at any time. In these circumstances, MS &
Co., as the calculation agent, will have the sole discretion to substitute a successor index that is comparable to the discontinued
index. MS & Co., in its capacity as both the calculation agent for the notes and underlying index publisher, could have an
economic interest that is different than that of investors in the notes.
|
|
§
|
Investing in the notes is not equivalent to investing in the underlying index. Investing in the notes is not equivalent
to investing in the underlying index or its component ETFs. Investors in the notes will not have voting rights or rights to receive
dividends or other distributions or any other right with respect to the component ETFs of the underlying index.
|
|
§
|
The notes will not be listed on any securities exchange and secondary trading may be limited. Accordingly, you should be
willing to hold your notes for the entire 6-year term of the notes. 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
|
Morgan Stanley Finance LLC
Market-Linked Notes due June 3, 2026
Based on the Value of the Morgan Stanley ETF-MAP 2 Index
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.
|
§
|
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 to other instruments
linked to the underlying index or its component ETFs), including trading in the component ETFs of the underlying index, in options
contracts on the component ETFs, or in other instruments related to the underlying index. 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 component ETFs of the underlying
index and other financial instruments related to the underlying index 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 pricing date could potentially increase the
initial index value, and, therefore, could increase the value at or above which the underlying index must close on the determination
date before an investor receives a payment at maturity that exceeds the stated principal amount of the notes. Additionally, such
hedging or trading activities during the term of the notes, including on the determination date, could adversely affect the closing
value of the underlying index on the determination date, and, accordingly, the amount of cash an investor will receive at maturity.
|
Morgan Stanley Finance LLC
Market-Linked Notes due June 3, 2026
Based on the Value of the Morgan Stanley ETF-MAP 2 Index
Underlying Index
Morgan Stanley ETF-MAP 2 Index – Index
Description
The Morgan Stanley ETF-MAP 2 Index has been developed by and
is calculated, published and rebalanced by MS & Co. as the “underlying index publisher.” This section outlines
the key steps in constructing the underlying index, including the timing and methodology of the underlying index calculation and
adjustment. In general, the construction of the Asset Portfolio for each Sub-Index is based on the principles of modern portfolio
theory and the efficient frontier. The fundamental premise of modern portfolio theory is that the weighting of assets in an investment
portfolio should be based not only on the individual risk and return characteristics of each asset but also on each asset’s
relationship, in terms of correlation, volatility and return, to the other portfolio components. The efficient frontier represents
a set of portfolios constructed using modern portfolio theory concepts, each of which has a different risk and return profile.
An investor choosing a portfolio from the “efficient frontier” should, the theory says, be maximizing returns for the
chosen level of risk.
The index methodology is applied to the Sub-Index scheduled for
monthly rebalancing on the specific rebalancing date (the “Rebalancing Selection Date”) to determine the Asset Portfolio
for such Sub-Index that had the maximum historical return with 5% annualized volatility during the prior 63-trading-day period
(the “Monthly Rebalancing”). Beginning on the trading day after the Rebalancing Selection Date and continuing for a
period of several trading days (each such trading day, a “Rebalancing Date”), the weight of each Index Component is
adjusted from its prior level and the new Asset Portfolio for the applicable Sub-Index is formed.
Inputs to the index methodology are price-transparent and include
the historical returns and historical volatilities of each Index Component as well as the historical correlations between any two
Index Components. All levels are calculated based on objective price inputs on an annualized basis over the preceding 63-trading-day
calculation window, with more recent data emphasized for volatility and correlation calculations. The index methodology also applies
pre-defined limits for Index Component weightings and sector exposures.
To calculate the “Daily Allocation” between the Asset
Portfolio and cash for each Sub-Index, on each business day the Calculation Agent determines the realized volatility of the Asset
Portfolio for each Sub-Index over a shorter-term and a longer-term period (the greater of which is the “Realized Volatility”).
If the Realized Volatility for a Sub-Index exceeds 5.5%, the allocation to the Asset Portfolio for such Sub-Index will be decreased,
with the objective of reducing Index volatility, and if the Realized Volatility is below 5%, the allocation to the Asset Portfolio
for such Sub-Index may be increased. In each case, the Asset Portfolio allocation for each Sub-Index will generally equal the Volatility
Target divided by its Realized Volatility, subject to a maximum of 100%. For example, if the Realized Volatility of a Sub-Index
is 7.5%, the allocation to the Asset Portfolio for such Sub-Index will equal the 5% Volatility Target divided by its 7.5% Realized
Volatility, or 66.67%. Volatility is a market standard statistical measure of the magnitude and frequency of price changes of a
financial asset over a period of time, used to express the riskiness of the asset. Note, however, that volatility does not identify
the direction of the asset’s price movement.
Because the Realized Volatility metric used to determine exposure
of each Sub-Index to its respective Asset Portfolio is the greater of shorter-term and longer-term volatility, Realized Volatility
for the Sub-Indices will increase more quickly when daily volatility increases, and Index exposure to the respective Asset Portfolios
will be correspondingly reduced. Conversely, Realized Volatility for the Sub-Indices will decrease more slowly when daily volatility
decreases, resulting in a more gradual increase in allocations to the respective Asset Portfolios.
The Daily Allocations with respect to the Sub-Indices will only
seek to adjust the volatility of the underlying index and will not attempt to optimize the asset allocations within the respective
Asset Portfolios. Because the underlying index will not use leverage it may not be possible to achieve the Volatility Target of
5% during periods of very low volatility.
Morgan Stanley ETF-MAP 2 Index – Index
Rules
|
·
|
The maximum asset weightings on each Rebalancing Date for each market
sector and for each Index Component within a given market sector are specified in the table below.
|
Morgan Stanley Finance LLC
Market-Linked Notes due June 3, 2026
Based on the Value of the Morgan Stanley ETF-MAP 2 Index
|
·
|
Asset weightings will not be rebalanced between each respective Monthly
Rebalancing for the Sub-Indices due to changes in market value of Index Components.
|
|
·
|
If between Monthly Rebalancings the Realized Volatility of a Sub-Index
exceeds 5.5% or falls below 5%, the allocation to the Asset Portfolio for such Sub-Index may be adjusted pursuant to the Daily
Allocation as described above.
|
|
·
|
The allocation to the Asset Portfolio for each Sub-Index will equal
the Volatility Target divided by its observed historical volatility, subject to a maximum of 100%.
|
|
·
|
The sum of allocations to the respective Asset Portfolio and cash will
not exceed 100% for any Sub-Index. Because the underlying index will not use leverage it may not be possible to achieve the Volatility
Target of 5% during periods of very low volatility.
|
|
·
|
The level of the index tracks the average daily returns of the Sub-Indices,
which are calculated on an excess return basis. Specifically, the level of each Sub-Index is determined by the weighted return
of the Asset Portfolio for such Sub-Index reduced by the return on an equivalent cash investment receiving the Federal Funds rate.
|
|
·
|
A servicing cost of 0.50% per annum, calculated on a daily basis, is
deducted when calculating the index level.
|
Index Components
The potential Index Components that can be
included in the Sub-Indices, and therefore the underlying index, at any time and the maximum asset weightings on each Rebalancing
Date for each market sector and for each Index Component within a given market sector are specified in the table below.
Sector
And
Maximum
Weight
|
Asset Class
|
index components
|
MaxIMUM Asset Weight
|
Short-Term Treasuries 100%
|
Short-Term Treasuries
|
Morgan Stanley Two Year Treasury Index
|
100%
|
Foreign Equity 70%
|
Developed Market Equities
|
iShares MSCI EAFE Index Fund
|
35%
|
Emerging Market Equities
|
Vanguard FTSE Emerging Markets ETF
|
35%
|
Japan Equities
|
iShares MSCI Japan ETF
|
35%
|
US Equity 50%
|
US Large Cap Equities
|
SPDR S&P 500 ETF Trust
|
50%
|
US Low Volatility Equities
|
PowerShares S&P 500 Low Volatility Portfolio
|
10%
|
Bonds 75%
|
Senior Loan
|
PowerShares Senior Loan Portfolio
|
10%
|
20+ Year Treasuries
|
iShares Barclays 20+ Year Treasury Bond Fund
|
25%
|
7-10 Year Treasuries
|
iShares Barclays 7-10 Year Treasury Bond Fund
|
25%
|
High Yield Bonds
|
iShares iBOXX High Yield Corporate Bond Fund
|
25%
|
Investment Grade Corporate Bonds
|
iShares iBOXX Investment Grade Corporate Bond Fund
|
10%
|
Emerging Markets Bonds
|
iShares JP Morgan USD Emerging Markets Bond Fund
|
15%
|
Alternative Investments 50%
|
Gold
|
SPDR Gold Trust
|
25%
|
Real Estate
|
iShares Dow Jones U.S. Real Estate Index Fund
|
25%
|
The Morgan Stanley Two Year Treasury Index has been developed
by Morgan Stanley & Co. LLC (the “Sponsor'') and will be calculated and rebalanced by Morgan Stanley & Co. LLC. The
Morgan Stanley Two Year Treasury Index is a rules-based index that seeks to capture the yield from US Treasury notes with a maturity
of between two years and two years and three months by notionally purchasing futures contracts on US Treasury notes. The
Morgan Stanley Two Year Treasury Index is published on Bloomberg under the ticker symbol MSUST2TR <Index>.
The Morgan Stanley Two Year Treasury Index, including its name,
methodology and levels (the “Index Information”) is the exclusive property of the Sponsor. Unless specifically agreed
by the Sponsor, no third party is authorized to use the Index Information in any way. The Sponsor and its affiliates disclaim any
responsibility for any unauthorised use
Morgan Stanley Finance LLC
Market-Linked Notes due June 3, 2026
Based on the Value of the Morgan Stanley ETF-MAP 2 Index
of the Index Information by any third party intending to promote,
sponsor, endorse, market, offer, sell, distribute or reference the Index Information or any product, service or contract relating
or linked to or otherwise referencing the Index Information.
iShares® is a registered mark of BlackRock Institutional
Trust Company, N.A. (“BTC”). The underlying index is not sponsored, endorsed, sold, or promoted by BTC. BTC makes no
representations or warranties to the owners of any investment linked to the underlying index or any member of the public regarding
the advisability of investing in any investment linked to the underlying index. BTC has no obligation or liability in connection
with the operation, marketing, trading or sale of any investment linked to the underlying index.
“S&P®”, “S&P 500®”
and “SPDR®” are trademarks of Standard & Poor’s Financial Services LLC (“S&P”).
The underlying index is not sponsored, endorsed, sold, or promoted by S&P or the SPDR® Gold Trust (together,
the “Trusts”). S&P and the Trusts make no representations or warranties to the owners of any investment linked
to the underlying index or any member of the public regarding the advisability of investing in any investment linked to the underlying
index. S&P and the Trusts have no obligation or liability in connection with the operation, marketing, trading or sale of any
investment linked to the underlying index.
“PowerShares®” is a registered trademark
of Invesco PowerShares Capital Management LLC (“Invesco PowerShares”). The Index is not sponsored, endorsed, sold,
or promoted by Invesco PowerShares. Invesco PowerShares makes no representations or warranties to the owners of any investment
linked to the underlying index or any member of the public regarding the advisability of investing in any investment linked to
the underlying index. Invesco PowerShares has no obligation or liability in connection with the operation, marketing, trading or
sale of any investment linked to the underlying index.
“Vanguard®” is a registered mark
of The Vanguard Group, Inc. (“Vanguard”). The Index is not sponsored, endorsed, sold, or promoted by Vanguard. Vanguard
makes no representations or warranties to the owners of any investment linked to the underlying index or any member of the public
regarding the advisability of investing in any investment linked to the underlying index. Vanguard has no obligation
or liability in connection with the operation, marketing, trading or sale of any investment linked to the underlying index.
Morgan Stanley Finance LLC
Market-Linked Notes due June 3, 2026
Based on the Value of the Morgan Stanley ETF-MAP 2 Index
Hypothetical
Retrospective and Historical Information
The
inception date for the underlying index was June 16, 2014. The information regarding the underlying index prior to June 16, 2014
is a hypothetical retrospective simulation calculated by the underlying index publisher, using the same methodology as is currently
employed for calculating the underlying index based on historical data. A retrospective simulation means that no actual investment
which allowed a tracking of the performance of the index existed at any time during the period of the retrospective simulation.
In addition, the Morgan Stanley Two Year Treasury Index and certain ETFs included in the Index Components existed for only a portion
of period for which the underlying index publisher calculates hypothetical retrospective values. For any period during which data
for the Morgan Stanley Two Year Treasury Index or one or more ETFs did not exist, the historical simulation is based on (i) the
value of the Morgan Stanley Two Year Treasury Index based on simulated historical performance and (ii) the value of each ETF’s
benchmark index less the relevant ETF’s current expense ratio. Therefore, information regarding the underlying index prior
to June 16, 2014 is hypothetical only and does not reflect actual historical performance. Investors should be aware that
no actual investment which allowed a tracking of the performance of the underlying index was possible at any time prior to June
16, 2014. Such data must be considered illustrative only.
You should
not take the historical or hypothetical retrospective values of the underlying index as an indication of its future performance.
Information
as of market close on May 29, 2020:
Bloomberg
Ticker Symbol:
|
MSUSMAP2
|
Current
Index Value:
|
1,163.87
|
The
following graph sets forth the hypothetical retrospective and historical daily closing values of the underlying index for the period
from January 1, 2003 through May 29, 2020. The related table sets forth the hypothetical retrospective and historical high and
low closing values, as well as end-of-quarter closing values, of the underlying index for each quarter from January 1, 2015 through
May 29, 2020. The closing value of the index on May 29, 2020 was 1,163.87. The underlying index was established on June
16, 2014. The information prior to June 16, 2014 is a hypothetical retrospective simulation calculated by the underlying index
publisher and must be considered illustrative only.
Morgan
Stanley ETF-MAP 2 Index Hypothetical Retrospective and Historical Performance
Daily Closing Values
January
1, 2003 to May 29, 2020
|
|
*The red vertical line indicates June 16, 2014,
which is the date on which the underlying index was established.
Morgan Stanley Finance LLC
Market-Linked Notes due June 3, 2026
Based on the Value of the Morgan Stanley ETF-MAP 2 Index
Morgan Stanley ETF-MAP 2 Index
|
High
|
Low
|
Period End
|
2015
|
|
|
|
First Quarter
|
1,059.51
|
1,023.06
|
1,036.32
|
Second Quarter
|
1,053.64
|
1,030.53
|
1,033.80
|
Third Quarter
|
1,035.85
|
992.09
|
1,005.94
|
Fourth Quarter
|
1,012.61
|
981.93
|
984.74
|
2016
|
|
|
|
First Quarter
|
983.78
|
965.22
|
982.17
|
Second Quarter
|
1,012.82
|
975.90
|
1,012.82
|
Third Quarter
|
1,032.61
|
1,012.29
|
1,025.49
|
Fourth Quarter
|
1,029.12
|
1,003.69
|
1,020.24
|
2017
|
|
|
|
First Quarter
|
1,064.50
|
1,024.29
|
1,063.22
|
Second Quarter
|
1,096.14
|
1,062.31
|
1,084.20
|
Third Quarter
|
1,106.95
|
1,075.58
|
1,085.41
|
Fourth Quarter
|
1,129.28
|
1,084.24
|
1,124.04
|
2018
|
|
|
|
First Quarter
|
1,176.91
|
1,125.92
|
1,129.14
|
Second Quarter
|
1,133.84
|
1,113.86
|
1,125.82
|
Third Quarter
|
1,159.71
|
1,124.50
|
1,145.81
|
Fourth Quarter
|
1,145.95
|
1,087.62
|
1,111.51
|
2019
|
|
|
|
First Quarter
|
1,143.63
|
1,106.00
|
1,143.63
|
Second Quarter
|
1,170.21
|
1,129.72
|
1,159.96
|
Third Quarter
|
1,208.94
|
1,159.27
|
1,186.33
|
Fourth Quarter
|
1,207.29
|
1,182.35
|
1,202.27
|
2020
|
|
|
|
First Quarter
|
1,229.48
|
1,142.79
|
1,160.14
|
Second Quarter (through May 29, 2020)
|
1,166.65
|
1,159.73
|
1,163.87
|
Hypothetical Underlying Index Return
The following table shows the hypothetical return on the
underlying index from January 1, 2003 to May 29, 2020. Because the publication of the underlying index began on June 16, 2014,
the return on the underlying index shown below is retrospectively simulated. No actual investment which allowed a tracking of
the performance of the underlying index was possible at any time prior to June 16, 2014.
|
|
Index Returns1
|
|
|
|
|
|
|
|
1/1/2003–5/29/2020
|
2003
|
2004
|
2005
|
2006
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
2017
|
2018
|
2019
|
20202
|
|
Returns
|
5.85%
|
18.80%
|
6.97%
|
3.00%
|
7.55%
|
3.71%
|
0.82%
|
10.98%
|
11.12%
|
10.77%
|
5.43%
|
5.50%
|
6.78%
|
-4.08%
|
3.61%
|
10.20%
|
-1.11%
|
8.17%
|
-3.19%
|
|
Data
based on simulated returns from January 1, 2003 to June 16, 2014 and actual returns thereafter.
1
All returns except year-to-date 2020 returns are annualized.
2
Year-to-date 2020 returns are not annualized.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Morgan Stanley Finance LLC
Market-Linked Notes due June 3, 2026
Based on the Value of the Morgan Stanley ETF-MAP 2 Index
Additional Terms of the Notes
Please read this information in conjunction
with the summary terms on the front cover of this document.
Additional Terms:
|
If
the terms described herein are inconsistent with those described in the accompanying product supplement or prospectus, the
terms described herein shall control.
|
Denominations:
|
$10
and integral multiples thereof
|
Interest:
|
None
|
Underlying index publisher:
|
MS & Co. or any successor thereof
|
Bull or bear notes:
|
Bull
notes
|
Call right:
|
The notes are not callable prior to the maturity date.
|
Market disruption event:
|
The following provision supersedes in its entirety “Description
of Equity-Linked Notes—General Terms of the Notes—market disruption event” in the accompanying product supplement:
“Market disruption event” means the occurrence or
existence of any of the following events with respect to any ETF included in the underlying index, as determined by the calculation
agent in its sole discretion:
(i) (a) the occurrence or existence of a suspension, absence
or material limitation of trading of the ETF on the primary market for the ETF for more than two hours of trading or during the
one-half hour period preceding the close of the principal trading session in such market; or
(b) a breakdown or failure in the price and trade reporting systems
of the primary market for the ETF as a result of which the reported trading prices for the ETF during the last one-half hour preceding
the close of the principal trading session in such market are materially inaccurate; or the suspension, absence or material limitation
of trading on the primary market for trading in futures or options contracts related to the ETF, if available, during the one-half
hour period preceding the close of the principal trading session in the applicable market; or
(c) the suspension, material limitation or absence of trading
on any major U.S. securities market for trading in futures or options contracts related to, if applicable, the ETF underlying index
or the ETF for more than two hours of trading or during the one-half hour period preceding the close of the principal trading session
on such market; and
(ii) a determination by the calculation agent in its sole discretion
that any event described in clause (a), (b) or (c) above materially interfered with our ability or the ability of any of our affiliates
to unwind or adjust all or a material portion of the hedge position with respect to the notes.
For the purpose of determining whether a market disruption event
exists at any time, if trading in an ETF included in the underlying index is materially suspended or materially limited at that
time, then the relevant percentage contribution of that ETF to the value of the underlying index shall be based on a comparison
of (x) the portion of the value of the underlying index attributable to that ETF relative to (y) the overall value of the underlying
index, in each case immediately before the suspension or limitation.
For the purpose of determining whether a market disruption event
has occurred: (1) a limitation on the hours or number of days of trading will not constitute a market disruption event if it results
from an announced change in the regular business hours of the relevant exchange or market, (2) a decision to permanently discontinue
trading in the ETF or in futures or options contract related to the ETF underlying index or the ETF will not constitute a market
disruption event, (3) a suspension of trading in futures or options contracts on the ETF underlying index or the ETF by the primary
securities market trading in such contracts by reason of (a) a price change exceeding limits set by such securities exchange or
market, (b) an imbalance of orders relating to such contracts or (c) a disparity in bid and ask quotes relating to such contracts
will constitute a suspension, absence or material limitation of trading in futures or options contracts related to the ETF underlying
index or the ETF and (4) a “suspension, absence or material limitation of trading” on any relevant exchange or on the
primary market on which futures or options contracts related to the ETF underlying index or the ETF are traded will not include
any time when such securities market is itself closed for trading under ordinary circumstances.
|
Relevant exchange:
|
The following provision supersedes in its entirety “Description
of Equity-Linked Notes—General Terms of the Notes—relevant exchange” in the accompanying product supplement:
The primary exchange(s) or market(s) of trading
for any ETF then-included in the underlying index, or any successor index.
|
Postponement of determination date:
|
If a market disruption event with respect to the underlying index occurs on the scheduled determination date, or if the scheduled determination date is not an index business day, the index closing value for such day shall be determined on the immediately succeeding index business day on
|
Morgan Stanley Finance LLC
Market-Linked Notes due June 3, 2026
Based on the Value of the Morgan Stanley ETF-MAP 2 Index
|
which no market disruption event shall have occurred with respect to the underlying index; provided that the final index value shall not be determined on a date later than the fifth scheduled index business day after the scheduled determination date, and if such date is not an index business day, or if there is a market disruption event on such date, the calculation agent shall determine the final index value using the index closing value as determined by the calculation agent in accordance with the formula for calculating the underlying index last in effect prior to the commencement of the market disruption event (or prior to the non-index business day), without rebalancing or substitution, using the closing price (or, if trading in the relevant securities has been materially suspended or materially limited, its good faith estimate of the closing price that would have prevailed but for such suspension, limitation or non-Index business day) on such date of each ETF most recently constituting the underlying index.
|
Postponement of maturity date:
|
If the determination date is postponed so that it falls less than two business days prior to the scheduled maturity date, the maturity date will be postponed to the second business day following the determination date as postponed.
|
Discontinuance of the underlying index:
|
The following provision supersedes in its entirety “Description
of Equity-Linked Notes—Discontinuance of Any Underlying Index or Basket Index; Alteration of Method of Calculation”
in the accompanying product supplement:
If the underlying index publisher discontinues publication of
the underlying index and such underlying index publisher or another entity publishes a successor or substitute index that MS &
Co., as the calculation agent, determines, in its sole discretion, to be comparable to the discontinued underlying index (such
index being referred to herein as a “successor index”), then any subsequent index closing value will be determined
by reference to the published value of such successor index at the regular weekday close of trading on any index business day that
the index closing value is to be determined, and, to the extent the index closing value of such successor index differs from the
index closing value of the underlying index at the time of such substitution, a proportionate adjustment will be made by the calculation
agent to the initial index value.
Upon any selection by the calculation agent of a successor index,
the calculation agent will cause written notice thereof to be furnished to the trustee, to us and to The Depositary Trust Company,
New York, New York (“DTC”), as holder of such notes, within three business days of such selection. We expect that such
notice will be made available to you, as a beneficial owner of the relevant notes, in accordance with the standard rules and procedures
of DTC and its direct and indirect participants.
If the underlying index publisher discontinues publication of
the underlying index and the calculation agent determines, in its sole discretion, that no successor index is available, then,
on the date of such determination, the calculation agent will determine, in good faith and in a commercially reasonable manner,
an alternative supplemental redemption amount, which will equal its estimate of the value, if any, of the investors’ forgone
opportunity to receive any supplemental redemption amount, determined by reference to the calculation agent’s pricing models,
inputs, assumptions about future market conditions including, without limitation, the volatility of the ETF-MAP 2 Index and its
components and current and expected interest rates. The alternative supplemental redemption amount, if any, will be paid at maturity
in addition to the stated principal amount of the notes.
|
Equity-linked notes:
|
All references to “equity-linked notes” or related terms in the accompanying product supplement for equity-linked notes shall be deemed to refer to market-linked notes when read in conjunction with this document.
|
Trustee:
|
The Bank of New York Mellon
|
Calculation agent:
|
MS & Co.
|
Issuer notice to registered note holders, the trustee and the depositary:
|
In the event that the 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 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 maturity date, the business day immediately preceding the scheduled maturity
date, and (ii) with respect to notice of the date to which the maturity date has been rescheduled, the business day immediately
following the actual determination date for determining the final index value.
The issuer shall, or shall cause the calculation
agent to, (i) provide written notice to the trustee at its New York office, on which notice the trustee may conclusively rely,
and to the depositary of the payment at maturity on or prior to 10:30 a.m. (New York City time) on the business day preceding the
maturity date and (ii) deliver the aggregate cash amount due with respect to the notes to the trustee for delivery to the depositary,
as holder of the notes, on the maturity date.
|
Morgan Stanley Finance LLC
Market-Linked Notes due June 3, 2026
Based on the Value of the Morgan Stanley ETF-MAP 2 Index