CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities Offered
|
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Maximum Aggregate Offering Price
|
|
Amount of Registration Fee
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Callable Contingent Income Securities due 2023
|
|
$2,350,000
|
|
$256.39
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October 2020
Pricing Supplement No. 5,023
Registration Statement Nos. 333-221595; 333-221595-01
Dated October 23, 2020
Filed pursuant to Rule 424(b)(2)
Morgan Stanley Finance LLC
Structured Investments
Opportunities in U.S. Equities
Callable Contingent Income Securities due October
26, 2023
Payments on the Securities Based on the Worst
Performing of the NASDAQ-100 Index®, the Russell 2000® Index and the Dow Jones Industrial AverageSM
Fully and Unconditionally Guaranteed by Morgan
Stanley
Principal at Risk Securities
The securities are unsecured obligations of Morgan Stanley Finance
LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley. The securities have the terms described
in the accompanying prospectus supplement, index supplement and prospectus, as supplemented or modified by this document. The securities
do not guarantee the repayment of principal and do not provide for the regular payment of interest. Instead, the securities will
pay a contingent semi-annual coupon but only if the index closing value of each of the NASDAQ-100 Index®,
the Russell 2000® Index and the Dow Jones Industrial AverageSM on the related call observation date
is at or above 70% of its respective initial level, which we refer to as the respective coupon barrier. If the index closing
value of any underlying index is less than the coupon barrier for such index on any call observation date, we will pay no
coupon for the related semi-annual period. In addition, beginning on April 28, 2021, we will redeem the securities on any semi-annual
redemption date, for a redemption payment equal to the sum of the stated principal amount plus any contingent semi-annual
coupon otherwise due with respect to the related call observation date, if and only if the output of a risk neutral valuation model
on a business day that is at least 2 but no more than 5 business days prior to such redemption date, based on the inputs indicated
under “Call feature” below, indicates that redeeming on such date is economically rational for us as compared to not
redeeming on such date. An early redemption of the securities will not automatically occur based on the performance of the underlying
indices. At maturity, if the securities have not been previously redeemed and if the final level of each underlying index
is greater than or equal to 70% of the respective initial level, which we refer to as the principal barrier, the payment at maturity
will be the stated principal amount and the related contingent semi-annual coupon. If, however, the final level of any underlying
index is less than its principal barrier, investors will be exposed to the decline in the worst performing underlying index on
a 1-to-1 basis and will receive a payment at maturity that is less than 70% of the stated principal amount of the securities and
could be zero. Accordingly, investors in the securities must be willing to accept the risk of losing their entire initial
investment based on the performance of any underlying index and also the risk of not receiving any semi-annual coupons during the
entire 3-year term of the securities. Because payments on the securities are based on the worst performing of the underlying
indices, a decline beyond the respective coupon barrier and/or respective principal barrier, as applicable, of any underlying
index will result in few or no contingent semi-annual coupons and/or a significant loss of your investment, as applicable, even
if the other underlying indices have appreciated or have not declined as much. Investors will not participate in any appreciation
in any underlying index. The securities are for investors who are willing to risk their principal and seek an opportunity to earn
interest at a potentially above-market rate in exchange for the risk of receiving no semi-annual interest if any underlying
index closes below the coupon barrier for such index on the call observation dates, and the risk of an early redemption of
the securities based on the output of a risk neutral valuation model. The securities 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
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Issuer:
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Morgan Stanley Finance LLC
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Guarantor:
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Morgan Stanley
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Underlying indices:
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NASDAQ-100 Index® (the “NDX Index”), Russell 2000® Index (the “RTY Index”) and Dow Jones Industrial AverageSM (the “INDU Index”)
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Aggregate principal amount:
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$2,350,000
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Stated principal amount:
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$1,000 per security
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Issue price:
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$1,000 per security (see “Commissions and issue price” below)
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Trade date:
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October 23, 2020
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Settlement date:
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October 28, 2020 (3 business days after the trade date)
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Maturity date:
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October 26, 2023
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Call feature:
|
Beginning on April 28, 2021, an early redemption, in whole but not in part, will occur on a redemption date if and only if the output of a risk neutral valuation model on a business day that is at least 2 but no more than 5 business days prior to such redemption date, as selected by the calculation agent (the “determination date”), taking as input: (i) prevailing reference market levels, volatilities and correlations, as applicable and in each case as of the determination date and (ii) Morgan Stanley’s credit spreads as of the trade date, indicates that redeeming on such date is economically rational for us as compared to not redeeming on such date. If we call the securities, we will give you notice at least 2 business days before the call date specified in the notice. No further payments will be made on the securities once they have been redeemed.
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Contingent semi-annual coupon:
|
If, on any call observation date, the index closing value of
each underlying index is greater than or equal to its respective coupon barrier, we will pay a contingent semi-annual
coupon at an annual rate of 9.50% (corresponding to approximately $47.50 per semi-annual period per security) on the related contingent
coupon payment date.
If, on any call observation date, the closing value of any
underlying index is less than the coupon barrier for such index, no contingent semi-annual coupon will be paid with
respect to that call observation date. It is possible that one or more underlying indices will remain below the respective coupon
barrier(s) for extended periods of time or even throughout the entire term of the securities so that you will receive few or no
contingent semi-annual coupons.
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Payment at maturity:
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If the securities have not previously been redeemed, investors
will receive on the maturity date a payment at maturity determined as follows:
If the final level of each underlying index is greater
than or equal to its respective principal barrier: the stated principal amount and the contingent semi-annual coupon with respect
to the final call observation date.
If the final level of any underlying index is less
than its respective principal barrier: (i) the stated principal amount multiplied by (ii) the index performance factor
of the worst performing underlying index. Under these circumstances, the payment at maturity will be less than 70% of the stated
principal amount of the securities and could be zero.
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Terms continued on the following page
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Agent:
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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.”
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Estimated value on the trade date:
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$950.90 per security. See “Investment Overview” beginning on page 3.
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Commissions and issue price:
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Price to public
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Agent’s commissions(1)
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Proceeds to us(2)
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Per security
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$1,000
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$15
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$985
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Total
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$2,350,000
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$35,250
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$2,314,750
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We also sold, pursuant to Pricing Supplement No. 5,022, a
separate issuance of securities, being sold only to fee-based advisory accounts, with terms similar to those of this issuance but
with a higher contingent semi-annual coupon rate.
|
(1)
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Selected dealers and their financial advisors will collectively receive from the agent, Morgan Stanley & Co. LLC, a
fixed sales commission of $15 for each security they sell. In addition, selected dealers and their financial advisors will receive
a structuring fee of up to $2.50 and a distribution fee of $3 for each security from the agent or its affiliates. See “Supplemental
information regarding plan of distribution; conflicts of interest.” For additional information, see “Plan of Distribution
(Conflicts of Interest)” in the accompanying prospectus supplement.
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|
(2)
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See “Use of proceeds and hedging” on page 32.
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The securities 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 securities, or determined if this document or the accompanying prospectus supplement,
index supplement and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The securities 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
prospectus supplement, index supplement and prospectus, each of which can be accessed via the hyperlinks below. Please also see
“Additional Terms of the Securities” and “Additional Information About the Securities” at the end of this
document.
References to “we,” “us” and “our”
refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Morgan Stanley
Finance LLC
Callable
Contingent Income Securities due October 26, 2023
Payments on the Securities Based on the Worst Performing of the NASDAQ-100
Index®, the Russell 2000® Index and the Dow Jones Industrial AverageSM
Principal at Risk Securities
Terms continued from previous page:
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Redemption payment:
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The redemption payment will be an amount equal to (i) the stated principal amount plus (ii) any contingent semi-annual coupon otherwise due with respect to the related call observation date.
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Redemption dates:
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Beginning on April 28, 2021, semi-annually. See “Call observation dates, Coupon Payment Dates and Redemption Dates” below. If any such day is not a business day, the redemption payment will be made on the next succeeding business day and no adjustment will be made to any redemption payment made on that succeeding business day.
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Initial level:
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With respect to the NDX Index: 11,692.57, which is the index
closing value of such index on the trade date
With respect to the RTY Index: 1,640.502, which is the index
closing value of such index on the trade date
With respect to the INDU Index: 28,335.57, which is the index
closing value of such index on the trade date
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Final level:
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With respect to each underlying index, the respective index closing value on the final call observation date
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Worst performing
underlying index:
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The underlying index with the largest percentage decrease from the respective initial level to the respective final level
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Index performance factor:
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Final level divided by the initial level
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Coupon barrier:
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With respect to the NDX Index: 8,184.799, which is 70% of the
initial level for such index
With respect to the RTY Index: 1,148.351, which is approximately
70% of the initial level for such index
With respect to the INDU Index: 19,834.899, which is 70% of the
initial level for such index
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Principal barrier:
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With respect to the NDX Index: 8,184.799, which is 70% of the
initial level for such index
With respect to the RTY Index: 1,148.351, which is approximately
70% of the initial level for such index
With respect to the INDU Index: 19,834.899, which is 70% of the
initial level for such index
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Coupon payment dates:
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Semi-annually, as set forth under “Call observation dates, Coupon Payment Dates and Redemption Dates” below. If any such day is not a business day, that contingent semi-annual coupon, if any, will be paid on the next succeeding business day and no adjustment will be made to any coupon payment made on that succeeding business day. The contingent semi-annual coupon, if any, with respect to the final call observation date shall be paid on the maturity date.
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Call observation dates:
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Semi-annually, as set forth under “Call observation dates, Coupon Payment Dates and Redemption Dates” below, subject to postponement for non-index business days and certain market disruption events. We also refer to October 23, 2023 as the final call observation date.
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CUSIP / ISIN:
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61771EBG2 / US61771EBG26
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Listing:
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The securities will not be listed on any securities exchange.
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Call observation dates, Coupon
Payment Dates and Redemption Dates
Call observation dates
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Coupon Payment Dates / Redemption Dates
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4/23/2021
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4/28/2021
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10/25/2021
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10/28/2021
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4/25/2022
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4/28/2022
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10/24/2022
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10/27/2022
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4/24/2023
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4/27/2023
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10/23/2023 (final call observation date)
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10/26/2023 (maturity date)
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Morgan Stanley
Finance LLC
Callable
Contingent Income Securities due October 26, 2023
Payments on the Securities Based on the Worst Performing of the NASDAQ-100
Index®, the Russell 2000® Index and the Dow Jones Industrial AverageSM
Principal at Risk Securities
Investment Overview
Callable Contingent Income Securities
Principal at Risk Securities
Callable Contingent Income Securities due October 26, 2023 Payments
on the Securities Based on the Worst Performing of the NASDAQ-100 Index®, the Russell 2000® Index
and the Dow Jones Industrial AverageSM (the “securities”) do not guarantee the repayment of principal and
do not provide for the regular payment of interest. Instead, the securities will pay a contingent semi-annual coupon but only
if the index closing value of each of the NASDAQ-100 Index®, the Russell 2000® Index and the
Dow Jones Industrial AverageSM (which we refer to together as the “underlying indices”) is at or
above 70% of its respective initial level, which we refer to as the respective coupon barrier, on the related call observation
date. If the index closing value of any underlying index is less than the coupon barrier for such index on any call observation
date, we will pay no coupon for the related semi-annual period. It is possible that the index closing value of one or more underlying
indices will remain below the respective coupon barrier(s) for extended periods of time or even throughout the entire term of the
securities so that you will receive few or no contingent semi-annual coupons during the entire term of the securities. Even if
an underlying index were to be at or above the coupon barrier for such index on some semi-annual call observation dates, it may
fluctuate below the coupon barrier on others. In addition, even if one underlying index were to be at or above the coupon barrier
for such index on all semi-annual call observation dates, you will receive a contingent semi-annual coupon only with respect to
the call observation dates on which the other underlying indices are also at or above their respective coupon barriers, if any.
In addition, beginning on April 28, 2021, we will redeem the securities on any semi-annual redemption date, for a redemption payment
equal to the sum of the stated principal amount plus any contingent semi-annual coupon otherwise due with respect to the
related call observation date, if and only if the output of a risk neutral valuation model on a business day that is at least 2
but no more than 5 business days prior to such redemption date, based on the inputs indicated under “Call feature”
on the cover page, indicates that redeeming on such date is economically rational for us as compared to not redeeming on such date.
An early redemption of the securities will not automatically occur based on the performance of the underlying indices. At maturity,
if the securities have not been previously redeemed and if the final level of each underlying index is greater than or equal
to 70% of the respective initial level, which we refer to as the principal barrier, the payment at maturity will be the stated
principal amount and the related contingent semi-annual coupon. If, however, the final level of any underlying index is
less than its principal barrier, investors will be exposed to the decline in the worst performing underlying index on a 1-to-1
basis and will receive a payment at maturity that is less than 70% of the stated principal amount of the securities and could be
zero. Accordingly, investors in the securities must be willing to accept the risk of losing their entire initial investment
based on the performance of any underlying index and also the risk of not receiving any semi-annual coupons during the entire 3-year
term of the securities.
Maturity:
|
Approximately 3 years, unless redeemed earlier based on the output of a risk neutral valuation model
|
Contingent semi-annual coupon:
|
If, on any call observation date, the index closing value of
each underlying index is greater than or equal to its respective coupon barrier, we will pay a contingent semi-annual
coupon at an annual rate of 9.50% (corresponding to approximately $47.50 per semi-annual period per security) on the related contingent
coupon payment date.
If, on any call observation date, the closing value of any
underlying index is less than the coupon barrier for such index, no contingent semi-annual coupon will be paid with
respect to that call observation date. It is possible that one or more underlying indices will remain below the respective coupon
barrier(s) for extended periods of time or even throughout the entire term of the securities so that you will receive few or no
contingent semi-annual coupons.
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Early redemption:
|
Beginning on April 28, 2021, we will redeem the securities on
any semi-annual redemption date for a redemption payment equal to the sum of the stated principal amount plus any contingent
semi-annual coupon otherwise due with respect to the related call observation date, if and only if the output of a risk neutral
valuation model on a business day that is at least 2 but no more than 5 business days prior to such redemption date, based on the
inputs indicated under “Call feature” on the cover page, indicates that redeeming on such date is economically rational
for us as compared to not redeeming on such date. An early redemption of the securities will not automatically occur based on the
performance of the underlying indices. In accordance with the risk neutral valuation model determination noted herein, it is more
likely that we will redeem the securities when it would otherwise be advantageous for you to continue to hold the securities. As
such, we will be more likely to redeem the
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Morgan Stanley Finance LLC
Callable Contingent Income Securities due October 26, 2023
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index®, the Russell 2000® Index and the Dow Jones Industrial AverageSM
Principal at Risk Securities
|
securities when the index closing value of each underlying index
on the call observation dates is at or above its respective coupon barrier, which would otherwise result in an amount of interest
payable on the securities that is greater than instruments of a comparable maturity and credit rating trading in the market. In
other words, we will be more likely to redeem the securities at a time when the securities are paying an above-market coupon. If
the securities are redeemed prior to maturity, you will receive no more contingent semi-annual coupon payments, may be forced to
invest in a lower interest rate environment and may not be able to reinvest at comparable terms or returns.
On the other hand, we will be less likely to redeem the securities
when the index closing value of any underlying index is below its respective coupon barrier and/or when the final level of any
underlying index is expected to be below the principal barrier, such that you will receive no contingent semi-annual coupons and/or
that you will suffer a significant loss on your initial investment in the securities at maturity. Therefore, if we do not redeem
the securities, it is more likely that you will receive few or no contingent semi-annual coupons and suffer a significant loss
at maturity.
|
Payment at maturity:
|
If the securities have not previously been redeemed, investors
will receive on the maturity date a payment at maturity determined as follows:
If the final level of each underlying index is greater
than or equal to its respective principal barrier: the stated principal amount and the contingent semi-annual coupon with respect
to the final call observation date.
If the final level of any underlying index is less
than its respective principal barrier: (i) the stated principal amount multiplied by (ii) the index performance factor
of the worst performing underlying index. Under these circumstances, the payment at maturity will be less than 70% of the stated
principal amount of the securities and could be zero.
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due October 26, 2023
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index®, the Russell 2000® Index and the Dow Jones Industrial AverageSM
Principal at Risk Securities
The original issue price of each security is $1,000. This price
includes costs associated with issuing, selling, structuring and hedging the securities, which are borne by you, and, consequently,
the estimated value of the securities on the trade date is less than $1,000. We estimate that the value of each security on the
trade date is $950.90.
What goes into the estimated value on the trade date?
In valuing the securities on the trade date, we take into account
that the securities comprise both a debt component and a performance-based component linked to the underlying indices. The estimated
value of the securities is determined using our own pricing and valuation models, market inputs and assumptions relating to the
underlying indices, instruments based on the underlying indices, 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 securities?
In determining the economic terms of the securities, including
the contingent semi-annual coupon rate, the coupon barriers and the principal barriers, 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
securities 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 securities?
The price at which MS & Co. purchases the securities in the
secondary market, absent changes in market conditions, including those related to the underlying indices, 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 securities are not fully deducted
upon issuance, for a period of up to 6 months following the settlement date, to the extent that MS & Co. may buy or sell the
securities in the secondary market, absent changes in market conditions, including those related to the underlying indices, 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
securities, and, if it once chooses to make a market, may cease doing so at any time.
Morgan Stanley Finance LLC
Callable Contingent Income Securities due October 26, 2023
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index®, the Russell 2000® Index and the Dow Jones Industrial AverageSM
Principal at Risk Securities
Key Investment Rationale
The securities do not provide for the regular payment of interest
and instead will pay a contingent semi-annual coupon but only if the index closing value of each underlying index
is at or above 70% of its initial level, which we refer to as the respective coupon barrier, on the related call observation
date. These securities are for investors who are willing to risk their principal and seek an opportunity to earn interest at a
potentially above-market rate in exchange for the risk of receiving no semi-annual interest if any underlying index closes below
the coupon barrier for such index on the call observation dates, and the risk of an early redemption of the securities based on
the output of a risk neutral valuation model. The following scenarios are for illustration purposes only to demonstrate how the
payment at maturity and contingent semi-annual coupon (if the securities have not previously been redeemed) are determined, and
do not attempt to demonstrate every situation that may occur. Accordingly, the securities may or may not be redeemed by us based
on the output of a risk neutral valuation model, the contingent semi-annual coupon may be payable with respect to none of, or some
but not all of, the semi-annual periods, and the payment at maturity may be less than 70% of the stated principal amount and could
be zero. Investors will not participate in any appreciation in any underlying index.
Scenario 1: The securities are redeemed prior to maturity.
|
This scenario assumes that we redeem the securities based on the output of a risk neutral valuation model prior to the maturity date on one of the semi-annual redemption dates, starting on April 28, 2021, for the redemption payment equal to the stated principal amount plus any contingent semi-annual coupon with respect to the relevant call observation date, as applicable. Prior to the early redemption, each underlying index closes at or above its respective coupon barrier on some or all of the semi-annual call observation dates. In this scenario, investors receive the contingent semi-annual coupon with respect to each such call observation date, but not for the semi-annual periods for which one of more underlying indices close below the respective coupon barrier on the related call observation date. No further payments will be made on the securities once they have been redeemed.
|
Scenario 2: The securities are not redeemed prior to maturity, and investors receive principal back at maturity.
|
This scenario assumes that we do not redeem the securities on any of the semi-annual redemption dates, and, as a result, investors hold the securities to maturity. During the term of the securities, each underlying index closes at or above its respective coupon barrier on some semi-annual call observation dates, but one or more underlying indices close below the respective coupon barrier(s) for such index on the others. Investors will receive the contingent semi-annual coupon for the semi-annual periods for which the index closing value of each underlying index is at or above its respective coupon barrier on the related call observation date, but not for the semi-annual periods for which one or more underlying indices close below the respective coupon barrier(s) on the related call observation date. At maturity, each underlying index closes at or above its principal barrier, and so investors receive the stated principal amount and the contingent semi-annual coupon with respect to the final call observation date.
|
Scenario 3: The securities are not redeemed prior to maturity, and investors suffer a substantial loss of principal at maturity.
|
This scenario assumes that we do not redeem the securities on any of the semi-annual redemption dates, and, as a result, investors hold the securities to maturity. During the term of the securities, one or more underlying indices close below the respective coupon barrier(s) on every semi-annual call observation date. Since one or more underlying indices close below the respective coupon barrier(s) on every semi-annual call observation date, investors do not receive any contingent semi-annual coupon. On the final call observation date, one or more underlying indices close below the respective principal barrier(s). At maturity, investors will receive an amount equal to the stated principal amount multiplied by the index performance factor of the worst performing underlying index. Under these circumstances, the payment at maturity will be less than 70% of the stated principal amount and could be zero.
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due October 26, 2023
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index®, the Russell 2000® Index and the Dow Jones Industrial AverageSM
Principal at Risk Securities
Underlying Indices Summary
NASDAQ-100 Index®
The NASDAQ-100 Index®, which is calculated, maintained
and published by Nasdaq, Inc., is a modified capitalization-weighted index of 100 of the largest and most actively traded equity
securities of non-financial companies listed on The NASDAQ Stock Market LLC. The NASDAQ-100 Index® includes companies
across a variety of major industry groups. At any moment in time, the value of the NASDAQ-100 Index® equals the
aggregate value of the then-current NASDAQ-100 Index® share weights of each of the NASDAQ-100 Index®
component securities, which are based on the total shares outstanding of each such NASDAQ-100 Index® component security,
multiplied by each such security’s respective last sale price on NASDAQ (which may be the official closing price published
by NASDAQ), and divided by a scaling factor, which becomes the basis for the reported NASDAQ-100 Index® value.
Information as of market close on October 23, 2020:
Bloomberg Ticker Symbol:
|
NDX
|
Current Index Value:
|
11,692.57
|
52 Weeks Ago:
|
7,889.47
|
52 Week High (on 9/2/2020):
|
12,420.54
|
52 Week Low (on 3/20/2020):
|
6,994.29
|
For additional information about the NASDAQ-100 Index®,
see the information set forth under “NASDAQ-100 Index®” in the accompanying index supplement. Furthermore,
for additional historical information, see “NASDAQ-100 Index® Historical Performance” below.
Russell 2000® Index
The Russell 2000®
Index is an index calculated, published and disseminated by FTSE Russell, and measures the composite price performance of stocks
of 2,000 companies incorporated in the U.S. and its territories. All 2,000 stocks are traded on a major U.S. exchange and are the
2,000 smallest securities that form the Russell 3000® Index. The Russell 3000® Index is composed
of the 3,000 largest U.S. companies as determined by market capitalization and represents approximately 98% of the U.S. equity
market. The Russell 2000® Index consists of the smallest 2,000 companies included in the Russell 3000®
Index and represents a small portion of the total market capitalization of the Russell 3000® Index. The Russell
2000® Index is designed to track the performance of the small capitalization segment of the U.S. equity market.
Information as of market close on October 23, 2020:
Bloomberg Ticker Symbol:
|
RTY
|
Current Index Value:
|
1,640.502
|
52 Weeks Ago:
|
1,552.855
|
52 Week High (on 1/16/2020):
|
1,705.215
|
52 Week Low (on 3/18/2020):
|
991.160
|
For additional information about the Russell 2000®
Index, see the information set forth under “Russell 2000® Index” in the accompanying index supplement.
Furthermore, for additional historical information, see “Russell 2000® Index Historical Performance”
below.
Dow Jones Industrial AverageSM
The Dow Jones Industrial AverageSM is a price-weighted
index composed of 30 common stocks that is published by S&P Dow Jones Indices LLC, the marketing name and a licensed trademark
of CME Group Inc., as representative of the broad market of U.S. industry.
Information as of market close on October 23, 2020:
Bloomberg Ticker Symbol:
|
INDU
|
Current Index Value:
|
28,335.57
|
52 Weeks Ago:
|
26,833.95
|
52 Week High (on 2/12/2020):
|
29,551.42
|
52 Week Low (on 3/23/2020):
|
18,591.93
|
For additional information about the Dow Jones Industrial AverageSM,
see the information set forth under “Dow Jones Industrial AverageSM” in the accompanying index supplement.
Furthermore, for additional historical information, see “Dow Jones Industrial AverageSM Historical Performance”
below.
Morgan Stanley Finance LLC
Callable Contingent Income Securities due October 26, 2023
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index®, the Russell 2000® Index and the Dow Jones Industrial AverageSM
Principal at Risk Securities
Hypothetical Examples
The following hypothetical examples illustrate how to determine
whether a contingent semi-annual coupon is paid with respect to a call observation date and how to calculate the payment at maturity.
The following examples are for illustrative purposes only. Whether you receive a contingent semi-annual coupon will be determined
by reference to the index closing value of each underlying index on each semi-annual call observation date, and the amount you
will receive at maturity, if any, will be determined by reference to the final level of each underlying index on the final call
observation date. Any early redemption of the securities will be based on the output of a risk neutral valuation model. The actual
initial level, coupon barrier and principal barrier for each underlying index are set forth on the cover of this document. All
payments on the securities, if any, are subject to our credit risk. The below examples are based on the following terms:
Contingent Semi-annual Coupon:
|
If, on any call observation date, the index closing value of
each underlying index is greater than or equal to its respective coupon barrier, we will pay a contingent semi-annual
coupon at an annual rate of 9.50% (corresponding to approximately $47.50 per semi-annual period per security) on the related contingent
coupon payment date.
If, on any call observation date, the closing value of any
underlying index is less than the coupon barrier for such index, no contingent semi-annual coupon will be paid with
respect to that call observation date. It is possible that one or more underlying indices will remain below the respective coupon
barrier(s) for extended periods of time or even throughout the entire term of the securities so that you will receive few or no
contingent semi-annual coupons.
|
Call Feature:
|
Beginning on April 28, 2021, an early redemption, in whole but not in part, will occur on a redemption date if and only if the output of a risk neutral valuation model on a business day that is at least 2 but no more than 5 business days prior to such redemption date, as selected by the calculation agent (the “determination date”), taking as input: (i) prevailing reference market levels, volatilities and correlations, as applicable and in each case as of the determination date and (ii) Morgan Stanley’s credit spreads as of the trade date, indicates that redeeming on such date is economically rational for us as compared to not redeeming on such date. If we call the securities, we will give you notice at least 2 business days before the call date specified in the notice. Any redemption payment will be equal to the stated principal amount plus any contingent semi-annual coupon otherwise due with respect to the related call observation date. If the securities are redeemed prior to maturity, you will receive no more contingent semi-annual coupon payments, may be forced to invest in a lower interest rate environment and may not be able to reinvest at comparable terms or returns.
|
Payment at Maturity (if the securities have not been redeemed early):
|
If the final level of each underlying index is greater
than or equal to its respective principal barrier: the stated principal amount and the contingent semi-annual coupon with respect
to the final call observation date.
If the final level of any underlying index is less
than its respective principal barrier: (i) the stated principal amount multiplied by (ii) the index performance factor
of the worst performing underlying index. Under these circumstances, the payment at maturity will be less than 70% of the stated
principal amount of the securities and could be zero.
|
Stated Principal Amount:
|
$1,000
|
Hypothetical Initial Level:
|
With respect to the NDX Index: 9,400
With respect to the RTY Index: 1,600
With respect to the INDU Index: 20,000
|
Hypothetical Coupon Barrier:
|
With respect to the NDX Index: 6,580, which is 70% of the hypothetical
initial level for such index
With respect to the RTY Index: 1,120, which is 70% of the hypothetical
initial level for such index
With respect to the INDU Index: 14,000, which is 70% of the hypothetical
initial level for such index
|
Hypothetical Principal Barrier:
|
With respect to the NDX Index: 6,580, which is 70% of the hypothetical
initial level for such index
With respect to the RTY Index: 1,120, which is 70% of the hypothetical
initial level for such index
With respect to the INDU Index: 14,000, which is 70% of the hypothetical
initial level for such index
|
* The actual contingent semi-annual coupon will be an amount
determined by the calculation agent based on the number of days in the applicable payment period, calculated on a 30/360 basis.
The hypothetical contingent semi-annual coupon of $47.50 is used in these examples for ease of analysis.
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Principal at Risk Securities
How to determine whether a contingent semi-annual
coupon is payable with respect to a call observation date (if the securities have not been previously redeemed):
|
Index Closing Value
|
Contingent Semi-Annual Coupon
|
|
NDX Index
|
RTY Index
|
INDU Index
|
|
Hypothetical Call Observation Date 1
|
8,000 (at or above coupon barrier)
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2,000 (at or above coupon barrier)
|
21,000 (at or above coupon barrier)
|
$47.50
|
Hypothetical Call Observation Date 2
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8,800 (at or above coupon barrier)
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1,600 (at or above coupon barrier)
|
10,000 (below coupon barrier)
|
$0
|
Hypothetical Call Observation Date 3
|
5,000 (below coupon barrier)
|
600 (below coupon barrier)
|
19,000 (at or above coupon barrier)
|
$0
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Hypothetical Call Observation Date 4
|
5,200 (below coupon barrier)
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500 (below coupon barrier)
|
9,000 (below coupon barrier)
|
$0
|
On hypothetical call observation date 1, the NDX Index, the RTY
Index and the INDU Index all close at or above their respective coupon barriers. Therefore a contingent semi-annual coupon of $47.50
is paid on the relevant coupon payment date.
On each of the hypothetical call observation dates 2 and 3, at
least one underlying index closes at or above its coupon barrier but one or both of the other underlying indices close below their
respective coupon barrier(s). Therefore, no contingent semi-annual coupon is paid on the relevant coupon payment date.
On hypothetical call observation date 4, each underlying index
closes below its respective coupon barrier and accordingly no contingent semi-annual coupon is paid on the relevant coupon payment
date.
How to calculate the payment
at maturity (if the securities have not been redeemed early):
|
Final Level
|
Payment at Maturity
|
|
NDX Index
|
RTY Index
|
INDU Index
|
|
Example 1:
|
10,000 (at or above the principal barrier and coupon barrier)
|
1,800 (at or above the principal barrier and coupon barrier)
|
26,000 (at or above the principal barrier and coupon barrier)
|
$1,047.50 (the stated principal amount plus the contingent semi-annual coupon with respect to the final call observation date)
|
Example 2:
|
8,800 (at or above the principal barrier)
|
1,600 (at or above the principal barrier)
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8,000 (below the principal barrier)
|
$1,000 × index performance factor of the worst performing underlying = $1,000 × (8,000 / 20,000) = $400
|
Example 3:
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6,200 (below the principal barrier)
|
640 (below the principal barrier)
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25,000 (at or above the principal barrier)
|
$1,000 × (640 / 1,600) = $400
|
Example 4:
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4,230 (below the principal barrier)
|
480 (below the principal barrier)
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8,000 (below the principal barrier)
|
$1,000 × (480 / 1,600) = $300
|
Example 5:
|
2,820 (below the principal barrier)
|
640 (below the principal barrier)
|
8,000 (below the principal barrier)
|
$1,000 × (2,820 / 9,400) = $300
|
In example 1, the final levels of the NDX Index, the RTY Index
and the INDU Index are all at or above their principal barriers. Therefore, investors receive at maturity the stated principal
amount of the securities and the contingent semi-annual coupon with respect to the final call observation date. Investors do not
participate in the appreciation of any underlying index.
In examples 2 and 3, the final level(s) of one or two of the
underlying indices are at or above their respective principal barrier(s) but the final level(s) of one or both of the other underlying
indices are below their respective principal barrier(s). Therefore, investors are
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Principal at Risk Securities
exposed to the downside performance of the worst performing underlying
index at maturity and receive at maturity an amount equal to the stated principal amount times the index performance factor
of the worst performing underlying index.
Similarly, in examples 4 and 5, the final level of each underlying
index is below its respective principal barrier, and investors receive at maturity an amount equal to the stated principal amount
times the index performance factor of the worst performing underlying index. In example 4, NDX Index has declined 55% from
its initial level to its final level, the RTY Index has declined 70% from its initial level to its final level and the INDU Index
has declined 60% from its initial level to its final level. Therefore, the payment at maturity equals the stated principal amount
times the index performance factor of the RTY Index, which is the worst performing underlying index in this example. In
example 5, the NDX Index has declined 70% from its initial level to its final level, the RTY Index has declined 60% from its initial
level and the INDU Index has declined 60% from its initial level to its final level. Therefore the payment at maturity equals the
stated principal amount times the index performance factor of the NDX Index, which is the worst performing underlying index
in this example.
If the securities have not been redeemed prior to maturity
and the final level of ANY underlying index is below its respective principal barrier, you will be exposed to the downside performance
of the worst performing underlying index at maturity, and your payment at maturity will be less than $700 per security and could
be zero.
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Callable Contingent Income Securities due October 26, 2023
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Principal at Risk Securities
Risk Factors
The following is a non-exhaustive list of certain key risk
factors for investors in the securities. For further discussion of these and other risks, you should read the section entitled
“Risk Factors” in the accompanying prospectus supplement, index supplement and prospectus. We also urge you to consult
with your investment, legal, tax, accounting and other advisers in connection with your investment in the securities.
|
§
|
The securities do not guarantee the return of any principal. The terms of the securities differ from those of ordinary
debt securities in that they do not guarantee the repayment of principal. If the securities have not been redeemed prior to maturity
and the final level of any underlying index is less than its principal barrier of 70% of its initial level, you will be
exposed to the decline in the closing value of the worst performing underlying index, as compared to its initial level, on a 1-to-1
basis, and you will receive for each security that you hold at maturity an amount equal to the stated principal amount times
the index performance factor of the worst performing underlying index. In this case, the payment at maturity will be less than
70% of the stated principal amount and could be zero.
|
|
§
|
The securities do not provide for regular interest payments. The terms of the securities differ from those of ordinary
debt securities in that they do not provide for the regular payment of interest. The securities will pay a contingent semi-annual
coupon only if the index closing value of each underlying index is at or above 70% of its respective initial level, which we refer
to as the respective coupon barrier, on the related call observation date. If, on the other hand, the index closing value of any
underlying index is lower than the coupon barrier for such index on the relevant call observation date for any interest period,
we will pay no coupon on the applicable coupon payment date. It is possible that the index closing value of one or more underlying
indices will remain below the respective coupon barrier(s) for extended periods of time or even throughout the entire term of the
securities. If you do not earn sufficient contingent semi-annual coupons over the term of the securities, the overall return on
the securities may be less than the amount that would be paid on a conventional debt security of ours of comparable maturity.
|
|
§
|
The securities have early redemption risk. The
term of the securities, and thus your opportunity to earn a potentially above-market coupon if the index closing value of each
underlying index is greater than or equal to the coupon barrier for such index on semi-annual call observation dates, will be limited
if we redeem the securities based on
the output of a risk neutral valuation model on any semi-annual redemption date, beginning April 28, 2021. The term of your investment
in the securities may be limited to as short
as six months. In accordance with the risk neutral valuation model determination noted herein, it is more likely that we will redeem
the securities when it would be advantageous
for you to continue to hold the securities. As such, we will be more likely to redeem the securities when the index closing
value of each underlying index on the call observation dates is at or above the coupon barrier for such index, which would otherwise
result in an amount of interest payable on the securities that is greater than instruments of a comparable maturity and credit
rating trading in the market. In other words, we will be more likely to redeem the securities at a time when the securities are
paying an above-market coupon. If the securities are redeemed prior to maturity, you will receive no more contingent semi-annual
coupon payments, may be forced to invest in a lower interest rate environment and may not be able to reinvest at comparable terms
or returns.
|
On the other hand, we will be less
likely to redeem the securities when the index closing value of any underlying index is below the respective coupon barrier and/or
when the final level for any underlying index is expected to be below the respective principal barrier, such that you will receive
no contingent semi-annual coupons and/or that you will suffer a significant loss on your initial investment in the securities at
maturity. Therefore, if we do not redeem the securities, it is more likely that you will receive few or no contingent semi-annual
coupons and suffer a significant loss at maturity.
|
§
|
You are exposed to the price risk of each underlying index, with respect to both the contingent semi-annual coupons, if
any, and the payment at maturity, if any. Your
return on the securities is not linked to a basket consisting of all three underlying indices. Rather, it will be contingent upon
the independent performance of each underlying index. Unlike an instrument with a return linked to a basket of underlying assets,
in which risk is mitigated and diversified among all the components of the basket, you will be exposed to the risks related to
each underlying index. Poor performance by any underlying
index over the term of the securities may negatively affect your return and will not be offset or mitigated by any positive performance
by the other underlying indices. To receive any contingent semi-annual coupons, each underlying
|
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index
must close at or above its respective coupon barrier on the applicable call observation date. In addition, if any
underlying index has declined to below its respective principal barrier as of the final call
observation date, you will be fully exposed to the decline in the worst performing
underlying index over the term of the securities on a 1-to-1 basis, even if the other underlying indices have appreciated or have
not declined as much. Under this scenario, the value of any such payment will be less than 70% of the stated principal amount and
could be zero. Accordingly, your investment is subject to the price risk of each underlying index.
|
§
|
Because the securities are linked to the performance of the worst performing underlying index, you are exposed to greater
risks of no contingent semi-annual coupons and sustaining a significant loss on your investment than if the securities were linked
to just one index. The risk that you will not receive any contingent semi-annual coupons, or that you will suffer a significant
loss on your investment, is greater if you invest in the securities as opposed to substantially similar securities that are linked
to the performance of just one underlying index. With three underlying indices, it is more likely that any underlying index will
close below its coupon barrier on any call observation date, or below its principal barrier on the final call observation date,
than if the securities were linked to only one underlying index. Therefore, it is more likely that you will not receive any contingent
semi-annual coupons and that you will suffer a significant loss on your investment.
|
|
§
|
The contingent semi-annual coupon, if any, is based only on the value of each underlying index on the related semi-annual
call observation date. Whether the contingent semi-annual coupon will be paid on any coupon payment date will be determined
at the end of the relevant interest period, based on the closing value of each underlying index on the relevant semi-annual call
observation date. As a result, you will not know whether you will receive the contingent semi-annual coupon on any coupon payment
date until near the end of the relevant semi-annual period. Moreover, because the contingent semi-annual coupon is based solely
on the value of each underlying index on semi-annual call observation dates, if the closing value of any underlying index on any
call observation date is below the coupon barrier for such index, you will receive no coupon for the related interest period, even
if the level of such underlying index was at or above its respective coupon barrier on other days during that interest period and
even if the closing values of the other underlying indices were at or above the coupon barriers for such indices.
|
|
§
|
Investors will not participate in any appreciation in any underlying index. Investors
will not participate in any appreciation in any underlying index from the initial level for such index, and the return on the securities
will be limited to the contingent semi-annual coupons, if any, that are paid with respect to each call observation date on which
the index closing value of each underlying index is greater than or equal to its respective coupon barrier until the securities
are redeemed or reach maturity.
|
|
§
|
The securities are linked to the Russell 2000®
Index and are subject to risks associated with small-capitalization companies. As the Russell 2000® Index is
one of the underlying indices, and the Russell 2000® Index consists of stocks issued by companies with relatively
small market capitalization, the securities are linked to the value of small-capitalization companies. These companies often have
greater stock price volatility, lower trading volume and less liquidity than large-capitalization companies and therefore the Russell
2000® Index may be more volatile than indices that consist of stocks issued by large-capitalization companies. Stock
prices of small-capitalization companies are also more vulnerable than those of large-capitalization companies to adverse business
and economic developments, and the stocks of small-capitalization companies may be thinly traded. In addition, small capitalization
companies are typically less well-established and less stable financially than large-capitalization companies and may depend on
a small number of key personnel, making them more vulnerable to loss of personnel. Such companies tend to have smaller revenues,
less diverse product lines, smaller shares of their product or service markets, fewer financial resources and less competitive
strengths than large-capitalization companies and are more susceptible to adverse developments related to their products.
|
|
§
|
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 securities
in the secondary market and the price at which MS & Co. may be willing to purchase or sell the securities in the secondary
market. We expect that generally the level of interest rates available in the market and the value of each underlying
index on any day, including in relation to its respective
coupon barrier and principal barrier, will affect the value of the securities more than any other factors. Other factors that may
influence the value of the securities include:
|
|
o
|
the volatility (frequency and magnitude of changes in value) of the underlying indices,
|
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|
o
|
whether the index closing value of any underlying index has been below its respective coupon barrier on any call observation
date,
|
|
o
|
geopolitical conditions and economic, financial, political, regulatory or judicial events that affect the component stocks
of the underlying indices or securities markets generally and which may affect the value of each underlying index,
|
|
o
|
dividend rates on the securities underlying the underlying indices,
|
|
o
|
the time remaining until the securities mature,
|
|
o
|
interest and yield rates in the market,
|
|
o
|
the availability of comparable instruments,
|
|
o
|
the composition of the underlying indices and changes in the constituent stocks of such indices, and
|
|
o
|
any actual or anticipated changes in our credit ratings or credit spreads.
|
Some
or all of these factors will influence the price that you will receive if you sell your securities prior to maturity. In particular,
if any underlying index has closed near or below the coupon barrier and the principal barrier for such index, the market value
of the securities is expected to decrease substantially and you may have to sell your securities at a substantial discount from
the stated principal amount of $1,000 per security.
You cannot predict the future performance
of any underlying index based on its historical performance. The value of any underlying index may decrease and be below the coupon
barrier for such index on each call observation date so that you will receive no return on your investment, and one or all of the
underlying indices may close below the respective principal barrier(s) on the final call observation date so that you lose more
than 30% or all of your initial investment in the securities. There can be no assurance that the closing value of each underlying
index will be at or above the respective coupon barrier on any call observation date so that you will receive a coupon payment
on the securities for the applicable interest period or that they will be at or above their respective principal barriers on the
final call observation date so that you do not suffer a significant loss on your initial investment in the securities. See “NASDAQ-100
Index® Historical Performance,” “Russell 2000® Index Historical Performance” and
“Dow Jones Industrial AverageSM Historical Performance” below.
|
§
|
The securities 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 securities. You are dependent on our ability to pay all amounts due on the securities
at maturity or on any coupon payment date, and therefore you are subject to our credit risk. The securities are not guaranteed
by any other entity. If we default on our obligations under the securities, your investment would be at risk and you could lose
some or all of your investment. As a result, the market value of the securities 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 securities.
|
|
§
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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.
|
|
§
|
Not equivalent to investing in the underlying indices. Investing in the securities
is not equivalent to investing in any underlying index or the component stocks of any underlying index. Investors in the securities
will not participate in any positive performance of any underlying index, and will not have voting rights or rights to receive
dividends or other distributions or any other rights with respect to stocks that constitute any underlying index.
|
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|
§
|
The securities will not be listed on any securities exchange and secondary trading may be limited. Accordingly, you should
be willing to hold your securities for the entire 3-year term of the securities.
The securities will not be listed on any securities exchange. Therefore, there may be little or no secondary market for the securities.
MS & Co. may, but is not obligated to, make a market in the securities 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 securities, 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 securities. Even if there is a secondary market, it may not provide
enough liquidity to allow you to trade or sell the securities easily. Since other broker-dealers may not participate significantly
in the secondary market for the securities, the price at which you may be able to trade your securities 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 securities, it is likely that there would be no secondary market for the securities. Accordingly, you should be willing to
hold your securities to maturity.
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|
§
|
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 securities in the original issue price reduce the economic terms of the securities,
cause the estimated value of the securities 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 securities 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 securities in the original issue price and the lower rate we are willing to pay as issuer
make the economic terms of the securities less favorable to you than they otherwise would be.
However, because the costs associated
with issuing, selling, structuring and hedging the securities are not fully deducted upon issuance, for a period of up to 6 months
following the settlement date, to the extent that MS & Co. may buy or sell the securities in the secondary market, absent changes
in market conditions, including those related to the underlying indices, 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 securities 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 securities than those generated by others, including other dealers in the market, if they attempted to value
the securities. 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 securities in the secondary market (if any exists) at any time. The value
of your securities 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 will be influenced by many unpredictable
factors” above.
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|
§
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Hedging and trading activity by our affiliates could potentially affect the value of the securities. One or more of
our affiliates and/or third-party dealers expect to carry out hedging activities related to the securities (and to other instruments
linked to the underlying indices or their component stocks), including trading in the stocks that constitute the underlying indices
as well as in other instruments related to the underlying indices. As a result, these entities may be unwinding or adjusting hedge
positions during the term of the securities, and the hedging strategy may involve greater and more frequent dynamic adjustments
to the hedge as the final call observation date approaches. Some of our affiliates also trade the stocks that constitute the underlying
indices and other financial instruments related to the underlying indices 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
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date could potentially increase
the initial level of an underlying index, and, therefore, could increase (i) the coupon barrier for such underlying index, which,
if the securities have not been redeemed, is the value at or above which such underlying index must close on the call observation
dates in order for you to earn a contingent semi-annual coupon (depending also on the performance of the other underlying indices),
and (ii) the principal barrier for such underlying index, which, if the securities have not been redeemed prior to maturity, is
the value at or above which the underlying index must close on the final call observation date so that you are not exposed to the
negative performance of the worst performing underlying index at maturity (depending also on the performance of the other underlying
indices). Additionally, such hedging or trading activities during the term of the securities could affect the value of an underlying
index on the call observation dates, and, accordingly, whether we pay a contingent semi-annual coupon on the securities and the
amount of cash you receive at maturity, if any (depending also on the performance of the other underlying indices).
|
§
|
The calculation agent, which is a subsidiary of Morgan Stanley and an affiliate of MSFL, will make determinations with respect
to the securities. As calculation agent, MS & Co. will determine the initial level, coupon barrier and principal barrier
for each underlying index, the payment at maturity, if any, and whether you receive a contingent semi-annual coupon on each coupon
payment date. 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
and the selection of a successor index or calculation of the index closing value in the event of a market disruption event or discontinuance
of an underlying index. These potentially subjective determinations may affect the payout to you upon an early redemption or at
maturity, if any. For further information regarding these types of determinations, see “Additional Terms of the Securities—Additional
Terms—Calculation agent,” “—Market disruption event,” “—Postponement of call observation
dates,” “—Discontinuance of an underlying index; alteration of method of calculation” and “—Alternate
exchange calculation in case of an event of default” below. In addition, MS & Co. has determined the estimated value
of the securities on the trade date.
|
|
§
|
Adjustments to the underlying indices could adversely affect the value of the securities. The publisher of each underlying
index may add, delete or substitute the component stocks of such underlying index or make other methodological changes that could
change the value of such underlying index. Any of these actions could adversely affect the value of the securities. The publisher
of each underlying index may also discontinue or suspend calculation or publication of such 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. could have an economic interest that is different than that of investors in the securities
insofar as, for example, MS & Co. is permitted to consider indices that are calculated and published by MS & Co. or any
of its affiliates. If MS & Co. determines that there is no appropriate successor index on any call observation date, the determination
of whether a contingent semi-annual coupon will be payable on the securities on the applicable coupon payment date, and/or the
amount payable at maturity, will be based on the value of such underlying index, based on the closing prices of the stocks constituting
such underlying index at the time of such discontinuance, without rebalancing or substitution, computed by MS & Co. as calculation
agent in accordance with the formula for calculating such underlying index last in effect prior to such discontinuance, as compared
to the coupon barrier or principal barrier, as applicable (depending also on the performance of the other underlying indices).
|
|
§
|
The U.S. federal income tax consequences of an investment in the securities are uncertain. There is no direct legal
authority as to the proper treatment of the securities for U.S. federal income tax purposes, and, therefore, significant aspects
of the tax treatment of the securities are uncertain.
|
Please read the discussion under
“Additional Information—Tax considerations” in this document concerning the U.S. federal income tax consequences
of an investment in the securities. We intend to treat a security 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 securities, could result in adverse
tax consequences to holders of the securities 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 securities,
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 securities, the timing and character of income or loss on the securities might differ significantly from the
tax treatment described herein. For example, under one possible treatment, the IRS could seek to recharacterize the securities
as debt instruments. In that event, U.S. Holders
Morgan Stanley Finance LLC
Callable Contingent Income Securities due October 26, 2023
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index®, the Russell 2000® Index and the Dow Jones Industrial AverageSM
Principal at Risk Securities
(as defined below) would be required
to accrue into income original issue discount on the securities 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 securities) and recognize all income and gain in respect of the securities as ordinary income. The risk that financial instruments
providing for buffers, triggers or similar downside protection features, such as the securities, would be recharacterized as debt
is greater than the risk of recharacterization for comparable financial instruments that do not have such features.
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.
In 2007, the U.S. Treasury Department
and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts”
and similar instruments. While it is not clear whether the securities would be viewed as similar to the prepaid forward contracts
described in the notice, it is possible that any Treasury regulations or other guidance promulgated after consideration of these
issues could materially and adversely affect the tax consequences of an investment in the securities, possibly with retroactive
effect. The notice focuses on a number of issues, the most relevant of which for holders of the securities are the character and
timing of income or loss and the degree, if any, to which income realized by non-U.S. investors should be subject to withholding
tax. 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 securities, including possible alternative treatments, the issues presented by this notice and any tax consequences
arising under the laws of any state, local or non-U.S. taxing jurisdiction.
Morgan Stanley Finance LLC
Callable Contingent Income Securities due October 26, 2023
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index®, the Russell 2000® Index and the Dow Jones Industrial AverageSM
Principal at Risk Securities
NASDAQ-100 Index®
Historical Performance
The following graph sets forth the daily closing values of the
NDX Index for the period from January 1, 2015 through October 23, 2020. The related table sets forth the published high and low
closing values, as well as end-of-quarter closing values, of the NDX Index for each quarter for the period from January 1, 2015
through October 23, 2020. The closing value of the underlying index on October 23, 2020 was 11,692.57. We obtained the information
in the table and graph below from Bloomberg Financial Markets, without independent verification. The NDX Index has at times experienced
periods of high volatility, and you should not take the historical values of the NDX Index as an indication of its future performance.
No assurance can be given as to the level of the NDX Index on any call observation date, including the final call observation date.
NDX Index Daily Closing
Values
January 1, 2015
to October 23, 2020
|
|
*The black solid line in the graph indicates both the coupon
barrier and the principal barrier of 8,184.799, each of which is 70% of the initial level.
|
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due October 26, 2023
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index®, the Russell 2000® Index and the Dow Jones Industrial AverageSM
Principal at Risk Securities
NASDAQ-100 Index®
|
High
|
Low
|
Period End
|
2015
|
|
|
|
First Quarter
|
4,483.05
|
4,089.65
|
4,333.69
|
Second Quarter
|
4,548.74
|
4,311.26
|
4,396.76
|
Third Quarter
|
4,679.68
|
4,016.32
|
4,181.06
|
Fourth Quarter
|
4,719.05
|
4,192.96
|
4,593.27
|
2016
|
|
|
|
First Quarter
|
4,497.86
|
3,947.80
|
4,483.66
|
Second Quarter
|
4,565.42
|
4,201.06
|
4,417.70
|
Third Quarter
|
4,891.36
|
4,410.75
|
4,875.70
|
Fourth Quarter
|
4,965.81
|
4,660.46
|
4,863.62
|
2017
|
|
|
|
First Quarter
|
5,439.74
|
4,911.33
|
5,436.23
|
Second Quarter
|
5,885.30
|
5,353.59
|
5,646.92
|
Third Quarter
|
6,004.38
|
5,596.96
|
5,979.30
|
Fourth Quarter
|
6,513.27
|
5,981.92
|
6,396.42
|
2018
|
|
|
|
First Quarter
|
7,131.12
|
6,306.10
|
6,581.13
|
Second Quarter
|
7,280.71
|
6,390.84
|
7,040.80
|
Third Quarter
|
7,660.18
|
7,014.55
|
7,627.65
|
Fourth Quarter
|
7,645.45
|
5,899.35
|
6,329.96
|
2019
|
|
|
|
First Quarter
|
7,493.27
|
6,147.13
|
7,378.77
|
Second Quarter
|
7,845.73
|
6,978.02
|
7,671.08
|
Third Quarter
|
8,016.95
|
7,415.69
|
7,749.45
|
Fourth Quarter
|
8,778.31
|
7,550.79
|
8,733.07
|
2020
|
|
|
|
First Quarter
|
9,718.73
|
6,994.29
|
7,813.50
|
Second Quarter
|
10,209.82
|
7,486.29
|
10,156.85
|
Third Quarter
|
12,420.54
|
10,279.25
|
11,418.06
|
Fourth Quarter (through October 23, 2020)
|
12,088.11
|
11,255.69
|
11,692.57
|
|
|
|
|
“Nasdaq®,” “NASDAQ-100®”
and “NASDAQ-100 Index®” are trademarks of Nasdaq, Inc. See “NASDAQ-100 Index®”
in the accompanying index supplement. See “NASDAQ-100 Index®” in the accompanying index supplement.
Morgan Stanley Finance LLC
Callable Contingent Income Securities due October 26, 2023
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index®, the Russell 2000® Index and the Dow Jones Industrial AverageSM
Principal at Risk Securities
Russell 2000®
Index Historical Performance
The following graph sets forth the daily closing values of the
RTY Index for the period from January 1, 2015 through October 23, 2020. The related table sets forth the published high and low
closing values, as well as end-of-quarter closing values, of the RTY Index for each quarter for the period from January 1, 2015
through October 23, 2020. The closing value of the underlying index on October 23, 2020 was 1,640.502. We obtained the information
in the table and graph below from Bloomberg Financial Markets, without independent verification. The RTY Index has at times experienced
periods of high volatility, and you should not take the historical values of the RTY Index as an indication of its future performance.
No assurance can be given as to the level of the RTY Index on any call observation date, including the final call observation date.
RTY Index Daily Closing
Values
January 1, 2015 to October
23, 2020
|
|
*The black solid line in the graph indicates both the coupon barrier and the principal barrier of 1,148.351, each of which is approximately 70% of the initial level.
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due October 26, 2023
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index®, the Russell 2000® Index and the Dow Jones Industrial AverageSM
Principal at Risk Securities
Russell 2000® Index
|
High
|
Low
|
Period End
|
2015
|
|
|
|
First Quarter
|
1,266.373
|
1,154.709
|
1,252.772
|
Second Quarter
|
1,295.799
|
1,215.417
|
1,253.947
|
Third Quarter
|
1,273.328
|
1,083.907
|
1,100.688
|
Fourth Quarter
|
1,204.159
|
1,097.552
|
1,135.889
|
2016
|
|
|
|
First Quarter
|
1,114.028
|
953.715
|
1,114.028
|
Second Quarter
|
1,188.954
|
1,089.646
|
1,151.923
|
Third Quarter
|
1,263.438
|
1,139.453
|
1,251.646
|
Fourth Quarter
|
1,388.073
|
1,156.885
|
1,357.130
|
2017
|
|
|
|
First Quarter
|
1,413.635
|
1,345.598
|
1,385.920
|
Second Quarter
|
1,425.985
|
1,345.244
|
1,415.359
|
Third Quarter
|
1,490.861
|
1,356.905
|
1,490.861
|
Fourth Quarter
|
1,548.926
|
1,464.095
|
1,535.511
|
2018
|
|
|
|
First Quarter
|
1,610.706
|
1,463.793
|
1,529.427
|
Second Quarter
|
1,706.985
|
1,492.531
|
1,643.069
|
Third Quarter
|
1,740.753
|
1,653.132
|
1,696.571
|
Fourth Quarter
|
1,672.992
|
1,266.925
|
1,348.559
|
2019
|
|
|
|
First Quarter
|
1,590.062
|
1,330.831
|
1,539.739
|
Second Quarter
|
1,614.976
|
1,465.487
|
1,566.572
|
Third Quarter
|
1,585.599
|
1,456.039
|
1,523.373
|
Fourth Quarter
|
1,678.010
|
1,472.598
|
1,668.469
|
2020
|
|
|
|
First Quarter
|
1,705.215
|
991.160
|
1,153.103
|
Second Quarter
|
1,536.895
|
1,052.053
|
1,441.365
|
Third Quarter
|
1,592.287
|
1,398.920
|
1,507.692
|
Fourth Quarter (through October 23, 2020)
|
1,649.053
|
1,531.202
|
1,640.502
|
The “Russell 2000® Index” is a trademark
of FTSE Russell. See “Russell 2000® Index” in the accompanying index supplement.
Morgan Stanley Finance LLC
Callable Contingent Income Securities due October 26, 2023
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index®, the Russell 2000® Index and the Dow Jones Industrial AverageSM
Principal at Risk Securities
Dow Jones Industrial AverageSM Historical
Performance
The following graph sets forth the daily closing values of the
INDU Index for the period from January 1, 2015 through October 23, 2020. The related table sets forth the published high and low
closing values, as well as end-of-quarter closing values, of the INDU Index for each quarter for the period from January 1, 2015
through October 23, 2020. The closing value of the INDU Index on October 23, 2020 was 28,335.57. We obtained the information in
the table and graph below from Bloomberg Financial Markets, without independent verification. The INDU Index has at times experienced
periods of high volatility, and you should not take the historical values of the INDU Index as an indication of its future performance.
No assurance can be given as to the level of the INDU Index on any call observation date, including the final call observation
date.
INDU Index Daily Closing Values
January 1, 2015 to October 23, 2020
|
|
*The black solid line in the graph indicates both the coupon barrier and the principal barrier of 19,834.899, each of which is 70% of the initial level.
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due October 26, 2023
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index®, the Russell 2000® Index and the Dow Jones Industrial AverageSM
Principal at Risk Securities
Dow Jones Industrial AverageSM
|
High
|
Low
|
Period End
|
2015
|
|
|
|
First Quarter
|
18,288.63
|
17,164.95
|
17,776.12
|
Second Quarter
|
18,312.39
|
17,596.35
|
17,619.51
|
Third Quarter
|
18,120.25
|
15,666.44
|
16,284.70
|
Fourth Quarter
|
17,918.15
|
16,272.01
|
17,425.03
|
2016
|
|
|
|
First Quarter
|
17,716.66
|
15,660.18
|
17,685.09
|
Second Quarter
|
18,096.27
|
17,140.24
|
17,929.99
|
Third Quarter
|
18,636.05
|
17,840.62
|
18,308.15
|
Fourth Quarter
|
19,974.62
|
17,888.28
|
19,762.60
|
2017
|
|
|
|
First Quarter
|
21,115.55
|
19,732.40
|
20,663.22
|
Second Quarter
|
21,528.99
|
20,404.49
|
21,349.63
|
Third Quarter
|
22,412.59
|
21,320.04
|
22,405.09
|
Fourth Quarter
|
24,837.51
|
22,557.60
|
24,719.22
|
2018
|
|
|
|
First Quarter
|
26,616.71
|
23,533.20
|
24,103.11
|
Second Quarter
|
25,322.31
|
23,644.19
|
24,271.41
|
Third Quarter
|
26,743.50
|
24,174.82
|
26,458.31
|
Fourth Quarter
|
26,828.39
|
21,792.20
|
23,327.46
|
2019
|
|
|
|
First Quarter
|
26,091.95
|
22,686.22
|
25,928.68
|
Second Quarter
|
26,753.17
|
24,815.04
|
26,599.96
|
Third Quarter
|
27,359.16
|
25,479.42
|
26,916.83
|
Fourth Quarter
|
28,645.26
|
26,078.62
|
28,538.44
|
2020
|
|
|
|
First Quarter
|
29,551.42
|
18,591.93
|
21,917.16
|
Second Quarter
|
27,572.44
|
20,943.51
|
25,812.88
|
Third Quarter
|
29,100.50
|
25,706.09
|
27,781.70
|
Fourth Quarter (through October 23, 2020)
|
28,837.52
|
27,682.81
|
28,335.57
|
“Dow Jones,” “Dow Jones Industrial Average,”
“Dow Jones Indexes” and “DJIA” are service marks of Dow Jones Trademark Holdings LLC. See “Dow Jones
Industrial AverageSM” in the accompanying index supplement.
Morgan Stanley Finance LLC
Callable Contingent Income Securities due October 26, 2023
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index®, the Russell 2000® Index and the Dow Jones Industrial AverageSM
Principal at Risk Securities
Additional Terms of the Securities
Please read this information in conjunction with the summary
terms on the front cover of this pricing supplement.
Additional Terms:
|
|
If the terms described herein are inconsistent with those described in the accompanying prospectus supplement, index supplement or prospectus, the terms described herein shall control.
|
Day-count convention:
|
Interest will be computed on the basis of a 360-day year of twelve 30-day months.
|
Underlying index publisher:
|
With respect to the NDX Index, Nasdaq, Inc., or any successor
thereof.
With respect to the RTY Index, FTSE Russell, or any successor
thereof.
With respect to the INDU Index, S&P Dow Jones Indices LLC,
or any successor thereof.
|
Denominations:
|
$1,000 per security and integral multiples thereof
|
Interest period:
|
The semi-annual period from and including the settlement date (in the case of the first interest period) or the previous scheduled coupon payment date, as applicable, to but excluding the following scheduled coupon payment date, with no adjustment for any postponement thereof.
|
Senior security or subordinated security:
|
Senior
|
Specified currency:
|
U.S. dollars
|
Record date:
|
One business day prior to the related scheduled coupon payment date; provided that any contingent semi-annual coupon payable at maturity shall be payable to the person to whom the payment at maturity shall be payable.
|
Business day:
|
Any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in The City of New York.
|
Index business day:
|
With respect to each underlying index, a day, as determined by the calculation agent, on which trading is generally conducted on each of the relevant exchange(s) for such underlying index, other than a day on which trading on such exchange(s) is scheduled to close prior to the time of the posting of its regular final weekday closing price.
|
Index closing value:
|
With respect to each of the NDX Index and the INDU Index, the
index closing value on any index business day shall be determined by the calculation agent and shall equal the official closing
value of such underlying index, or any successor underlying index (as defined under “Discontinuance of an underlying index;
alteration of method of calculation” below), published at the regular official weekday close of trading on such index business
day by the underlying index publisher for such underlying index. In certain circumstances, the index closing value for the NDX
Index or the INDU Index will be based on the alternate calculation of such underlying index as described under “Discontinuance
of an underlying index; alteration of method of calculation” below.
With respect to the RTY Index, the index closing value on any
index business day shall be determined by the calculation agent and shall equal the closing value of the RTY Index, or any successor
underlying index (as defined under “Discontinuance of an underlying index; alteration of method of calculation” below),
reported by Bloomberg Financial Services, or any successor reporting service the calculation agent may select, on such index business
day. In certain circumstances, the index closing value for the RTY Index will be based on the alternate calculation of the RTY
Index as described under “Discontinuance of an underlying index; alteration of method of calculation” below.
|
Market disruption event:
|
With respect to each underlying index, market disruption event
means:
(i) the
occurrence or existence of any of:
(a) a suspension, absence or material
limitation of trading of securities then constituting 20 percent or more of the value of such underlying index (or a successor
index) on the relevant exchange(s) for such securities for more than two hours of trading or during the one-half hour period preceding
the close of the principal trading session on such relevant exchange(s), or
(b) a breakdown or failure in the
price and trade reporting systems of any relevant exchange as a result of which the reported trading prices for securities then
constituting 20 percent or more of the value of such underlying index (or a successor index) during the last one-half hour preceding
the close of the principal trading session on such relevant exchange(s) are materially inaccurate, or
(c) the suspension, material limitation
or absence of trading on any major U.S. securities market for trading in futures or options contracts or exchange-traded funds
related to such underlying index (or
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due October 26, 2023
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index®, the Russell 2000® Index and the Dow Jones Industrial AverageSM
Principal at Risk Securities
|
a successor index) 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,
in each case as determined by the
calculation agent in its sole discretion; and
(ii) a determination
by the calculation agent in its sole discretion that any event described in clause (i) 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
securities.
For the purpose of determining whether a market disruption event
exists at any time with respect to an underlying index, if trading in a security included in such underlying index is materially
suspended or materially limited at that time, then the relevant percentage contribution of that security to the value of such underlying
index shall be based on a comparison of (x) the portion of the value of such underlying index attributable to that security relative
to (y) the overall value of such underlying index, in each case immediately before that suspension or limitation.
For the purpose of determining whether a market disruption event
exists at any time with respect to an underlying index: (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 relevant futures or options contract or exchange-traded fund will not
constitute a market disruption event, (3) a suspension of trading in futures or options contracts or exchange-traded funds on such
underlying index by the primary securities market trading in such contracts or funds 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 funds or (c) a disparity
in bid and ask quotes relating to such contracts or funds will constitute a suspension, absence or material limitation of trading
in futures or options contracts or exchange-traded funds related to such underlying index 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
or exchange-traded funds related to such underlying index are traded will not include any time when such securities market is itself
closed for trading under ordinary circumstances.
|
Relevant exchange:
|
With respect to each underlying index or its successor index, the primary exchange(s) or market(s) of trading for (i) any security then included in such index and (ii) any futures or options contracts related to such index or to any security then included in such index.
|
Postponement of call observation dates:
|
The call observation dates are subject to postponement due to
non-index business days or certain market disruption events, as described in the following paragraph.
If any scheduled call observation date, including the final call
observation date, is not an index business day with respect to any underlying index or if there is a market disruption event on
such day with respect to any underlying index, the relevant call observation date solely with respect to that affected underlying
index shall be the next succeeding index business day with respect to that underlying index on which there is no market disruption
event with respect to that underlying index; provided that if a market disruption event with respect to that underlying
index has occurred on each of the five index business days with respect to that underlying index immediately succeeding any of
the scheduled call observation dates, then (i) such fifth succeeding index business day shall be deemed to be the relevant call
observation date with respect to that affected underlying index, notwithstanding the occurrence of a market disruption event with
respect to that underlying index on such day and (ii) with respect to any such fifth index business day on which a market disruption
event occurs with respect to that underlying index, the calculation agent shall determine the index closing value on such fifth
index business day in accordance with the formula for and method of calculating that underlying index last in effect prior to the
commencement of the market disruption event, 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
or limitation) at the close of the principal trading session of the relevant exchange on such index business day of each security
most recently constituting that affected underlying index without any rebalancing or substitution of such securities following
the commencement of the market disruption event.
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Postponement of coupon payment dates
(including the maturity date and redemption dates):
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If any scheduled coupon payment date is not a business day, that semi-annual coupon, if any, shall be paid on the next succeeding business day; provided that the contingent semi-annual coupon, if any, with respect to the final call observation date shall be paid on the maturity date; provided further that if, due to a market disruption event or otherwise, any call observation date with respect to any underlying index is postponed so that it falls less than two business days prior to the scheduled coupon payment date, maturity date or redemption date, as applicable, the coupon payment date, maturity date or redemption date, as applicable, shall be postponed to the second business day following the call observation date as postponed, by which date the index closing value of each underlying index has been determined. In any of these cases, no adjustment shall be made to any contingent semi-annual coupon payment, payment at maturity or redemption
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Morgan Stanley Finance LLC
Callable Contingent Income Securities due October 26, 2023
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index®, the Russell 2000® Index and the Dow Jones Industrial AverageSM
Principal at Risk Securities
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payment made on that postponed date.
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Discontinuance of an underlying index;
alteration of method of calculation:
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If any underlying index publisher discontinues publication of
the relevant underlying index and such underlying index publisher or another entity (including MS & Co.) publishes a successor
or substitute index that the calculation agent determines, in its sole discretion, to be comparable to the discontinued index (such
index being referred to herein as the “successor index”), then any subsequent index closing value for the discontinued
index 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 for such underlying index is to be determined, and, to the extent the index
closing value of such successor index differs from the index closing value of the relevant underlying index at the time of such
substitution, proportionate adjustments shall be made by the calculation agent to the relevant initial level, coupon barrier and
principal barrier.
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, as holder
of the securities, within three business days of such selection. We expect that such notice will be made available to you, as a
beneficial owner of the securities, in accordance with the standard rules and procedures of the depositary and its direct and indirect
participants.
If any underlying index publisher discontinues publication of
the relevant underlying index or a successor index prior to, and such discontinuance is continuing on, any call observation date
and the calculation agent determines, in its sole discretion, that no successor index is available at such time, then the calculation
agent will determine the index closing value for such underlying index for such date. The index closing value of such underlying
index or such successor index will be computed by the calculation agent in accordance with the formula for and method of calculating
such index last in effect prior to such discontinuance, 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 or limitation) at the close of the principal trading session of the relevant exchange on such date of each security
most recently constituting such index without any rebalancing or substitution of such securities following such discontinuance.
Notwithstanding these alternative arrangements, discontinuance of the publication of an underlying index may adversely affect the
value of the securities.
If at any time, the method of calculating any underlying index
or any successor index, or the value thereof, is changed in a material respect, or if any underlying index or any successor index
is in any other way modified so that such index does not, in the opinion of the calculation agent, fairly represent the value of
such index had such changes or modifications not been made, then, from and after such time, the calculation agent will, at the
close of business in New York City on each date on which the index closing value for such underlying index is to be determined,
make such calculations and adjustments as, in the good faith judgment of the calculation agent, may be necessary in order to arrive
at a value of a stock index comparable to such underlying index or such successor index, as the case may be, as if such changes
or modifications had not been made, and the calculation agent will calculate the index closing value with reference to such underlying
index or such successor index, as adjusted. Accordingly, if the method of calculating any underlying index or any successor index
is modified so that the value of such index is a fraction of what it would have been if it had not been modified (e.g., due to
a split in such underlying index), then the calculation agent will adjust such index in order to arrive at a value of such underlying
index or such successor index as if it had not been modified (e.g., as if such split had not occurred).
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Alternate exchange calculation in case
of an event of default:
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If an event of default with respect to the securities shall have
occurred and be continuing, the amount declared due and payable upon any acceleration of the securities (the “Acceleration
Amount”) will be an amount, determined by the calculation agent in its sole discretion, that is equal to the cost of having
a qualified financial institution, of the kind and selected as described below, expressly assume all our payment and other obligations
with respect to the securities as of that day and as if no default or acceleration had occurred, or to undertake other obligations
providing substantially equivalent economic value to you with respect to the securities. That cost will equal:
· the lowest amount that a qualified financial institution would charge to effect this assumption or undertaking, plus
· the reasonable expenses, including reasonable attorneys’ fees, incurred by the holders of the securities in preparing any
documentation necessary for this assumption or undertaking.
During the default quotation period for the securities,
which we describe below, the holders of the securities and/or we may request a qualified financial institution to provide a quotation
of the amount it would charge to effect this assumption or undertaking. If either party obtains a quotation, it must notify the
other party in writing of the quotation. The amount referred to in the first bullet point above will equal the lowest—or,
if there is only one, the only—quotation obtained, and as to which notice is so given, during the default quotation period.
With respect to any quotation, however, the party not obtaining the quotation may object, on
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Morgan Stanley Finance LLC
Callable Contingent Income Securities due October 26, 2023
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index®, the Russell 2000® Index and the Dow Jones Industrial AverageSM
Principal at Risk Securities
|
reasonable and significant grounds, to the assumption or undertaking
by the qualified financial institution providing the quotation and notify the other party in writing of those grounds within two
business days after the last day of the default quotation period, in which case that quotation will be disregarded in determining
the Acceleration Amount.
Notwithstanding the foregoing, if a voluntary or involuntary
liquidation, bankruptcy or insolvency of, or any analogous proceeding is filed with respect to MSFL or Morgan Stanley, then depending
on applicable bankruptcy law, your claim may be limited to an amount that could be less than the Acceleration Amount.
If the maturity of the securities is accelerated because of an
event of default as described above, we shall, or shall cause the calculation agent to, 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 Acceleration Amount and the
aggregate cash amount due, if any, with respect to the securities as promptly as possible and in no event later than two business
days after the date of such acceleration.
Default quotation period
The default quotation period is the period beginning on the day
the Acceleration Amount first becomes due and ending on the third business day after that day, unless:
· no quotation of the kind referred to above is obtained, or
· every quotation of that kind obtained is objected to within five business days after the due date as described above.
If either of these two events occurs, the default quotation period
will continue until the third business day after the first business day on which prompt notice of a quotation is given as described
above. If that quotation is objected to as described above within five business days after that first business day, however, the
default quotation period will continue as described in the prior sentence and this sentence.
In any event, if the default quotation period and the subsequent
two business day objection period have not ended before the final call observation date, then the Acceleration Amount will equal
the principal amount of the securities.
Qualified financial institutions
For the purpose of determining the Acceleration Amount at any
time, a qualified financial institution must be a financial institution organized under the laws of any jurisdiction in the United
States or Europe, which at that time has outstanding debt obligations with a stated maturity of one year or less from the date
of issue and rated either:
· A-2 or higher by Standard & Poor’s Ratings Services or any successor, or any other comparable rating then used by that
rating agency, or
· P-2 or higher by Moody’s Investors Service or any successor,
or any other comparable rating then used by that rating agency.
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Trustee:
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The Bank of New York Mellon, a New York banking corporation
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Calculation agent:
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The calculation agent for the securities will be MS & Co.
All determinations made by the calculation agent will be at the sole discretion of the calculation agent and will, in the absence
of manifest error, be conclusive for all purposes and binding on you, the trustee and us.
All calculations with respect to the contingent semi-annual coupon,
the redemption payment and the payment at maturity, if any, shall be made by the calculation agent and shall be rounded to the
nearest one hundred-thousandth, with five one-millionths rounded upward (e.g., .876545 would be rounded to .87655); all dollar
amounts related to determination of the amount of cash payable per stated principal amount, if any, shall be rounded to the nearest
ten-thousandth, with five one hundred-thousandths rounded upward (e.g., .76545 would be rounded up to .7655); and all dollar amounts
paid on the aggregate principal amount of the securities shall be rounded to the nearest cent, with one-half cent rounded upward.
Because the calculation agent is our affiliate, the economic
interests of the calculation agent and its affiliates may be adverse to your interests as an investor in the securities, including
with respect to certain determinations and judgments that the calculation agent must make in determining the payment that you will
receive, if any, on each coupon payment date, upon early redemption or at maturity or whether a market disruption event has occurred.
See “Market disruption event” and “Discontinuance of an underlying index; alteration of method of calculation”
below. MS & Co. is obligated to carry out its duties and functions as calculation agent in good faith and using its reasonable
judgment.
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Issuer notices to registered:
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In the event that the maturity date is postponed due to postponement
of the final call observation date, the
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Morgan Stanley Finance LLC
Callable Contingent Income Securities due October 26, 2023
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index®, the Russell 2000® Index and the Dow Jones Industrial AverageSM
Principal at Risk Securities
security holders, the trustee and the depositary
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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 securities 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 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 securities
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 final call observation date as postponed.
In the event that any coupon payment date is postponed due to
the postponement of the relevant call observation date, the issuer shall give notice of such postponement and, once it has been
determined, of the date to which the applicable coupon payment date has been rescheduled (i) to each registered holder of the securities
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 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 securities
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 any coupon payment date, the business day immediately preceding the applicable scheduled
coupon payment date, and (ii) with respect to notice of the date to which the applicable coupon payment date has been rescheduled,
the business day immediately following the applicable call observation date as postponed.
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 contingent semi-annual coupon, if any, with respect to the securities 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 with respect
to the applicable interest 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, on which notice the trustee may conclusively rely, and to the depositary of the amount of
cash, if any, to be delivered with respect to the securities, on or prior to 10:30 a.m. (New York City time) on the business day
preceding the redemption date or the business day preceding the maturity date, as applicable, and (ii) deliver the aggregate cash
amount due with respect to the securities, if any, to the trustee for delivery to the depositary, as holder of the securities,
on the redemption date or maturity date, as applicable.
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due October 26, 2023
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index®, the Russell 2000® Index and the Dow Jones Industrial AverageSM
Principal at Risk Securities