Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due July 31, 2026, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of Amazon.com, Inc., the Common Stock of The Boeing Company, the Common Stock of Netflix, Inc. and the Class A Common Stock of Facebook, Inc.
Principal at Risk Securities
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.
Risks Relating to the Underlying Stocks
■You are exposed to the price risk of all of the underlying stocks, with respect to both the contingent quarterly coupons, if any, and the payment at maturity, if any. Your return on the securities is not linked to a basket consisting of the underlying stocks. Rather, it will be contingent upon the independent performance of each underlying stock. 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 of the underlying stocks. Poor performance by any underlying stock 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 stocks. To receive any contingent quarterly coupons, all of the underlying stocks must close at or above their respective downside threshold levels on the applicable observation date. In addition, if any underlying stock has declined to below its respective downside threshold level as of the final observation date, you will be fully exposed to the decline in the worst performing underlying stock over the term of the securities on a 1-to-1 basis, even if the other underlying stocks have appreciated. Under this scenario, the value of any such payment will be less than 60% of the stated principal amount and could be zero. Accordingly, your investment is subject to the price risk of all of the underlying stocks.
■No affiliation with Amazon.com, Inc., The Boeing Company, Netflix, Inc. or Facebook, Inc. Amazon.com, Inc., The Boeing Company, Netflix, Inc. and Facebook, Inc. are not affiliates of ours, are not involved with this offering in any way, and have no obligation to consider your interests in taking any corporate actions that might affect the value of the securities. We have not made any due diligence inquiry with respect to Amazon.com, Inc., The Boeing Company, Netflix, Inc. or Facebook, Inc. in connection with this offering.
■We may engage in business with or involving Amazon.com, Inc., The Boeing Company, Netflix, Inc. or Facebook, Inc. without regard to your interests. We or our affiliates may presently or from time to time engage in business with Amazon.com, Inc., The Boeing Company, Netflix, Inc. or Facebook, Inc. without regard to your interests and thus may acquire non-public information about Amazon.com, Inc., The Boeing Company, Netflix, Inc. or Facebook, Inc. Neither we nor any of our affiliates undertakes to disclose any such information to you. In addition, we or our affiliates from time to time have published and in the future may publish research reports with respect to Amazon.com, Inc., The Boeing Company, Netflix, Inc. or Facebook, Inc., which may or may not recommend that investors buy or hold the underlying stock(s).
■The antidilution adjustments the calculation agent is required to make do not cover every corporate event that could affect the underlying stocks. MS & Co., as calculation agent, will adjust the adjustment factors for certain corporate events affecting the underlying stocks, such as stock splits, stock dividends and extraordinary dividends, and certain other corporate actions involving the issuers of the underlying stocks, such as mergers. However, the calculation