CALCULATION
OF REGISTRATION FEE
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Maximum Aggregate
|
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Amount of Registration
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Title of Each Class of Securities Offered
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Offering Price
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|
Fee
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|
|
|
|
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Contingent Income Auto-Callable
|
|
$1,000,000
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$121.20
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Securities due 2022
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May 2019
Pricing Supplement No. 2,023
Registration Statement Nos. 333-221595;
333-221595-01
Dated May 30, 2019
Filed pursuant to Rule 424(b)(2)
M
organ
S
tanley
F
inance
LLC
Structured
Investments
Opportunities
in U.S. Equities
Contingent Income Auto-Callable Securities due
June 7, 2022, with 1-year Initial Non-Call Period
All Payments on the Securities Based on the Worst
Performing of the Common Stock of Marathon Petroleum Corporation, the Common Stock of Caterpillar Inc. and the iShares PHLX Semiconductor
ETF
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
product 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
quarterly coupon
but only if
the determination closing
price of
each
of the common stock of Marathon Petroleum
Corporation, the common stock of Caterpillar Inc. and the iShares PHLX Semiconductor ETF, which we refer to collectively as the
underlyings,
is
at or above
50% of its respective initial
share price, which we refer to as the respective downside threshold level,
on
the related observation date. If the determination closing price of
any underlying
is less than its respective downside
threshold level on any observation date, we will pay no interest for the related quarterly period. However, if the determination
closing price of each of the underlyings is at or above its respective downside threshold level on any subsequent observation date,
investors will receive, in addition to the contingent quarterly coupon for the related quarterly period, any previously unpaid
contingent quarterly coupons from prior observation dates. In addition, the securities will be automatically redeemed if the determination
closing
price of
each underlying
is
greater than or equal to
its respective redemption threshold level
on
any quarterly redemption determination date (
beginning approximately one year after the original issue date)
for
the early redemption payment equal to the sum of the stated principal amount plus the related contingent quarterly coupon and any
previously unpaid contingent quarterly coupons from prior observation dates. At maturity, if
the securities have not previously
been redeemed and the final share price of
each underlying
is
greater than or equal to
its respective downside threshold
level, the payment at maturity will also be the sum of the stated principal amount plus the related contingent quarterly coupon
and any previously unpaid contingent quarterly coupons from prior observation dates. However, if the final share price of
any
underlying
is
less than
its respective downside threshold level, investors will be exposed to the decline in the worst
performing underlying on a 1-to-1 basis and will receive a payment at maturity that is less than 50% of the stated principal amount
of the securities and could be zero.
Accordingly,
i
nvestors in the securities must be willing to accept the risk of losing
their entire initial investment and also the risk of not receiving any contingent quarterly coupons throughout the 3-year term
of the securities.
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 quarterly interest over the entire 3-year
term and in exchange for the possibility of an automatic early redemption prior to maturity. Because the payment of contingent
quarterly coupons is based on the worst performing of the underlyings, the fact that the securities are linked to three underlyings
does not provide any asset diversification benefits and instead means that a decline of
any
underlying below the relevant
downside threshold level will result in no contingent quarterly coupons, even if one or both of the other underlyings close at
or above the respective downside threshold levels. Because all payments on the securities are based on the worst performing of
the underlyings, a decline beyond the respective downside threshold level of any underlying will result in no contingent quarterly
coupon payments and a significant loss of your investment, even if one or both of the other underlyings have appreciated or have
not declined as much. Investors will not participate in any appreciation of any underlying. 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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Underlyings:
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Marathon Petroleum Corporation common stock (the “MPC Stock”), Caterpillar Inc. common stock (the “CAT Stock”) and iShares PHLX Semiconductor ETF (the “SOXX Shares”)
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Aggregate principal amount:
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$1,000,000
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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
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Pricing date:
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May 30, 2019
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Original issue date:
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June 6, 2019 (5 business days after the pricing date)
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Maturity date:
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June 7, 2022
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Early redemption:
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The securities are not subject to early redemption until one
year after the original issue date. Following this one-year non-call period, if, on any redemption determination date, beginning
on June 1, 2020, the determination closing price of
each underlying
is greater than or equal to its respective redemption
threshold level, the securities will be automatically redeemed for an early redemption payment on the related early redemption
date. No further payments will be made on the securities once they have been redeemed.
The securities will not be redeemed early on any early redemption
date if the determination closing price of any underlying is below its respective redemption threshold level on the related redemption
determination date.
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Early redemption payment:
|
The early redemption payment will be an amount equal to (i) the stated principal amount for each security you hold
plus
(ii) the contingent quarterly coupon with respect to the related observation date and any previously unpaid contingent quarterly coupons from the prior observation dates.
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Determination closing price:
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With respect to each underlying, the closing price of such underlying on any redemption determination date or observation date (other than the final observation date),
times
the adjustment factor for such underlying on such determination date or observation date, as applicable
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Early redemption dates:
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Beginning after one year, quarterly, on June 8, 2020, September 8, 2020, December 7, 2020, March 8, 2021, June 8, 2021, September 7, 2021, December 7, 2021 and March 7, 2022. If any such day is not a business day, that early redemption payment will be made on the next succeeding business day and no adjustment will be made to any early redemption payment made on that succeeding business day.
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Contingent quarterly coupon:
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A
contingent
quarterly coupon at an annual rate of 13.00%
(corresponding to approximately $32.50 per quarter per security)
plus
any previously unpaid contingent quarterly coupons
from any prior observation dates will be paid on the securities on each coupon payment date
but only if
the determination
closing price of
each underlying
is at or above its respective downside threshold level on the related observation date;
provided, however,
in the case of any such payment of a previously unpaid contingent quarterly coupon, no additional interest
shall accrue or be payable in respect of such unpaid contingent quarterly coupon from and after the end of the original interest
period for such unpaid contingent quarterly coupon. You will not receive such unpaid contingent quarterly coupons if the determination
closing price of any underlying is less than its respective redemption threshold level on each subsequent observation date.
If, on any observation date, the determination closing price
of any underlying is less than its respective downside threshold level, no contingent quarterly coupon will be paid with respect
to that observation date. It is possible that one or more underlyings will remain below their respective downside threshold levels
for extended periods of time or even throughout the entire 3-year term of the securities so that you will receive few or no contingent
quarterly coupons.
|
Downside threshold level:
|
With respect to the MPC Stock, $23.555, which is equal to 50%
of its initial share price
With respect to the CAT Stock, $60.92, which is equal to 50%
of its initial share price
With respect to the SOXX Shares, $89.525, which is equal to 50%
of its initial share price
|
Payment at maturity:
|
If the securities are not redeemed prior to maturity, investors
will receive a payment at maturity determined as follows:
·
If the final share price of
each underlying
is
greater than or equal to
its respective downside threshold level:
(i) the stated principal amount
plus
(ii) the contingent quarterly coupon with respect to the final observation date and
any previously unpaid contingent quarterly coupons from the prior observation dates
·
If the final share price of
any underlying
is
less than
its respective downside threshold level: (i) the stated principal
amount
multiplied by
(ii) the share performance factor of the worst performing underlying
Under these circumstances, the payment at maturity
will be significantly less than the stated principal amount of $1,000, and will represent a loss of more than 50%, and possibly
all, of your investment.
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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 pricing date:
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$967.40 per security. See “Investment Summary” beginning on page 3.
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Commissions and issue price:
|
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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$0
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$1,000
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Total
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$1,000,000
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$0
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$1,000,000
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(1)
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Selected dealers and their financial advisors will receive a structuring fee of $4 per security from the agent or its affiliates.
MS & Co. will not receive a sales commission with respect to the securities. See “Supplemental information regarding
plan of distribution; conflicts of interest.” For additional information, see “Plan of Distribution (Conflicts of Interest)”
in the accompanying product supplement.
|
|
(2)
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See “Use of proceeds and hedging” on page
34.
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The securities involve risks not associated
with an investment in ordinary debt securities. See “Risk Factors” beginning on page 13.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these securities, or determined if this document or the accompanying product supplement,
index supplement and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The securities are not deposits or saving accounts and are
not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they obligations
of, or guaranteed by, a bank.
You should read this document together with the related product
supplement, 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.
As used in this document, “we,” “us”
and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Product Supplement for Auto-Callable Securities dated November 16, 2017
Index Supplement dated November 16, 2017
Prospectus dated November 16, 2017
Morgan Stanley Finance LLC
Contingent Income
Auto-Callable Securities due June 7, 2022, with 1-year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of Common Stock of Marathon Petroleum Corporation, the Common Stock of Caterpillar Inc. and the iShares PHLX Semiconductor ETF
Principal at Risk Securities
Terms continued from previous page:
|
Redemption determination dates:
|
June 1, 2020, August 31, 2020, November 30, 2020, March 1, 2021, June 1, 2021, August 30, 2021, November 30, 2021 and February 28, 2022, subject to postponement for non-trading days and certain market disruption events.
|
Redemption threshold level:
|
With respect to the MPC Stock, $47.11, which is equal to 100%
of its initial share price
With respect to the CAT Stock, $121.84, which is equal to 100%
of its initial share price
With respect to the SOXX Shares, $179.05, which is equal to 100%
of its initial share price
|
Initial share price:
|
With respect to the MPC Stock, $47.11, which is its closing price
on the pricing date
With respect to the CAT Stock, $121.84, which is its closing
price on the pricing date
With respect to the SOXX Shares, $179.05, which is its closing
price on the pricing date
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Coupon payment dates:
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Quarterly, on September 9, 2019, December 9, 2019, March 9, 2020, June 8, 2020, September 8, 2020, December 7, 2020, March 8, 2021, June 8, 2021, September 7, 2021, December 7, 2021, March 7, 2022 and the maturity date;
provided
that if any such day is not a business day, that contingent quarterly coupon payment will be made on the next business day, and no adjustment will be made to any payment made on such postponed day.
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Observation dates:
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August 30, 2019, December 2, 2019, March 2, 2020, June 1, 2020, August 31, 2020, November 30, 2020, March 1, 2021, June 1, 2021, August 30, 2021, November 30, 2021, February 28, 2022 and May 31, 2022, subject, independently in the case of each underlying, to postponement for non-trading days and certain market disruption events. We also refer to May 31, 2022 as the final observation date.
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Final share price:
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With respect to each underlying, the closing price of such underlying on the final observation date
times
the adjustment factor on such date
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Adjustment factor:
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With respect to each underlying, 1.0, subject to adjustment in the event of certain corporate events affecting such underlying
|
Worst performing underlying:
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The underlying with the largest percentage decrease from the respective initial share price to the respective final share price
|
Share performance factor:
|
Final share price
divided by
the initial share price
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CUSIP / ISIN:
|
61769HCZ6 / US61769HCZ64
|
Listing:
|
The securities will not be listed on any securities exchange.
|
Morgan Stanley Finance LLC
Contingent Income
Auto-Callable Securities due June 7, 2022, with 1-year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of Common Stock of Marathon Petroleum Corporation, the Common Stock of Caterpillar Inc. and the iShares PHLX Semiconductor ETF
Principal at Risk Securities
Investment Summary
Contingent Income Auto-Callable Securities
Principal at Risk Securities
Contingent Income Auto-Callable Securities due June 7, 2022,
with 1-year Initial Non-Call Period All Payments on the Securities Based on the Worst Performing of the Common Stock of Marathon
Petroleum Corporation, the Common Stock of Caterpillar Inc. and the iShares PHLX Semiconductor ETF (the “securities”)
do not provide for the regular payment of interest. Instead, the securities will pay a contingent quarterly coupon at an annual
rate of 13.00% (corresponding to approximately $32.50 per quarter per security)
but only if
the determination closing price
of
each underlying
is
at or above
50% of its respective initial share price, which we refer to as the respective
downside threshold level, on the related observation date. If the determination closing price of
any underlying
is less
than its downside threshold level on any observation date, we will pay no coupon for the related quarterly period.
However,
if the determination closing price of each of the underlyings is at or above its respective downside threshold level on any subsequent
observation date, investors will receive, in addition to the contingent quarterly coupon for the related quarterly period, any
previously unpaid contingent quarterly coupons from prior observation dates.
It is possible that the determination closing
price of
one or more underlyings will remain below their respective downside threshold levels
for extended periods of time
or even throughout the entire 3-year term of the securities so that you will receive few or no contingent quarterly coupons during
the entire term of the securities. We refer to these coupons as contingent, because there is no guarantee that you will receive
a coupon payment on any coupon payment date. Even if all of the underlyings were to be at or above their respective downside threshold
levels on some quarterly observation dates, one or more underlyings may fluctuate below the respective downside threshold level(s)
on others, and the underlyings may not close at or above their respective downside threshold level on any subsequent observation
date, in which case you will not receive payment of any unpaid previously contingent quarterly coupons. In addition, if the securities
have not been automatically called prior to maturity and the final share price of
any underlying
is less than its respective
downside threshold level, investors will be exposed to the decline in the worst performing underlying on a 1-to-1 basis, and will
receive a payment at maturity that is less than 50% of the stated principal amount of the securities and could be zero.
Accordingly,
i
nvestors in the securities must be willing to accept the risk of losing their entire initial investment and also the risk of
not receiving any contingent quarterly payments throughout the entire 3-year term of the securities.
Maturity:
|
Approximately 3 years
|
Contingent quarterly coupon:
|
A
contingent
quarterly coupon at an annual rate of 13.00%
(corresponding to approximately $32.50 per quarter per security) will be paid on the securities on each coupon payment date
but
only if
the determination closing price of
each underlying
is at or above its respective downside threshold level on
the related observation date.
If the contingent quarterly coupon is not paid on any coupon
payment date (because the determination closing price of an underlying on the related observation date is less than the downside
threshold level), such unpaid contingent quarterly coupon will be paid on a later coupon payment date but only if the determination
closing price of each underlying on such later observation date is greater than or equal to the respective downside threshold level. You
will not receive such unpaid contingent quarterly coupon if the determination closing price of any underlying on each subsequent
observation date is less than its respective downside threshold level. If the determination closing price of any underlying
on each observation date is less than its respective downside threshold level, you will not receive any contingent quarterly coupon
for the entire term of the securities.
|
Automatic early redemption quarterly beginning after one year:
|
Starting in June 2020, if the determination closing price of
each
underlying
is greater than or equal to its respective redemption threshold level (equal to 100% of the respective initial
share price) on any quarterly determination date, beginning on June 1, 2020 (approximately one year after the original issue date),
the securities will be automatically redeemed for an early redemption payment equal to the stated principal
|
Morgan Stanley Finance LLC
Contingent Income
Auto-Callable Securities due June 7, 2022, with 1-year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of Common Stock of Marathon Petroleum Corporation, the Common Stock of Caterpillar Inc. and the iShares PHLX Semiconductor ETF
Principal at Risk Securities
|
amount
plus
the contingent quarterly coupon with respect to the related observation date and any previously unpaid contingent quarterly coupons from prior observation dates.
|
Payment at maturity:
|
If the securities have not previously been redeemed and the final
share price of
each underlying
is
greater than or equal to
its respective downside threshold level, the payment at
maturity will be the sum of the stated principal amount
plus
the related contingent quarterly coupon and any previously
unpaid contingent quarterly coupons from prior observation dates.
If the final share price of
any underlying
is less than
its downside threshold level, investors will receive a payment at maturity based on the decline in the worst performing underlying
over the term of the securities. Under these circumstances, the payment at maturity will be less than 50% of the stated principal
amount of the securities and could be zero.
Accordingly,
i
nvestors in the securities must be willing to accept the risk
of losing their entire initial investment.
|
Morgan Stanley Finance LLC
Contingent Income
Auto-Callable Securities due June 7, 2022, with 1-year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of Common Stock of Marathon Petroleum Corporation, the Common Stock of Caterpillar Inc. and the iShares PHLX Semiconductor ETF
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 pricing date is less than $1,000. We estimate that the value
of each security on the pricing date is $967.40.
What goes into the estimated value on the pricing date?
In valuing the securities on the pricing date,
we take into account that the securities comprise both a debt component and a performance-based component linked to the underlyings.
The estimated value of the securities is determined using our own pricing and valuation models, market inputs and assumptions relating
to the underlyings, instruments based on the underlyings, 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 quarterly coupon rate, the redemption threshold levels and the downside threshold levels, 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 terms of
the securities would be more favorable to you.
What is the relationship between the estimated value on the
pricing date and the secondary market price of the securities?
The price at which MS & Co. purchases the
securities in the secondary market, absent changes in market conditions, including those related to the underlyings, may vary from,
and be lower than, the estimated value on the pricing date, because the secondary market price takes into account our secondary
market credit spread as well as the bid-offer spread that MS & Co. would charge in a secondary market transaction of this type
and other factors. However, because the costs associated with issuing, selling, structuring and hedging the securities are not
fully deducted upon issuance, for a period of up to 6 months following the issue date, to the extent that MS & Co. may buy
or sell the securities in the secondary market, absent changes in market conditions, including those related to the underlyings,
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
Contingent Income
Auto-Callable Securities due June 7, 2022, with 1-year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of Common Stock of Marathon Petroleum Corporation, the Common Stock of Caterpillar Inc. and the iShares PHLX Semiconductor ETF
Principal at Risk Securities
Key Investment Rationale
The securities do not provide for the regular payment of interest.
Instead, the securities will pay a contingent quarterly coupon
but only if
the determination closing price of
each underlying
is
at or above
its respective downside threshold level on the related observation date. The securities have been designed
for investors who are willing to forgo market floating interest rates and risk the loss of principal and accept the risk of receiving
few or no coupon payments for the entire 3-year term of the securities in exchange for an opportunity to earn interest at a potentially
above-market rate if all of the underlyings close at or above their respective downside threshold levels, unless the securities
are redeemed early. The following scenarios are for illustration purposes only to demonstrate how the coupon and the payment at
maturity (if the securities have not previously been redeemed) are calculated, and do not attempt to demonstrate every situation
that may occur. Accordingly, the securities may or may not be redeemed, the contingent coupon may be payable in none of, or some
but not all of, the quarterly periods during the 3-year term of the securities, and the payment at maturity may be less than 50%
of the stated principal amount of the securities and may be zero.
Scenario
1: The securities are redeemed prior to maturity
|
This scenario assumes that, prior to early redemption, all of
the underlyings close at or above their respective downside threshold levels on some quarterly observation dates, but one or more
underlyings close below the respective downside threshold level(s) on the others. Investors receive the contingent quarterly coupon,
as well as any previously unpaid contingent quarterly coupons form prior observation dates, for the quarterly periods for which
the determination closing price of each underlying is greater than or equal to the respective downside threshold level on the related
observation date.
Starting on June 1, 2020, when all of the underlyings close at
or above their respective redemption threshold levels on a quarterly redemption determination date, the securities will be automatically
redeemed for the stated principal amount
plus
the contingent quarterly coupon with respect to the related observation date
and any previously unpaid contingent quarterly coupons from prior observation dates.
|
Scenario
2: The securities are not redeemed prior to maturity, and investors receive principal back at maturity
|
This scenario assumes that all of the underlyings close at or above their respective downside threshold levels on some quarterly observation dates, but one or more underlyings close below the respective downside threshold level(s) on the others, and at least one of the underlyings closes below its redemption threshold level on every quarterly redemption determination date. Consequently, the securities are not redeemed early, and investors receive the contingent quarterly coupon, as well as any previously unpaid contingent quarterly coupons form prior observation dates, for the quarterly periods for which the determination closing price of each underlying is greater than or equal to the respective downside threshold level on the related observation date. On the final observation date, all of the underlyings close at or above their respective downside threshold levels. At maturity, in addition to the contingent quarterly coupon with respect to the final observation date and any previously unpaid contingent quarterly coupons form prior observation dates, investors will receive the stated principal amount.
|
Morgan Stanley Finance LLC
Contingent Income
Auto-Callable Securities due June 7, 2022, with 1-year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of Common Stock of Marathon Petroleum Corporation, the Common Stock of Caterpillar Inc. and the iShares PHLX Semiconductor ETF
Principal at Risk Securities
Scenario
3: The securities are not redeemed prior to maturity, and investors suffer a substantial loss of principal at maturity
|
This scenario assumes that all of the underlyings close at or above their respective downside threshold levels on some quarterly observation dates, but one or more underlyings close below the respective downside threshold level(s) on the others, and at least one of the underlyings closes below its redemption threshold level on every quarterly redemption determination date. Consequently, the securities are not redeemed early, and investors receive the contingent quarterly coupon, as well as any previously unpaid contingent quarterly coupons form prior observation dates, for the quarterly periods for which the determination closing price of each underlying is greater than or equal to the respective downside threshold level on the related observation date. On the final observation date, one or more underlyings close below the respective downside threshold level(s). At maturity, investors will receive an amount equal to the stated principal amount multiplied by the share performance factor of the worst performing underlying. Under these circumstances, the payment at maturity will be less than 50% of the stated principal amount and could be zero. No coupon will be paid at maturity in this scenario, and investors will not receive payment of any previously unpaid contingent quarterly coupons at maturity.
|
Morgan Stanley Finance LLC
Contingent Income
Auto-Callable Securities due June 7, 2022, with 1-year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of Common Stock of Marathon Petroleum Corporation, the Common Stock of Caterpillar Inc. and the iShares PHLX Semiconductor ETF
Principal at Risk Securities
How the Securities Work
The following diagrams illustrate the potential outcomes for
the securities depending on (1) the determination closing prices on each quarterly observation date, (2) the determination closing
prices on each quarterly redemption determination date and (3) the final share prices. Please see “Hypothetical Examples”
below for an illustration of hypothetical payouts on the securities.
Diagram #1: Contingent Quarterly Coupons
(Beginning on the First Coupon Payment Date until Early Redemption or Maturity)
Diagram #2: Automatic Early Redemption (Starting
after one year)
Morgan Stanley Finance LLC
Contingent Income
Auto-Callable Securities due June 7, 2022, with 1-year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of Common Stock of Marathon Petroleum Corporation, the Common Stock of Caterpillar Inc. and the iShares PHLX Semiconductor ETF
Principal at Risk Securities
Diagram #3: Payment at Maturity if No Automatic
Early Redemption Occurs
For more information about the payout at
maturity in different hypothetical scenarios, see “Hypothetical Examples” below.
Morgan Stanley Finance LLC
Contingent Income
Auto-Callable Securities due June 7, 2022, with 1-year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of Common Stock of Marathon Petroleum Corporation, the Common Stock of Caterpillar Inc. and the iShares PHLX Semiconductor ETF
Principal at Risk Securities
Hypothetical Examples
The following hypothetical examples illustrate how to determine
whether a contingent quarterly coupon is paid with respect to an observation date and how to calculate the payment at maturity,
if any, assuming the securities are not redeemed prior to maturity. The following examples are for illustrative purposes only.
Whether you receive a contingent quarterly coupon will be determined by reference to the determination closing price of each underlying
on each quarterly observation date. Whether the securities are redeemed early will be determined by reference to the determination
closing price of each underlying on each quarterly determination date (beginning approximately one year after the original issue
date) and the payment at maturity, if any, will be determined by reference to the final share price of each underlying on the final
determination date. The actual initial share price and downside threshold level for each underlying 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 Quarterly Coupon:
|
13.00% per annum, (corresponding to approximately $32.50 per
quarter per security)
1
With respect to each coupon payment date, a contingent quarterly
coupon
plus
any previously unpaid quarterly coupons from any prior observation dates is paid but only if the determination
closing price of each underlying is at or above its respective downside threshold level on the related observation date.
|
Payment at Maturity (if the securities are not redeemed prior to maturity):
|
If the final share price of
each
underlying is
greater
than or equal to
its respective downside threshold level: the stated principal amount
plus
the contingent quarterly
coupon with respect to the final observation date and any previously unpaid contingent quarterly coupons from the prior observation
dates
If the final share price of
any
underlying is
less
than
its respective downside threshold level: (i) the stated principal amount
multiplied by
(ii) the share performance
factor of the worst performing underlying
|
Stated Principal Amount:
|
$1,000
|
Hypothetical Initial Share Price:
|
With respect to the MPC Stock: $50.00
With respect to the CAT Stock: $120.00
With respect to the SOXX Shares: $175.00
|
Hypothetical Downside Threshold Level:
|
With respect to the MPC Stock: $25.00, which is 50% of its hypothetical
initial share price
With respect to the CAT Stock: $60.00, which is 50% of its hypothetical
initial share price
With respect to the SOXX Shares: $87.50, which is 50% of its
hypothetical initial share price
|
1
The actual contingent quarterly
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 day count basis. The hypothetical contingent quarterly coupon of $32.50 is used in these examples for ease of analysis.
How to determine whether a contingent quarterly
coupon is payable with respect to an observation date:
|
Determination Closing Price
|
Hypothetical Contingent Quarterly Coupon
|
|
MPC Stock
|
CAT Stock
|
SOXX Shares
|
|
1
st
Quarterly Observation Date
|
$35.00 (
at or above
its downside threshold level)
|
$75.00 (
at or above
its downside threshold level)
|
$135.00 (
at or above
its downside threshold level)
|
$32.50
|
2
nd
Quarterly Observation Date
|
$45.00 (
at or above
its downside threshold level)
|
$50.00 (
below
its downside threshold level)
|
$135.00 (
at or above
its downside threshold level)
|
$0
|
3
rd
Quarterly Observation Date
|
$40.00 (
at or above
its downside threshold level)
|
$80.00 (
at or above
its downside threshold level)
|
$160.00 (
at or above
its downside threshold level)
|
$32.50 + $32.50 = $65.00
|
4
th
Quarterly Observation Date
|
$15.00 (
below
its downside threshold level)
|
$45.00 (
below
its downside threshold level)
|
$55.00 (
below
its downside threshold level)
|
$0
|
Morgan Stanley Finance LLC
Contingent Income
Auto-Callable Securities due June 7, 2022, with 1-year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of Common Stock of Marathon Petroleum Corporation, the Common Stock of Caterpillar Inc. and the iShares PHLX Semiconductor ETF
Principal at Risk Securities
On hypothetical observation date 1, each of the underlyings closes
at or above its respective downside threshold level. Therefore, a contingent quarterly coupon of $32.50 is paid on the relevant
coupon payment date.
On hypothetical observation date 2, two underlyings close at
or above their respective downside threshold levels, but the other underlying closes below its respective downside threshold level.
Therefore, no contingent quarterly coupon is paid on the relevant coupon payment date.
On hypothetical observation date 3, each of the underlyings closes
at or above its respective downside threshold level. Therefore, investors receive the hypothetical contingent quarterly coupon
with respect to the third observation date as well as the previously unpaid contingent quarterly coupon with respect to the second
observation date.
On hypothetical observation date 4, each of the underlyings closes
below its respective downside threshold level, and accordingly no contingent quarterly coupon is paid on the relevant coupon payment
date.
You will not receive a contingent quarterly coupon on any
coupon payment date if the determination closing price of any underlying is below its respective downside threshold level on the
related observation date.
How to calculate the payment at maturity:
In the following examples, one or more underlyings close below
the respective redemption threshold levels on each redemption determination date, and, consequently, the securities are not automatically
redeemed prior to, and remain outstanding until, maturity.
|
Final Share Price
|
Payment at Maturity
|
|
MPC Stock
|
CAT Stock
|
SOXX Shares
|
|
Example 1:
|
$70.00 (
at or above
its downside threshold level)
|
$140.00 (
at or above
its downside threshold level)
|
$195.00 (
at or above
its downside threshold level)
|
$1,000
plus
the contingent quarterly coupon with respect to the final observation date and any previously unpaid contingent quarterly coupons from the prior observation dates
|
Example 2:
|
$10.00 (
below
its downside threshold level)
|
$75.00 (
at or above
its downside threshold level)
|
$161.00 (
at or above
its downside threshold level)
|
$1,000 x share performance factor of the worst performing underlying = $1,000 x ($10.00 / $50.00) = $200.00
|
Example 3:
|
$40.00 (
at or above
its downside threshold level)
|
$88.00 (
at or above
its downside threshold level)
|
$78.75 (
below
its downside threshold level)
|
$1,000 x ($78.75 / $175.00) = $450.00
|
Example 4:
|
$20.00 (
below
its downside threshold level)
|
$54.00 (
below
its downside threshold level)
|
$77.00 (
below
its downside threshold level)
|
$1,000 x ($20.00 / $50.00) = $400.00
|
Example 5:
|
$22.50 (
below
its downside threshold level)
|
$36.00 (
below
its downside threshold level)
|
$77.00 (
below
its downside threshold level)
|
$1,000 x ($36.00 / $120.00) = $300.00
|
In example 1, the final share prices of each of the MPC Stock,
CAT Stock and SOXX Shares are at or above their respective downside threshold levels. Therefore, investors receive at maturity
the stated principal amount of the securities
plus
the hypothetical contingent quarterly coupon with respect to the final
observation date and any previously unpaid contingent quarterly coupons from the prior observation dates. Investors do not participate
in the appreciation of any of the underlyings.
In example 2, the final share prices of two underlyings are above
their respective downside threshold levels, but the final share price of the other underlying is below its downside threshold level.
Therefore, investors are exposed to the downside performance of the worst performing underlying at maturity and receive an amount
equal to the stated principal amount
times
the share performance factor of the worst performing underlying.
In example 3, the final share prices of two underlyings are at
or above their respective downside threshold levels, but the final share price of the other underlying is below its downside threshold
level. Therefore, investors are exposed to the downside performance of the worst performing underlying at maturity and receive
at maturity an amount equal to the stated principal amount times the share performance factor of the worst performing underlying.
Morgan Stanley Finance LLC
Contingent Income
Auto-Callable Securities due June 7, 2022, with 1-year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of Common Stock of Marathon Petroleum Corporation, the Common Stock of Caterpillar Inc. and the iShares PHLX Semiconductor ETF
Principal at Risk Securities
In examples 4 and 5, the final share prices of all of the underlyings
are below their respective downside threshold levels, and investors receive at maturity an amount equal to the stated principal
amount
times
the share performance factor of the worst performing underlying. In example 4, the MPC Stock has declined 60%
from its initial share price to its final share price, the CAT Stock has declined 55% from its initial share price to its final
share price and the SOXX Shares have declined 56% from its initial share price to its final share price. Therefore, the payment
at maturity equals the stated principal amount
times
the share performance factor of the MPC Stock, which represents the
worst performing underlying in this example. In example 5, the MPC Stock has declined 55% from its initial share price to its final
share price, the CAT Stock has declined 70% from its initial share price to its final share price and the SOXX Shares have declined
56% from its initial share price to its final share price. Therefore the payment at maturity equals the stated principal amount
times
the share performance factor of the CAT Stock, which represents the worst performing underlying in this example.
If the final share price of ANY underlying is below its respective
downside threshold level, you will be exposed to the downside performance of the worst performing underlying at maturity, and your
payment at maturity will be less than 50% of the stated principal amount per security and could be zero.
Morgan Stanley Finance LLC
Contingent Income
Auto-Callable Securities due June 7, 2022, with 1-year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of Common Stock of Marathon Petroleum Corporation, the Common Stock of Caterpillar Inc. and the iShares PHLX Semiconductor ETF
Principal at Risk Securities
Risk Factors
The
following is a 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 product supplement, index supplement and prospectus.
You should also 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 return of any of the principal
amount at maturity. If the securities have not been automatically redeemed prior to maturity and if the final share price of
any
underlying is less than its downside threshold level of 50% of its initial share price, you will be exposed to the decline in the
closing price of the worst performing underlying, as compared to its initial share price, 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 share performance factor
of the worst performing underlying. In this case, the payment at maturity will be less than 50% of the stated principal amount
and could be zero.
You could lose up to your entire investment in the securities.
|
|
§
|
The securities do not provide for the regular payment of interest
and may pay no interest over the entire term of the securities.
The terms of the securities differ from those of ordinary
debt securities in that they do not provide for the regular payment of interest. Instead, the securities will pay a contingent
quarterly coupon but only if the determination closing price of each underlying is at or above 50% of its respective initial share
price, which we refer to as the respective downside threshold level, on the related observation date. If the determination closing
price of any underlying is lower than its downside threshold level on the relevant observation date for any interest period, we
will pay no coupon on the applicable coupon payment date. However, if the determination closing price of each of the underlyings
is at or above its respective downside threshold level on any subsequent observation date, investors will receive, in addition
to the contingent quarterly coupon for the related quarterly period, any previously unpaid contingent quarterly coupons from prior
observation dates. Nevertheless, it is possible that the determination closing price(s) of one or more underlyings could remain
below the respective downside threshold level(s) for extended periods of time or even throughout the entire 3-year term of the
securities so that you will receive few or no contingent quarterly coupons. If you do not earn sufficient contingent 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.
|
|
§
|
You are exposed to the price risk of all of the underlyings, 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 underlyings. Rather, it will be contingent upon the independent
performance of each underlying. 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 underlyings. Poor
performance by
any
underlying 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 underlyings. To receive
any
contingent quarterly coupons,
all
of the underlyings
must close at or above their respective downside threshold levels on the applicable observation date. In addition, if
any
underlying 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
over the term of the securities on a 1-to-1 basis, even if the other underlyings have appreciated or have not declined as much.
Under this scenario, the value of any such payment will be less than 50% of the stated principal amount and could be zero. Accordingly,
your investment is subject to the price risk of all of the underlyings.
|
|
§
|
The contingent coupon, if any, is based only on the determination closing prices of the underlyings on the related quarterly
observation date at the end of the related interest period
.
Whether the contingent coupon will be paid on any coupon payment date will be determined at the end of the relevant interest period
based on the determination closing price of each underlying on the relevant quarterly observation date. As a result, you will not
know whether you will receive the contingent coupon on any coupon payment date until near the end of the relevant interest period.
Moreover, because the contingent coupon is based solely on the price of each underlying on quarterly observation dates, if the
determination closing price of any underlying on any observation date is below the respective
|
Morgan Stanley Finance LLC
Contingent Income
Auto-Callable Securities due June 7, 2022, with 1-year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of Common Stock of Marathon Petroleum Corporation, the Common Stock of Caterpillar Inc. and the iShares PHLX Semiconductor ETF
Principal at Risk Securities
downside threshold level, you will
receive no coupon for the related interest period, or any previously unpaid coupons, even if the price(s) of one or more of the
underlyings were higher on other days during that interest period.
|
§
|
Investors will not participate in any appreciation in the price of any underlying.
Investors will not participate in
any appreciation in the price of any underlying from its initial share price, and the return on the securities will be limited
to the contingent quarterly coupon, if any, that is paid with respect to each observation date on which all determination closing
prices are greater than or equal to their respective downside threshold levels, if any.
|
|
§
|
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 prices of the
underlyings
on any day, including in relation to the respective
downside threshold levels, 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 trading price and volatility (frequency and magnitude of changes in value) of the underlyings and of the securities composing
the PHLX Semiconductor Sector
SM
Index (the “share underlying index”),
|
|
o
|
whether the determination closing price of any underlying has been below its respective downside threshold level on any observation
date,
|
|
o
|
dividend rates on the MPC Stock and CAT Stock,
|
|
o
|
geopolitical conditions and economic, financial, political, regulatory or judicial events that affect the underlyings and which
may affect the prices of the underlyings,
|
|
o
|
the time remaining until the securities mature,
|
|
o
|
interest and yield rates in the market,
|
|
o
|
the availability of comparable instruments,
|
|
o
|
the occurrence of certain events affecting the underlying that may or may not require an adjustment to the adjustment factor,
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. For example,
you may have to sell your securities at a substantial discount from the stated principal amount of $1,000 per security if the price
of any underlying at the time of sale is near or below its downside threshold level or if market interest rates rise.
The
prices of the underlyings may be, and have recently been, volatile, and we can give you no assurance that the volatility will lessen.
The prices of the underlyings may decrease and be below the respective downside threshold level(s) on each observation date so
that you will receive no return on your investment and receive a payment at maturity that is less than 50% of the stated principal
amount and could be zero. There can be no assurance that the determination closing prices of all of the underlyings will be at
or above their respective downside threshold levels on any observation date so that you will receive a coupon payment on the securities
for the applicable interest period, or, with respect to the final observation date, so that you do no suffer a significant loss
on your initial investment in the securities.
See
“Marathon Petroleum Corporation Overview,” “Caterpillar Inc. Overview” and “iShares PHLX Semiconductor
ETF Overview” below.
|
§
|
There are risks associated with investments concentrated in the semiconductor sector.
All or substantially all of the
equity securities held by the iShares PHLX Semiconductor ETF are issued by companies whose primary line of business is directly
associated with the design, distribution, manufacture and sale of semiconductors. The values of companies that are involved in
the semiconductor industry are particularly vulnerable to rapid changes in technology product cycles, rapid product obsolescence,
government regulation, changes in the prices and availability of raw materials and competition in the semiconductor industry, both
domestically and internationally, including competition
|
Morgan Stanley Finance LLC
Contingent Income
Auto-Callable Securities due June 7, 2022, with 1-year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of Common Stock of Marathon Petroleum Corporation, the Common Stock of Caterpillar Inc. and the iShares PHLX Semiconductor ETF
Principal at Risk Securities
from foreign competitors with potentially
lower productions costs. Such companies may also be heavily dependent on patent and intellectual property rights, the loss or impairment
of which may adversely affect profitability. Additionally, such companies may face competition for the services of, and difficulties
in employing and retaining, qualified personnel. Any of these factors could cause the value of some or all of the securities included
in the SOXX Shares, and thus, the price of the SOXX Shares, to decline during the term of the securities.
|
§
|
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
on each coupon payment date, upon automatic redemption and at maturity 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.
|
|
§
|
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.
|
|
§
|
Reinvestment risk.
The term
of your investment in the securities may be shortened due to the automatic early redemption feature of the securities. If the securities
are redeemed prior to maturity, you will receive no more contingent quarterly coupons and may be forced to invest in a lower interest
rate environment and may not be able to reinvest at comparable terms or returns. However, under no circumstances will the securities
be redeemed in the first year of the term of the securities.
|
|
§
|
Investing in the securities is not equivalent to investing in the
underlyings or the securities composing the share underlying index.
Investing in the securities
is not equivalent to investing in the underlyings, the share underlying index or the securities that constitute the share underlying
index. Investors in the securities will not participate in any appreciation in the underlyings and will not have voting rights
or rights to receive dividends or other distributions or any other rights with respect to the underlyings or the stocks that constitute
the share underlying index. As a result, any return on the securities will not reflect the return you would realize if you actually
owned shares of the MPC Stock and the CAT Stock and received the dividends paid or distributions made on them.
|
|
§
|
No affiliation with Marathon Petroleum Corporation or Caterpillar Inc.
Marathon Petroleum Corporation and Caterpillar
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 Marathon Petroleum Corporation or Caterpillar Inc. in connection with this offering.
|
|
§
|
We may engage in business with or involving Marathon Petroleum Corporation or Caterpillar Inc. without regard to your interests.
We or our affiliates may presently or from time to time engage in business with Marathon Petroleum Corporation or Caterpillar
Inc. without regard to your interests and thus may acquire non-public information about Marathon Petroleum Corporation or Caterpillar
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 Marathon Petroleum Corporation
or Caterpillar Inc., which may or may not recommend that investors buy or hold the underlying(s).
|
Morgan Stanley Finance LLC
Contingent Income
Auto-Callable Securities due June 7, 2022, with 1-year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of Common Stock of Marathon Petroleum Corporation, the Common Stock of Caterpillar Inc. and the iShares PHLX Semiconductor ETF
Principal at Risk Securities
|
§
|
The antidilution adjustments the calculation agent is required to make do not cover every corporate event that could affect
the underlyings.
MS & Co., as calculation agent, will adjust the adjustment factors for certain corporate events affecting
the underlyings, such as stock splits and stock dividends, and certain other corporate actions involving the issuers of the MPC
Stock and the CAT Stock, such as mergers. However, the calculation agent will not make an adjustment for every corporate event
that can affect the underlyings. For example, the calculation agent is not required to make any adjustments if the issuers of the
MPC Stock or the CAT Stock or anyone else makes a partial tender or partial exchange offer for the MPC Stock or the CAT Stock,
nor will adjustments be made following the final observation date. In addition, no adjustments will be made for regular cash dividends,
which are expected to reduce the price of the MPC Stock and the CAT Stock by the amount of such dividends. If an event occurs
that does not require the calculation agent to adjust an adjustment factor, such as a regular cash dividend, the market price of
the
securities
and your return on the securities
may be materially and adversely affected. For example, if the record date for a regular cash dividend were to occur on or shortly
before an observation date, this may decrease the determination closing price of the MPC Stock or the CAT Stock to be less than
the respective downside threshold level (resulting in no contingent quarterly coupon being paid with respect to such date) or the
final share price to be less than the respective downside threshold level (resulting in a loss of a significant portion of all
of your investment in the securities), materially and adversely affecting your return.
|
|
§
|
Adjustments to the SOXX Shares or to the share underlying index could adversely affect the value of the securities.
The investment advisor to the iShares PHLX Semiconductor ETF, BlackRock Fund Advisors (the “Investment Advisor”), seeks
investment results that correspond generally to the price and yield performance, before fees and expenses, of the share underlying
index. Pursuant to its investment strategy or otherwise, the Investment Advisor may add, delete or substitute the stocks composing
the iShares PHLX Semiconductor ETF. Any of these actions could adversely affect the price of the SOXX Shares and, consequently,
the value of the securities. NASDAQ PHLX is responsible for calculating and maintaining the share underlying index. NASDAQ PHLX
may add, delete or substitute the securities constituting the share underlying index or make other methodological changes that
could change the value of the share underlying index, and, consequently, the price of the SOXX Shares and the value of the securities.
NASDAQ PHLX may discontinue or suspend calculation or publication of the share underlying index at any time. In these circumstances,
the calculation agent will have the sole discretion to substitute a successor index that is comparable to the discontinued share
underlying index and will be permitted to consider indices that are calculated and published by the calculation agent or any of
its affiliates.
|
|
§
|
The performance and market price of the iShares PHLX Semiconductor ETF, particularly during periods of market volatility,
may not correlate with the performance of the share underlying index, the performance of the component securities of the share
underlying index or the net asset value per share of the iShares PHLX Semiconductor ETF.
The iShares PHLX Semiconductor
ETF does not fully replicate the share underlying index and may hold securities that are different than those included in the share
underlying index. In addition, the performance of the iShares PHLX Semiconductor ETF will reflect additional transaction
costs and fees that are not included in the calculation of the share underlying index. All of these factors may lead to a
lack of correlation between the performance of the iShares PHLX Semiconductor ETF and the share underlying index. In addition,
corporate actions (such as mergers and spin-offs) with respect to the equity securities underlying the iShares PHLX Semiconductor
ETF may impact the variance between the performances of the iShares PHLX Semiconductor ETF and the share underlying index.
Finally, because the shares of the iShares PHLX Semiconductor ETF are traded on an exchange and are subject to market supply
and investor demand, the market price of one share of the iShares PHLX Semiconductor ETF may differ from the net asset value per
share of the iShares PHLX Semiconductor ETF.
|
In particular, during periods of
market volatility, or unusual trading activity, trading in the securities underlying the iShares PHLX Semiconductor ETF may be
disrupted or limited, or such securities may be unavailable in the secondary market. Under these circumstances, the liquidity
of the iShares PHLX Semiconductor ETF may be adversely affected, market participants may be unable to calculate accurately the
net asset value per share of the iShares PHLX Semiconductor ETF, and their ability to create and redeem shares of the iShares PHLX
Semiconductor ETF may be disrupted. Under these circumstances, the market price of shares of the iShares PHLX Semiconductor ETF
may vary
Morgan Stanley Finance LLC
Contingent Income
Auto-Callable Securities due June 7, 2022, with 1-year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of Common Stock of Marathon Petroleum Corporation, the Common Stock of Caterpillar Inc. and the iShares PHLX Semiconductor ETF
Principal at Risk Securities
substantially from the net asset
value per share of the iShares PHLX Semiconductor ETF or the level of the share underlying index.
For all of the foregoing reasons,
the performance of the iShares PHLX Semiconductor ETF may not correlate with the performance of the share underlying index, the
performance of the component securities of the share underlying index or the net asset value per share of the iShares PHLX Semiconductor
ETF. Any of these events could materially and adversely affect the price of the shares of the iShares PHLX Semiconductor
ETF and, therefore, the value of the securities. Additionally, if market volatility or these events were to occur on the
final observation date, the calculation agent would maintain discretion to determine whether such market volatility or events have
caused a market disruption event to occur, and such determination would affect the payment at maturity of the securities. If
the calculation agent determines that no market disruption event has taken place, the payment at maturity would be based solely
on the published closing price per share of the iShares PHLX Semiconductor ETF on the final observation date, even if the iShares
PHLX Semiconductor ETF’s shares are underperforming the share underlying index or the component securities of the share underlying
index and/or trading below the net asset value per share of the iShares PHLX Semiconductor ETF.
|
§
|
The securities will not be listed on any securities exchange and secondary trading may be limited
,
and
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.
|
|
§
|
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 issue 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 underlyings, 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
|
Morgan Stanley Finance LLC
Contingent Income
Auto-Callable Securities due June 7, 2022, with 1-year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of Common Stock of Marathon Petroleum Corporation, the Common Stock of Caterpillar Inc. and the iShares PHLX Semiconductor ETF
Principal at Risk Securities
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 pricing 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.
|
§
|
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 have carried out, and will continue to carry out, hedging activities related to the securities
(and to other instruments linked to the underlyings or the share underlying index), including trading in the underlyings and in
other instruments related to the underlyings or the share underlying index. Some of our affiliates also trade the underlyings or
the stocks that constitute the share underlying index and other financial instruments related to the share underlying index and
other financial instruments related to the underlyings on a regular basis as part of their general broker-dealer and other businesses.
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 observation date approaches. Any of these hedging
or trading activities on or prior to the pricing date could have increased the initial share price of an underlying, and, therefore,
could have increased (i) the value at or above which such underlying must close on the redemption determination dates so that the
securities are redeemed prior to maturity for the early redemption payment (depending also on the performance of the other underlyings)
and (ii) the downside threshold level for such underlying, which is the value at or above which the underlying must close on the
observation dates so that you receive a contingent quarterly coupon on the securities (depending also on the performance of the
other underlyings), and, with respect to the final observation date, so that you are not exposed to the negative performance of
the worst performing underlying at maturity (depending also on the performance of the other underlyings). Additionally, such hedging
or trading activities during the term of the securities could potentially affect the value of any underlying on the redemption
determination dates and the observation dates, and, accordingly, whether we redeem the securities prior to maturity, whether we
pay a contingent quarterly coupon on the securities and the amount of cash you will receive at maturity, if any (depending also
on the performance of the other underlyings).
|
|
§
|
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. has determined the initial share prices, the redemption threshold levels
and the downside threshold levels and will determine the final share prices, the payment at maturity, if any, whether you receive
a contingent quarterly coupon on each coupon payment date and/or at maturity, whether the securities will be redeemed on any early
redemption date, whether a market disruption event has occurred and whether to make any adjustments to the adjustment factors.
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 certain
adjustments to the adjustment factors or calculation of a determination closing price in the event of a market disruption event.
These potentially subjective determinations may affect the payout to you upon an automatic early redemption or at maturity, if
any. For further information regarding these types of determinations, see “Description of Auto-Callable Securities—Auto-Callable
Securities Linked to Underlying Shares” and “—Calculation Agent and Calculations” and related definitions
in the accompanying product supplement. In addition, MS & Co. has determined the estimated value of the securities on the pricing
date.
|
|
§
|
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
Morgan Stanley Finance LLC
Contingent Income
Auto-Callable Securities due June 7, 2022, with 1-year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of Common Stock of Marathon Petroleum Corporation, the Common Stock of Caterpillar Inc. and the iShares PHLX Semiconductor ETF
Principal at Risk Securities
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 (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
Contingent Income
Auto-Callable Securities due June 7, 2022, with 1-year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of Common Stock of Marathon Petroleum Corporation, the Common Stock of Caterpillar Inc. and the iShares PHLX Semiconductor ETF
Principal at Risk Securities
Marathon Petroleum
Corporation Overview
Marathon Petroleum Corporation is a petroleum product refiner,
marketer and transporter. The MPC Stock is registered under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). Information provided to or filed with the Securities and Exchange Commission by Marathon Petroleum Corporation pursuant
to the Exchange Act can be located by reference to the Securities and Exchange Commission file number 001-35054 through the Securities
and Exchange Commission’s website at www.sec.gov. In addition, information regarding Marathon Petroleum Corporation may be
obtained from other sources including, but not limited to, press releases, newspaper articles and other publicly disseminated documents.
Neither the issuer nor the agent makes any representation that such publicly available documents or any other publicly available
information regarding the issuer of the MPC Stock is accurate or complete.
Information as of market close on May 30, 2019:
Bloomberg Ticker Symbol:
|
MPC
|
Exchange:
|
NYSE
|
Current Stock Price:
|
$47.11
|
52 Weeks Ago:
|
$79.55
|
52 Week High (on 10/3/2018):
|
$86.39
|
52 Week Low (on 5/30/2019):
|
$47.11
|
Current Dividend Yield:
|
4.63%
|
The following table sets forth the published
high and low closing prices of, as well as dividends on, the MPC Stock for each quarter from January 1, 2016 through May 30, 2019.
The closing price of the MPC Stock on May 30, 2019 was $47.11. The associated graph shows the closing prices of the MPC Stock for
each day from January 1, 2014 through May 30, 2019. We obtained the information in the table and graph below from Bloomberg Financial
Markets, without independent verification. The historical performance of the MPC Stock should not be taken as an indication of
its future performance, and no assurance can be given as to the price of the MPC Stock at any time, including on the redemption
determination dates or the observation dates.
Common Stock of Marathon Petroleum Corporation (CUSIP 56585A102)
|
High ($)
|
Low ($)
|
Dividends ($)
|
2016
|
|
|
|
First Quarter
|
51.24
|
30.73
|
0.32
|
Second Quarter
|
41.46
|
32.81
|
0.32
|
Third Quarter
|
43.74
|
35.48
|
0.36
|
Fourth Quarter
|
51.12
|
40.96
|
0.36
|
2017
|
|
|
|
First Quarter
|
52.93
|
47.71
|
0.36
|
Second Quarter
|
55.03
|
48.19
|
0.36
|
Third Quarter
|
56.53
|
49.45
|
0.40
|
Fourth Quarter
|
66.84
|
55.72
|
0.40
|
2018
|
|
|
|
First Quarter
|
73.68
|
62.79
|
0.46
|
Second Quarter
|
82.93
|
69.20
|
0.46
|
Third Quarter
|
85.79
|
69.60
|
0.46
|
Fourth Quarter
|
86.39
|
54.32
|
0.46
|
2019
|
|
|
|
First Quarter
|
67.18
|
57.50
|
0.53
|
Second Quarter (through May 30, 2019)
|
63.60
|
47.11
|
0.53]
|
We make no representation as to the amount
of dividends, if any, that Marathon Petroleum Corporation may pay in the future. In any event, as an investor in the Contingent
Income Auto-Callable Securities, you will not be entitled to receive dividends, if any, that may be payable on the common stock
of Marathon Petroleum Corporation.
Morgan Stanley Finance LLC
Contingent Income
Auto-Callable Securities due June 7, 2022, with 1-year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of Common Stock of Marathon Petroleum Corporation, the Common Stock of Caterpillar Inc. and the iShares PHLX Semiconductor ETF
Principal at Risk Securities
Common Stock of Marathon Petroleum Corporation – Daily Closing Prices
January 1, 2014 to May 30, 2019
|
|
* The red solid line indicates the downside
threshold level of $23.555, which is 50% of the initial share price.
This document relates only to the securities
referenced hereby and does not relate to the MPC Stock or other securities of Marathon Petroleum Corporation. We have derived all
disclosures contained in this document regarding Marathon Petroleum Corporation stock from the publicly available documents described
above. In connection with the offering of the securities, neither we nor the agent has participated in the preparation of such
documents or made any due diligence inquiry with respect to Marathon Petroleum Corporation. Neither we nor the agent makes any
representation that such publicly available documents or any other publicly available information regarding Marathon Petroleum
Corporation is accurate or complete. Furthermore, we cannot give any assurance that all events occurring prior to the date hereof
(including events that would affect the accuracy or completeness of the publicly available documents described above) that would
affect the trading price of the MPC Stock (and therefore the price of the MPC Stock at the time we priced the securities) have
been publicly disclosed. Subsequent disclosure of any such events or the disclosure of or failure to disclose material future events
concerning Marathon Petroleum Corporation could affect the value received with respect to the securities and therefore the value
of the securities.
Neither the issuer nor any of its affiliates
makes any representation to you as to the performance of the MPC Stock.
Morgan Stanley Finance LLC
Contingent Income
Auto-Callable Securities due June 7, 2022, with 1-year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of Common Stock of Marathon Petroleum Corporation, the Common Stock of Caterpillar Inc. and the iShares PHLX Semiconductor ETF
Principal at Risk Securities
Caterpillar Inc. Overview
Caterpillar Inc. is a manufacturer of construction and mining
equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. The CAT Stock is registered
under the Exchange Act. Information provided to or filed with the Securities and Exchange Commission by Caterpillar Inc. pursuant
to the Exchange Act can be located by reference to the Securities and Exchange Commission file number 001- 00768 through the Securities
and Exchange Commission’s website at .www.sec.gov. In addition, information regarding Caterpillar Inc. may be obtained from
other sources including, but not limited to, press releases, newspaper articles and other publicly disseminated documents.
Neither
the issuer nor the agent makes any representation that such publicly available documents or any other publicly available information
regarding the issuer of the CAT Stock is accurate or complete.
Information as of market close on May 30, 2019:
Bloomberg Ticker Symbol:
|
CAT
|
Exchange:
|
NYSE
|
Current Stock Price:
|
$121.84
|
52 Weeks Ago:
|
$155.46
|
52 Week High (on 10/3/2018):
|
$158.22
|
52 Week Low (on 10/242018):
|
$112.34
|
Current Dividend Yield:
|
3.43%
|
The following table sets forth the published
high and low closing prices of, as well as dividends on, the CAT Stock for each quarter from January 1, 2016 through May 30, 2019.
The closing price of the CAT Stock on May 30, 2019 was $121.84. The associated graph shows the closing prices of the CAT Stock
for each day from January 1, 2014 through May 30, 2019. We obtained the information in the table and graph below from Bloomberg
Financial Markets, without independent verification. The historical performance of the CAT Stock should not be taken as an indication
of its future performance, and no assurance can be given as to the price of the CAT Stock at any time, including on the redemption
determination dates or the observation dates.
Common Stock of Caterpillar Inc. (CUSIP 149123101)
|
High ($)
|
Low ($)
|
Dividends ($)
|
2016
|
|
|
|
First Quarter
|
76.54
|
57.91
|
0.77
|
Second Quarter
|
80.39
|
69.43
|
0.77
|
Third Quarter
|
88.77
|
74.38
|
0.77
|
Fourth Quarter
|
97.33
|
81.11
|
0.77
|
2017
|
|
|
|
First Quarter
|
99.02
|
91.39
|
0.77
|
Second Quarter
|
107.60
|
92.27
|
0.77
|
Third Quarter
|
125.23
|
106.51
|
0.78
|
Fourth Quarter
|
158.42
|
124.72
|
0.78
|
2018
|
|
|
|
First Quarter
|
170.89
|
144.29
|
0.78
|
Second Quarter
|
158.92
|
134.61
|
0.78
|
Third Quarter
|
156.38
|
132.02
|
0.86
|
Fourth Quarter
|
158.22
|
112.34
|
0.86
|
2019
|
|
|
|
First Quarter
|
141.41
|
121.51
|
0.86
|
Second Quarter (through May 30, 2019)
|
143.36
|
121.48
|
0.86
|
We make no representation as to the amount
of dividends, if any, that Caterpillar Inc. may pay in the future. In any event, as an investor in the Contingent Income Auto-Callable
Securities, you will not be entitled to receive dividends, if any, that may be payable on the common stock of Caterpillar Inc.
Morgan Stanley Finance LLC
Contingent Income
Auto-Callable Securities due June 7, 2022, with 1-year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of Common Stock of Marathon Petroleum Corporation, the Common Stock of Caterpillar Inc. and the iShares PHLX Semiconductor ETF
Principal at Risk Securities
Common Stock of Caterpillar Inc. – Daily Closing Prices
January 1, 2014 to May 30, 2019
|
|
* The red solid line indicates the downside
threshold level of $60.92, which is 50% of the initial share price.
This document relates only to the securities
referenced hereby and does not relate to the CAT Stock or other securities of Caterpillar Inc. We have derived all disclosures
contained in this document regarding Caterpillar Inc. stock from the publicly available documents described above. In connection
with the offering of the securities, neither we nor the agent has participated in the preparation of such documents or made any
due diligence inquiry with respect to Caterpillar Inc. Neither we nor the agent makes any representation that such publicly available
documents or any other publicly available information regarding Caterpillar Inc. is accurate or complete. Furthermore, we cannot
give any assurance that all events occurring prior to the date hereof (including events that would affect the accuracy or completeness
of the publicly available documents described above) that would affect the trading price of the CAT Stock (and therefore the price
of the CAT Stock at the time we priced the securities) have been publicly disclosed. Subsequent disclosure of any such events or
the disclosure of or failure to disclose material future events concerning Caterpillar Inc. could affect the value received with
respect to the securities and therefore the value of the securities.
Neither the issuer nor any of its affiliates
makes any representation to you as to the performance of the CAT Stock.
Morgan Stanley Finance LLC
Contingent Income
Auto-Callable Securities due June 7, 2022, with 1-year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of Common Stock of Marathon Petroleum Corporation, the Common Stock of Caterpillar Inc. and the iShares PHLX Semiconductor ETF
Principal at Risk Securities
iShares PHLX Semiconductor ETF Overview
The iShares PHLX Semiconductor ETF (the “Fund”) is
an exchange-traded fund managed by iShares Trust (“iShares”), a registered investment company, that seeks investment
results that correspond generally to the price and yield performance, before fees and expenses, of the PHLX Semiconductor Sector
SM
Index.
Information provided to or filed with the Securities and Exchange Commission (“the Commission”) by iShares pursuant
to the Securities Act of 1933 and the Investment Company Act of 1940 can be located by reference to Commission file numbers 333-92935
and 811-09729, respectively, through the Commission’s website at
.
www.sec.gov. In addition,
information may be obtained from other publicly available sources.
Neither the issuer nor the agent makes any representation
that such publicly available information regarding the Fund is accurate or complete.
Information as of market close on May 30, 2019:
Bloomberg Ticker Symbol:
|
SOXX UP
|
Current Share Price:
|
$179.05
|
52 Weeks Ago:
|
$188.81
|
52 Week High (on 4/24/2019):
|
$215.77
|
52 Week Low (on 12/24/2018):
|
$145.30
|
The following table sets forth the published high and low closing
prices of, as well as the end-of-quarter closing prices, of the SOXX Shares for each quarter from January 1, 2014 through May 30,
2019. The closing price of the SOXX Shares on May 30, 2019 was $179.05. The associated graph shows the daily closing prices of
the SOXX Shares for each day from January 1, 2014 through May 30, 2019. We obtained the information in the table and graph below
from Bloomberg Financial Markets, without independent verification. The historical performance of the SOXX Shares should not be
taken as an indication of future performance, and no assurance can be given as to the price of the SOXX Shares at any time, including
on the redemption determination dates or the observation dates.
iShares PHLX Semiconductor ETF (CUSIP: 464287523)
|
High ($)
|
Low ($)
|
Period End ($)
|
2014
|
|
|
|
First Quarter
|
80.02
|
70.32
|
79.70
|
Second Quarter
|
86.61
|
76.13
|
86.37
|
Third Quarter
|
89.63
|
81.59
|
86.85
|
Fourth Quarter
|
95.84
|
74.71
|
92.90
|
2015
|
|
|
|
First Quarter
|
99.54
|
88.36
|
94.04
|
Second Quarter
|
101.10
|
91.79
|
92.09
|
Third Quarter
|
92.80
|
76.01
|
81.40
|
Fourth Quarter
|
93.68
|
80.47
|
89.79
|
2016
|
|
|
|
First Quarter
|
92.15
|
75.77
|
91.65
|
Second Quarter
|
97.01
|
85.51
|
93.73
|
Third Quarter
|
113.01
|
91.15
|
113.01
|
Fourth Quarter
|
127.08
|
108.62
|
122.69
|
2017
|
|
|
|
First Quarter
|
137.34
|
122.01
|
136.85
|
Second Quarter
|
154.37
|
129.91
|
140.18
|
Third Quarter
|
158.60
|
138.28
|
158.60
|
Fourth Quarter
|
181.77
|
159.54
|
169.82
|
2018
|
|
|
|
First Quarter
|
196.31
|
165.34
|
180.13
|
Second Quarter
|
195.33
|
168.35
|
178.26
|
Third Quarter
|
191.86
|
175.94
|
185.17
|
Fourth Quarter
|
185.97
|
145.30
|
156.88
|
2019
|
|
|
|
First Quarter
|
195.90
|
148.84
|
189.60
|
Second Quarter (through May 30, 2019)
|
215.77
|
176.95
|
179.05
|
Morgan Stanley Finance LLC
Contingent Income
Auto-Callable Securities due June 7, 2022, with 1-year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of Common Stock of Marathon Petroleum Corporation, the Common Stock of Caterpillar Inc. and the iShares PHLX Semiconductor ETF
Principal at Risk Securities
iShares PHLX Semiconductor
ETF – Daily Closing Prices
January 1, 2014 to May
30, 2019
|
|
* The red solid line indicates the downside
threshold level of $89.525, which is 50% of the initial share price.
This document relates only to the securities referenced hereby
and does not relate to the SOXX Shares. We have derived all disclosures contained in this document regarding iShares from the publicly
available documents described above. In connection with the offering of the securities, neither we nor the agent has participated
in the preparation of such documents or made any due diligence inquiry with respect to iShares. Neither we nor the agent makes
any representation that such publicly available documents or any other publicly available information regarding iShares is accurate
or complete. Furthermore, we cannot give any assurance that all events occurring prior to the date hereof (including events that
would affect the accuracy or completeness of the publicly available documents described above) that would affect the trading price
of the SOXX Shares (and therefore the price of the SOXX Shares at the time we priced the securities) have been publicly disclosed.
Subsequent disclosure of any such events or the disclosure of or failure to disclose material future events concerning iShares
could affect the value received with respect to the securities and therefore the value of the securities.
Neither we nor any of our affiliates makes any representation
to you as to the performance of the SOXX Shares.
We and/or our affiliates may presently or from time to time engage
in business with iShares. In the course of such business, we and/or our affiliates may acquire non-public information with respect
to iShares, and neither we nor any of our affiliates undertakes to disclose any such information to you. In addition, one or more
of our affiliates may publish research reports with respect to the SOXX Shares. The statements in the preceding two sentences are
not intended to affect the rights of investors in the securities under the securities laws. As a purchaser of the securities, you
should undertake an independent investigation of iShares as in your judgment is appropriate to make an informed decision with respect
to an investment linked to the SOXX Shares.
iShares
®
is a registered trademark of BlackRock
Institutional Trust Company, N.A. (“BTC”). The securities are not sponsored,endorsed, sold, or promoted by BTC. BTC
makes no representations or warranties to the owners of the securities or any member of the public regarding the advisability of
investing in the securities. BTC has no obligation or liability in connection with the operation, marketing, trading or sale of
the securities.
The PHLX Semiconductor
Sector
SM
Index.
The PHLX Semiconductor Sector
SM
Index is a modified
capitalization-weighted index that tracks the performance of a set of companies engaged in the design, distribution, manufacture
and sale of semiconductors. For additional information about the PHLX Semiconductor Sector
SM
Index, please see the information
set forth under “PHLX Semiconductor Sector
SM
Index” in the accompanying index supplement.
Morgan Stanley Finance LLC
Contingent Income
Auto-Callable Securities due June 7, 2022, with 1-year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of Common Stock of Marathon Petroleum Corporation, the Common Stock of Caterpillar Inc. and the iShares PHLX Semiconductor ETF
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 document.
Additional Terms:
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If the terms described herein are inconsistent with those described in the accompanying product supplement, index supplement or prospectus, the terms described herein shall control.
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Interest period:
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The quarterly period from and including the original issue 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.
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Record date:
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The record date for each coupon payment date shall be the date one business day prior to such scheduled coupon payment date;
provided
, however, that any coupon payable at maturity (or upon early redemption) shall be payable to the person to whom the payment at maturity or early redemption payment, as the case may be, shall be payable.
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Underlyings:
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The accompanying product supplement refers to the underlyings as the “underlying shares.”
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Underlying stock issuer:
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With respect to the MPC Stock, Marathon Petroleum Corporation
With respect to the CAT Stock, Caterpillar Inc.
The accompanying product supplement refers to each such underlying
issuer as an “underlying company.”
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Share underlying index:
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PHLX Semiconductor Sector
SM
Index
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Share underlying index publisher:
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Nasdaq, Inc., or any successor thereof.
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Downside threshold level:
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The accompanying product supplement refers to the downside threshold level as the “trigger level.”
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Day count convention:
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Interest will be computed on the basis of a 360-day year of twelve 30-day months.
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Postponement of maturity date:
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If the final observation date is postponed due to a non-trading day or certain market disruption events with respect to any underlying so that it falls less than two business days prior to the scheduled maturity date, the maturity date will be postponed to the second business day following that final observation date as postponed with respect to any underlying, and no adjustment will be made to the payment at maturity made on that postponed date.
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Antidilution adjustments:
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With respect to each of the MPC Stock and the CAT Stock, the
following replaces in its entirety the portion of the section entitled “Antidilution Adjustments” in the accompanying
product supplement for auto-callable securities from the start of paragraph 5 to the end of such section.
5. If, with respect to one or more of the underlyings, (i) there
occurs any reclassification or change of such underlying, including, without limitation, as a result of the issuance of any tracking
stock by the underlying issuer for such underlying, (ii) such underlying issuer or any surviving entity or subsequent surviving
entity of such underlying issuer (the “successor corporation”) has been subject to a merger, combination or consolidation
and is not the surviving entity, (iii) any statutory exchange of securities of such underlying issuer or any successor corporation
with another corporation occurs (other than pursuant to clause (ii) above), (iv) such underlying issuer is liquidated, (v) such
underlying issuer issues to all of its shareholders equity securities of an issuer other than such underlying issuer (other than
in a transaction described in clause (ii), (iii) or (iv) above) (a “spin-off event”) or (vi) a tender or exchange offer
or going-private transaction is consummated for all the outstanding shares of such underlying (any such event in clauses (i) through
(vi), a “reorganization event”), the method of determining whether an early redemption has occurred and the amount
payable upon an early redemption date or at maturity for each security will be as follows:
·
Upon any redemption determination date following the effective date of a reorganization event and prior to the final
observation date: If the exchange property value (as defined below) is greater than or equal to the respective
redemption threshold level, and the determination closing price (or exchange property value, if applicable) of each
other underlying is also greater than or equal to its redemption threshold level, the securities will be
automatically redeemed for an early redemption payment.
·
Upon the final observation date, if the securities have not previously been automatically redeemed: You will receive for each security
that you hold a payment at maturity equal to:
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Morgan Stanley Finance LLC
Contingent Income
Auto-Callable Securities due June 7, 2022, with 1-year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of Common Stock of Marathon Petroleum Corporation, the Common Stock of Caterpillar Inc. and the iShares PHLX Semiconductor ETF
Principal at Risk Securities
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Ø
If the exchange property value on the final observation date is greater than or equal to the respective downside threshold level,
and the final share price of each other underlying (or exchange property value, as applicable) is also greater than its respective
downside threshold level:
(i) the stated principal amount plus (ii) the contingent quarterly coupon with respect to the final
observation date and any previously unpaid contingent quarterly coupons from the prior observation dates.
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If the exchange property value on the final observation date is less than the respective downside threshold level, or if the final
share price (or exchange property value, if applicable) of any other underlying is less than its respective downside threshold
level:
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If the worst performing underlying has not undergone a reorganization event as described in paragraph 5 above:
(i) the stated
principal amount multiplied by (ii) the share performance factor of the worst performing underlying.
Ø
If the worst performing underlying has undergone a reorganization event as described in paragraph 5 above:
(i) the stated principal
amount multiplied by (ii) the share performance factor of the worst performing underlying. For purposes of determining the share
performance factor of the worst performing underlying, the final share price of such worst performing underlying will be deemed
to equal the per-share cash value, determined as of the final observation date, of the securities, cash or any other assets distributed
to holders of the worst performing underlying in or as a result of any such reorganization event, including (A) in the case of
the issuance of tracking stock, the reclassified share of such worst performing underlying, (B) in the case of a spin-off event,
the share of such worst performing underlying with respect to which the spun-off security was issued, and (C) in the case of any
other reorganization event where such worst performing underlying continues to be held by the holders receiving such distribution,
such worst performing underlying (collectively, the “exchange property”).
Following the effective date of a reorganization event, the contingent
quarterly coupon, as well as any previously unpaid contingent quarterly coupons, will be payable for each observation date on which
the exchange property value is greater than or equal to the downside threshold level and the determination closing price (or exchange
property value, as applicable) of each other underlying is also greater than or equal to its downside threshold level.
If exchange property includes a cash component, investors will
not receive any interest accrued on such cash component. In the event exchange property consists of securities, those securities
will, in turn, be subject to the antidilution adjustments set forth in paragraphs 1 through 5.
For purposes of determining whether or not the exchange property
value is less than the initial share price, or less than the downside threshold level, or for determining the worst performing
underlying, “exchange property value” means (x) for any cash received in any reorganization event, the value, as determined
by the calculation agent, as of the date of receipt, of such cash received for one share of such underlying, as adjusted by the
adjustment factor at the time of such reorganization event, (y) for any property other than cash or securities received in any
such reorganization event, the market value, as determined by the calculation agent in its sole discretion, as of the date of receipt,
of such exchange property received for one share of such underlying, as adjusted by the adjustment factor at the time of such reorganization
event and (z) for any security received in any such reorganization event, an amount equal to the determination closing price, as
of the day on which the exchange property value is determined, per share of such security multiplied by the quantity of such security
received for each share of such underlying, as adjusted by the adjustment factor at the time of such reorganization event.
For purposes of paragraph 5 above, in the case of a consummated
tender or exchange offer or going-private transaction involving consideration of particular types, exchange property shall be deemed
to include the amount of cash or other property delivered by the offeror in the tender or exchange offer (in an amount determined
on the basis of the rate of exchange in such tender or exchange offer or going-private transaction). In the event of a tender or
exchange offer or a going-private transaction with respect to exchange property in which an offeree may elect to receive cash or
other property, exchange property shall be deemed to include the kind and amount of cash and other property received by offerees
who elect to receive cash.
Following the occurrence of any reorganization event referred to in paragraph 5 above, all
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Morgan Stanley Finance LLC
Contingent Income
Auto-Callable Securities due June 7, 2022, with 1-year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of Common Stock of Marathon Petroleum Corporation, the Common Stock of Caterpillar Inc. and the iShares PHLX Semiconductor ETF
Principal at Risk Securities
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references in this offering document and in the related product
supplement with respect to the securities to such “underlying” shall be deemed to refer to the exchange property and
references to a “share” or “shares” of such underlying shall be deemed to refer to the applicable unit
or units of such exchange property, unless the context otherwise requires.
No adjustment to the adjustment factor will be required unless
such adjustment would require a change of at least 0.1% in the adjustment factor then in effect. The adjustment factor resulting
from any of the adjustments specified above will be rounded to the nearest one hundred-thousandth, with five one-millionths rounded
upward. Adjustments to the adjustment factor will be made up to the close of business on the final observation date.
No adjustments to the adjustment factor or method of calculating
the adjustment factor will be required other than those specified above. The adjustments specified above do not cover all events
that could affect the determination closing price or the final share price of such underlying, including, without limitation, a
partial tender or exchange offer for such underlying.
The calculation agent shall be solely responsible for the determination
and calculation of any adjustments to the adjustment factor or method of calculating the adjustment factor and of any related determinations
and calculations with respect to any distributions of stock, other securities or other property or assets (including cash) in connection
with any corporate event described in paragraphs 1 through 5 above, and its determinations and calculations with respect thereto
shall be conclusive in the absence of manifest error.
The calculation agent will provide information as to any adjustments
to the adjustment factor or to the method of calculating the amount payable at maturity of the securities made pursuant to paragraph
5 above upon written request by any investor in the securities.
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Trustee:
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The Bank of New York Mellon
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Calculation agent:
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MS & Co.
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Issuer notices to registered security holders, the trustee and the depositary:
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In the event that the maturity date is postponed due to postponement
of the final observation date, the issuer shall give notice of such postponement and, once it has been determined, of the date
to which the maturity date has been rescheduled (i) to each registered holder of the 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 Depository Trust Company (the “depositary”) by telephone or facsimile confirmed by
mailing such notice to the depositary by first class mail, postage prepaid. Any notice that is mailed to a registered holder of
the 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 observation date as postponed.
In the event that the securities are subject to early redemption,
the issuer shall, (i) on the business day following the applicable redemption determination date, give notice of the early redemption
and the early redemption payment, including specifying the payment date of the amount due upon the early redemption, (x) to each
registered holder of the securities by mailing notice of such early redemption by first class mail, postage prepaid, to such registered
holder’s last address as it shall appear upon the registry books, (y) to the trustee by facsimile confirmed by mailing such
notice to the trustee by first class mail, postage prepaid, at its New York office and (z) to the depositary by telephone or facsimile
confirmed by mailing such notice to the depositary by first class mail, postage prepaid, and (ii) on or prior to the early redemption
date, deliver the aggregate cash amount due with respect to the securities to the trustee for delivery to the depositary, as holder
of the securities. 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. This notice
shall be given by the issuer or, at the issuer’s request, by the trustee in the name and at the expense of the issuer, with
any such request to be accompanied by a copy of the notice to be given.
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 quarterly coupon, if any, with respect to each security on or prior
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Morgan Stanley Finance LLC
Contingent Income
Auto-Callable Securities due June 7, 2022, with 1-year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of Common Stock of Marathon Petroleum Corporation, the Common Stock of Caterpillar Inc. and the iShares PHLX Semiconductor ETF
Principal at Risk Securities
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to 10:30 a.m. (New York City time) on the business day preceding
each coupon payment date, and (ii) deliver the aggregate cash amount due, if any, with respect to the contingent quarterly coupon
to the trustee for delivery to the depositary, as holder of the securities, on the applicable coupon payment date.
The issuer shall, or shall cause the calculation agent to, (i)
provide written notice to the trustee, 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 maturity date, 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 maturity date.
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Morgan Stanley Finance LLC
Contingent Income
Auto-Callable Securities due June 7, 2022, with 1-year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of Common Stock of Marathon Petroleum Corporation, the Common Stock of Caterpillar Inc. and the iShares PHLX Semiconductor ETF
Principal at Risk Securities