CALCULATION OF REGISTRATION FEE
|
|
Maximum Aggregate
|
|
Amount of Registration
|
Title of Each Class of Securities Offered
|
|
Offering Price
|
|
Fee
|
|
|
|
|
|
Callable Contingent Income Securities due 2022
|
|
$1,000,000
|
|
$121.20
|
|
|
|
|
|
June 2019
Pricing Supplement No. 2,086
Registration Statement Nos. 333-221595; 333-221595-01
Dated June 21, 2019
Filed pursuant to Rule 424(b)(2)
Morgan Stanley Finance LLC
Structured
Investments
Opportunities in U.S. and International
Equities
Callable Contingent Income Securities due June
28, 2022
Payments on the Securities Based on the Worst
Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets 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 prospectus supplement, index supplement and prospectus, as supplemented or modified by this document. The
securities do not guarantee the repayment of principal and do not provide for the regular payment of interest. Instead,
the securities will pay a contingent semi-annual coupon
but only if
the closing level of
each of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
on the related observation date is
at or above 70% of its respective
initial level
, which we refer to as the respective coupon barrier level. If the closing level
of either underlying
is less than the coupon barrier level for such underlying on any observation date, we will pay no interest for the related
semi-annual period. In addition, beginning on December 31, 2019,
we will redeem the securities on any semi-annual
redemption date
when the output of a risk neutral valuation model, based on the inputs indicated in the contingent early redemption
terms, indicates that redeeming on such date is more to our economic advantage than not redeeming on such date. Any redemption
payment will be equal to the sum of the stated principal amount plus any contingent semi-annual coupon otherwise due with respect
to the related observation date. An early redemption of the securities will not automatically occur based solely on the performance
of the underlyings. At maturity, if the securities have not previously been redeemed and the final level of
each
underlying is greater than or equal to 70% of the respective initial level, which we refer to as the downside threshold level,
the payment at maturity will be the stated principal amount and the related contingent semi-annual coupon. If, however,
the final level of
either
underlying is less than its 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 70% 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 based on the performance of either underlying and also the risk of
not receiving any semi-annual coupons during the entire three-year term of the securities.
Because payments on the
securities are based on the worst performing of the underlyings, a decline beyond the respective coupon barrier level and/or respective
downside threshold level, as applicable, of
either
underlying will result in few or no contingent semi-annual coupons and/or
a significant loss of your investment, as applicable, even if the other underlying has appreciated or has not declined as much. Investors
will not participate in any appreciation in either underlying. The securities are for investors who are willing to risk
their principal and seek an opportunity to earn interest at a potentially above-market rate in exchange for the risk of receiving
no semi-annual interest if
either underlying
closes below the coupon barrier level for such underlying on the observation
dates, and the risk of an early redemption of the securities. 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
|
Issuer:
|
Morgan Stanley Finance LLC
|
Guarantor:
|
Morgan Stanley
|
Underlyings:
|
NASDAQ-100 Index
®
(the “NDX Index”) and iShares
®
MSCI Emerging Markets ETF (the “EEM Shares”)
|
Aggregate principal amount:
|
$1,000,000
|
Stated principal amount:
|
$1,000 per security
|
Issue price:
|
$1,000 per security (see “Commissions and issue price” below)
|
Pricing date:
|
June 21, 2019
|
Original issue date:
|
June 28, 2019 (5 business days after the pricing date)
|
Maturity date:
|
June 28, 2022
|
Contingent early redemption:
|
Beginning on December 31, 2019, an early redemption, in whole but not in part, will occur on a semi-annual redemption date if the output from a risk neutral valuation model based on (i) the performance of the underlyings, (ii) the forward level of the underlyings, (iii) the volatility of the underlyings and (iv) the level of interest rates, and based on our credit spreads as of the original issue date, indicates that redeeming on such date is more to our economic advantage than not redeeming on such date. If we decide to redeem the securities, we will give you notice at least 5 business days before the redemption date specified in the notice. No further payments will be made on the securities once they have been redeemed.
|
Contingent semi-annual coupon:
|
If, on any observation date, the closing level of
each underlying
is
greater than or equal to
its respective coupon barrier level, we will pay a contingent semi-annual coupon at an annual
rate of 10.00% (corresponding to approximately $50.00 per semi-annual period per security) on the related contingent coupon payment
date.
If, on any observation date, the closing level
of either underlying
is
less than
the coupon barrier level for such underlying, no contingent semi-annual coupon will be paid with respect
to that observation date.
It is possible that one or both underlyings will remain below the respective coupon barrier level(s)
for extended periods of time or even throughout the entire term of the securities so that you will receive few or no contingent
semi-annual coupons.
|
Payment at maturity:
|
If the securities have not previously been redeemed, investors
will receive on the maturity date a payment at maturity determined as follows:
If the final level of
each
underlying is
greater than
or equal to
its respective downside threshold level: the stated principal amount and the contingent semi-annual coupon with
respect to the final observation date.
If the final level of
either
underlying is
less than
its respective downside threshold level: (i) the stated principal amount
multiplied by
(ii) the performance factor of
the worst performing underlying. Under these circumstances, the payment at maturity will be less than 70% of the stated
principal amount of the securities and could be zero.
|
|
Terms continued on the following page
|
Agent:
|
Morgan Stanley & Co. LLC (“MS & Co.”), an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley. See “Supplemental information regarding plan of distribution; conflicts of interest.”
|
Estimated value on the pricing date:
|
$987.30 per security. See “Investment Overview” beginning on page 3.
|
Commissions and issue price:
|
Price to public
|
Agent’s commissions
(1)
|
Proceeds to us
(2)
|
Per security
|
$1,000
|
$0
|
$1,000
|
Total
|
$1,000,000
|
$0
|
$1,000,000
|
|
(1)
|
Selected dealers and their financial advisors will receive a structuring fee of $2.50 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 prospectus supplement.
|
|
(2)
|
See “Use of proceeds and hedging” on page 34.
|
The securities involve risks not associated with an investment
in ordinary debt securities. See “Risk Factors” beginning on page 12.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these securities, or determined if this document or the accompanying prospectus supplement,
index supplement and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The securities are not deposits or savings accounts and are
not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they obligations
of, or guaranteed by, a bank.
You should read this document together with the related prospectus
supplement, index supplement and prospectus, each of which can be accessed via the hyperlinks below. Please also see
“Additional Terms of the Securities” and “Additional Information About the Securities” at the end of this
document.
References to “we,” “us” and “our”
refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Morgan Stanley Finance LLC
|
Callable Contingent Income Securities due June 28, 2022
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
Terms continued from previous page:
|
Redemption payment:
|
The redemption payment will be an amount equal to (i) the stated principal amount
plus
(ii) any contingent semi-annual coupon otherwise due with respect to the related observation date.
|
Redemption dates:
|
Beginning on December 31, 2019, semi-annually. See “Observation Dates, Coupon Payment Dates and Redemption Dates” below. If any such day is not a business day, the redemption payment will be made on the next succeeding business day and no adjustment will be made to any redemption payment made on that succeeding business day.
|
Initial level:
|
With respect to the NDX Index: 7,728.782, which is the closing
level of such underlying on the pricing date
With respect to the EEM Shares: $42.77, which is the
closing level of such underlying on the pricing date
|
Final level:
|
With respect to each underlying, the respective closing level on the final observation date
|
Closing level:
|
With respect to the NDX Index, on any index business day, the
index closing value of such underlying on such day
With respect to the EEM Shares, on any trading day,
the closing price of one EEM Share on such day
times
the adjustment factor on such day
|
Worst performing
underlying:
|
The underlying with the larger percentage decrease from the respective initial level to the respective final level
|
Performance factor:
|
Final level
divided by
the initial level
|
Coupon barrier level:
|
With respect to the NDX Index: 5,410.147, which is approximately
70% of the initial level for such underlying
With respect to the EEM Shares: $29.939, which is 70%
of the initial level for such underlying
|
Downside threshold level:
|
With respect to the NDX Index: 5,410.147, which is approximately
70% of the initial level for such underlying
With respect to the EEM Shares: $29.939, which is 70%
of the initial level for such underlying
|
Coupon payment dates:
|
Semi-annually, as set forth under “Observation Dates, Coupon Payment Dates and Redemption Dates” below. If any such day is not a business day, that contingent semi-annual coupon, if any, will be paid on the next succeeding business day and no adjustment will be made to any coupon payment made on that succeeding business day;
provided further
that the contingent semi-annual coupon, if any, with respect to the final observation date shall be paid on the maturity date.
|
Observation dates:
|
Semi-annually, as set forth under “Observation Dates, Coupon Payment Dates and Redemption Dates” below, subject to postponement for non-index business days and non-trading days, as applicable, and certain market disruption events. We also refer to June 21, 2022 as the final observation date.
|
Adjustment factor:
|
With respect to the EEM Shares, 1.0, subject to adjustment in the event of certain events affecting the EEM Shares
|
CUSIP / ISIN:
|
61769HFG5 / US61769HFG56
|
Listing:
|
The securities will not be listed on any securities exchange.
|
Observation Dates, Coupon
Payment Dates and Redemption Dates
Observation Dates
|
Coupon Payment Dates / Redemption Dates
|
December 23, 2019
|
December 31, 2019
|
June 22, 2020
|
June 29, 2020
|
December 21, 2020
|
December 29, 2020
|
June 21, 2021
|
June 28, 2021
|
December 21, 2021
|
December 29, 2021
|
June 21, 2022 (final observation date)
|
June 28, 2022 (maturity date)
|
Morgan Stanley Finance LLC
|
Callable Contingent Income Securities due June 28, 2022
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
Investment Overview
Callable Contingent Income Securities
Principal at Risk Securities
Callable Contingent Income Securities due June 28, 2022 Payments
on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging
Markets ETF (the “securities”) do not guarantee the repayment of principal and do not provide for the regular payment
of interest. Instead, the securities will pay a contingent semi-annual coupon
but only if
the closing level of
each of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
(which we refer to
together as the “underlyings”) is
at or above
70% of its respective initial level, which we refer to as the
respective coupon barrier level, on the related observation date. If the closing level
of either underlying
is
less than the coupon barrier level for such underlying on any observation date, we will pay no coupon for the related semi-annual
period. It is possible that the closing level of one or both underlyings will remain below the respective coupon barrier
level(s) for extended periods of time or even throughout the entire term of the securities so that you will receive few or no contingent
semi-annual coupons during the entire three-year term of the securities. Even if an underlying were to be at or above the coupon
barrier level for such underlying on some semi-annual observation dates, it may fluctuate below the coupon barrier level on others. In
addition, even if one underlying were to be at or above the coupon barrier level for such underlying on all semi-annual observation
dates, you will receive a contingent semi-annual coupon only with respect to the observation dates on which the other underlying
is also at or above the coupon barrier level for such underlying, if any. In addition, beginning on December 31, 2019,
we will
redeem the securities on any semi-annual redemption date
when the output of a risk neutral valuation model, based on the inputs
indicated in the contingent early redemption terms, indicates that redeeming on such date is more to our economic advantage than
not redeeming on such date. Any redemption payment will be equal to the sum of the stated principal amount plus any contingent
semi-annual coupon otherwise due with respect to the related observation date. An early redemption of the securities will not automatically
occur based solely on the performance of the underlyings. At maturity, if the securities have not been previously redeemed
and if the final level of
each
underlying is greater than or equal to 70% of the respective initial level, which we refer
to as the downside threshold level, the payment at maturity will be the stated principal amount and the related contingent semi-annual
coupon. If, however, the final level of
either
underlying is less than its 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 70% of the stated principal amount of the securities and could be zero.
Accordingly, investors in the
securities must be willing to accept the risk of losing their entire initial investment based on the performance of either index
and also the risk of not receiving any semi-annual coupons throughout the entire term of the securities.
Maturity:
|
3 years, unless redeemed earlier
|
Contingent semi-annual coupon:
|
If, on any observation date, the closing level of
each underlying
is
greater than or equal to
its respective coupon barrier level, we will pay a contingent semi-annual coupon at an annual
rate of 10.00% (corresponding to approximately $50.00 per semi-annual period per security) on the related contingent coupon payment
date.
If, on any observation date, the closing level
of either underlying
is
less than
the coupon barrier level for such underlying, no contingent semi-annual coupon will be paid with respect to
that observation date.
It is possible that one or both underlyings will remain below the respective coupon barrier level(s)
for extended periods of time or even throughout the entire term of the securities so that you will receive few or no contingent
semi-annual coupons.
|
Early redemption:
|
Beginning on December 31, 2019, we have the right to redeem the
securities based on the output of a risk neutral valuation model on any semi-annual redemption date for an early redemption payment
equal to the stated principal amount plus any contingent semi-annual coupon otherwise due with respect to the related observation
date. Any early redemption of the securities will not automatically occur based on the performance of the underlyings. In
accordance with the risk neutral valuation model determination noted below, it is more likely that we will redeem the securities
when it would otherwise be advantageous for you to continue to hold the securities. As such, we will be more likely
to redeem the securities when the closing level of each underlying on the observation dates is at or above its respective coupon
barrier level, which would otherwise result in an amount of interest payable on the securities that is greater than instruments
of a comparable maturity and credit rating trading in the market. In other words, we will be more likely to redeem the
securities at a time when the securities are paying an above-market coupon. If the securities are redeemed prior to
maturity, you will receive no more contingent semi-annual coupon payments, may be
|
Morgan Stanley Finance LLC
|
Callable Contingent Income Securities due June 28, 2022
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
|
forced to invest in a lower interest rate environment and may
not be able to reinvest at comparable terms or returns.
On the other hand, we will be less likely to exercise our redemption
right when the closing level of either underlying is below its respective coupon barrier level and/or when the final level of either
underlying is expected to be below the downside threshold level, such that you will receive no contingent semi-annual coupons and/or
that you will suffer a significant loss on your initial investment in the securities at maturity. Therefore, if we do not exercise
our redemption right, it is more likely that you will receive few or no contingent semi-annual coupons and suffer a significant
loss at maturity.
Beginning on December 31, 2019, an early redemption, in whole
but not in part, will occur on a semi-annual redemption date if the output from a risk neutral valuation model based on (i) the
performance of the underlyings, (ii) the forward level of the underlyings, (iii) the volatility of the underlyings and (iv) the
level of interest rates, and based on our credit spreads as of the original issue date, indicates that redeeming on such date is
more to our economic advantage than not redeeming on such date. If we decide to redeem the securities, we will give you notice
at least 5 business days before the redemption date specified in the notice. No further payments will be made on the securities
once they have been redeemed.
|
Payment at maturity:
|
If the securities have not previously been redeemed, investors
will receive on the maturity date a payment at maturity determined as follows:
If the final level of
each
underlying is
greater than
or equal to
its respective downside threshold level: the stated principal amount and the contingent semi-annual coupon with
respect to the final observation date.
If the final level of
either
underlying is
less than
its respective downside threshold level: (i) the stated principal amount
multiplied by
(ii) the performance factor of
the worst performing underlying. Under these circumstances, the payment at maturity will be less than 70% of the stated
principal amount of the securities and could be zero.
|
Morgan Stanley clients may contact their local Morgan Stanley
branch office or our principal executive offices at 1585 Broadway, New York, New York 10036 (telephone number (866) 477-4776). All
other clients may contact their local brokerage representative. Third-party distributors may contact Morgan Stanley
Structured Investment Sales at (800) 233-1087.
Morgan Stanley Finance LLC
|
Callable Contingent Income Securities due June 28, 2022
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets 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 $987.30.
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 semi-annual coupon rate, the coupon barrier 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
of the economic 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
|
Callable Contingent Income Securities due June 28, 2022
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
Key Investment Rationale
The securities do not provide for the regular payment of interest
and instead will pay a contingent semi-annual coupon
but only if
the closing level of
each underlying
is
at or
above
70% of its initial level, which we refer to as the respective coupon barrier level, on the related observation date. These
securities are for investors who are willing to risk their principal and seek an opportunity to earn interest at a potentially
above-market rate in exchange for the risk of receiving no semi-annual interest if either underlying closes below the coupon barrier
level for such underlying on the observation dates, and the risk of an early redemption of the securities. The following
scenarios are for illustration purposes only to demonstrate how the payment at maturity and contingent semi-annual coupon (if the
securities have not previously been redeemed) are determined, and do not attempt to demonstrate every situation that may occur. Accordingly,
the securities may or may not be redeemed by us, the contingent semi-annual coupon may be payable with respect to none of, or some
but not all of, the semi-annual periods, and the payment at maturity may be less than 70% of the stated principal amount and could
be zero. Investors will not participate in any appreciation in either underlying.
Scenario 1:
The securities are redeemed prior to maturity.
|
This scenario assumes that we redeem the securities prior to the maturity date on one of the semi-annual redemption dates, starting on December 31, 2019, six months after the original issue date, for the redemption payment equal to the stated principal amount
plus
any contingent semi-annual coupon with respect to the relevant observation date, as applicable. Prior to the contingent early redemption, each underlying closes at or above its respective coupon barrier level on some or all of the semi-annual observation dates. In this scenario, investors receive the contingent semi-annual coupon with respect to each such observation date, but not for the semi-annual periods for which one of both underlyings close below the respective coupon barrier level on the related observation date. No further payments will be made on the securities once they have been redeemed.
|
Scenario 2:
The securities are not redeemed prior to maturity, and investors receive principal back at maturity.
|
This scenario assumes that we do not exercise our redemption right on any of the semi-annual redemption dates, and, as a result, investors hold the securities to maturity. During the term of the securities, each underlying closes at or above its respective coupon barrier level on some semi-annual observation dates, but one or both underlyings close below the respective coupon barrier level(s) for such underlying on the others. Investors will receive the contingent semi-annual coupon for the semi-annual periods for which the closing level of each underlying is at or above its respective coupon barrier level on the related observation date, but not for the semi-annual periods for which one or both underlyings close below the respective coupon barrier level(s) on the related observation date. On the final observation date, each underlying closes at or above its downside threshold level. At maturity, investors receive the stated principal amount and the contingent semi-annual coupon with respect to the final observation date.
|
Scenario 3:
The securities are not redeemed prior to maturity, and investors suffer a substantial loss of principal at maturity.
|
This scenario assumes that we do not exercise our redemption right on any of the semi-annual redemption dates, and, as a result, investors hold the securities to maturity. During the term of the securities, one or both underlyings close below the respective coupon barrier level(s) on every semi-annual observation date. Since one or both underlyings close below the respective coupon barrier level(s) on every semi-annual observation date, investors do not receive any contingent semi-annual coupon. On the final observation date, one or both 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 performance factor of the worst performing underlying. Under these circumstances, the payment at maturity will be less than 70% of the stated principal amount and could be zero.
|
Morgan Stanley Finance LLC
|
Callable Contingent Income Securities due June 28, 2022
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
Underlyings Summary
NASDAQ-100 Index
®
The NASDAQ-100 Index
®
, which is calculated, maintained
and published by Nasdaq, Inc., is a modified capitalization-weighted index of 100 of the largest and most actively traded equity
securities of non-financial companies listed on The NASDAQ Stock Market LLC. The NASDAQ-100 Index
®
includes
companies across a variety of major industry groups. At any moment in time, the value of the NASDAQ-100 Index
®
equals
the aggregate value of the then-current NASDAQ-100 Index
®
share weights of each of the NASDAQ-100 Index
®
component
securities, which are based on the total shares outstanding of each such NASDAQ-100 Index
®
component security,
multiplied by each such security’s respective last sale price on NASDAQ (which may be the official closing price published
by NASDAQ), and divided by a scaling factor, which becomes the basis for the reported NASDAQ-100 Index
®
value.
Information as of market close on June 21, 2019:
Bloomberg Ticker Symbol:
|
NDX
|
Current Index Value:
|
7,728.782
|
52 Weeks Ago:
|
7,217.488
|
52 Week High (on 5/3/2019):
|
7,845.729
|
52 Week Low (on 12/24/2018):
|
5,899.354
|
|
|
For additional information about the NASDAQ-100 Index
®
,
see the information set forth under “NASDAQ-100 Index
®
” in the accompanying index supplement. Furthermore,
for additional historical information, see “NASDAQ-100 Index
®
Historical Performance” below.
iShares
®
MSCI Emerging Markets
ETF
The iShares
®
MSCI Emerging Markets ETF is
an exchange-traded fund that seeks investment results that correspond generally to the price and yield performance, before fees
and expenses, of the MSCI Emerging Markets Index
SM
. The iShares
®
MSCI Emerging Markets ETF is managed
by iShares
®
, Inc. (“iShares”), a registered investment company that consists of numerous separate investment
portfolios, including the iShares
®
MSCI Emerging Markets ETF. 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 033-97598 and 811-09102, 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 iShares
®
MSCI
Emerging Markets ETF is accurate or complete.
Information as of market close on June 21, 2019:
Bloomberg Ticker Symbol:
|
EEM UP
|
Current Index Value:
|
$42.77
|
52 Weeks Ago:
|
$43.47
|
52 Week High (on 7/25/2018):
|
$45.03
|
52 Week Low (on 10/29/2018):
|
$38.00
|
|
|
This document relates only to the securities referenced hereby
and does not relate to the EEM 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 EEM Shares (and therefore the price of the EEM Shares at the time we priced the securities) have been publicly
Morgan Stanley Finance LLC
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®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
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 EEM 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 EEM 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 EEM 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 MSCI Emerging Markets Index
SM
.
The
MSCI Emerging Markets Index
SM
is a stock index calculated, published and disseminated daily by MSCI Inc. and is
intended to provide performance benchmarks for certain emerging equity markets including Brazil, Chile, China, Colombia, Czech
Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia,
South Africa, Taiwan, Thailand, Turkey and United Arab Emirates. The MSCI Emerging Markets Index
SM
is described
in “MSCI Emerging Markets Index
SM
” and “MSCI Global Investable Market Indices Methodology” in
the accompanying index supplement.
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|
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Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
Hypothetical Examples
The following hypothetical examples illustrate how to determine
whether a contingent semi-annual coupon is paid with respect to an observation date and how to calculate the payment at maturity. The
following examples are for illustrative purposes only. Whether you receive a contingent semi-annual coupon will be determined
by reference to the closing level of each underlying on each semi-annual observation date, and the amount you will receive at maturity,
if any, will be determined by reference to the final level of each underlying on the final observation date. The actual
initial level, coupon barrier level 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 Semi-Annual Coupon:
|
If, on any observation date, the closing level of
each underlying
is
greater than or equal to
its respective coupon barrier level, we will pay a contingent semi-annual coupon at an annual
rate of 10.00% (corresponding to approximately $50.00 per semi-annual period per security) on the related contingent coupon payment
date.
If, on any observation date, the closing level
of either underlying
is
less than
the coupon barrier level for such underlying, no contingent semi-annual coupon will be paid with respect
to that observation date.
It is possible that one or both underlyings will remain below the respective coupon barrier level(s)
for extended periods of time or even throughout the entire term of the securities so that you will receive few or no contingent
semi-annual coupons.
|
Contingent Early Redemption:
|
Beginning on December 31, 2019, the securities may be redeemed by us on any semi-annual redemption date for a redemption payment equal to the stated principal amount plus any contingent semi-annual coupon otherwise due with respect to the related observation date.
If the securities are redeemed prior to maturity, you will receive no more contingent semi-annual coupon payments, may be forced to invest in a lower interest rate environment and may not be able to reinvest at comparable terms or returns.
|
Payment at Maturity (if the securities have not been redeemed early):
|
If the final level of
each
underlying is
greater than
or equal to
its respective downside threshold level: the stated principal amount and the contingent semi-annual coupon with
respect to the final observation date.
If the final level of
either
underlying is
less than
its respective downside threshold level: (i) the stated principal amount
multiplied by
(ii) the performance factor of
the worst performing underlying. Under these circumstances, the payment at maturity will be less than 70% of the stated
principal amount of the securities and could be zero.
|
Stated Principal Amount:
|
$1,000
|
Hypothetical Initial Level:
|
With respect to the NDX Index: 7,000
With respect to the EEM Shares: $40.00
|
Hypothetical Coupon Barrier Level:
|
With respect to the NDX Index: 4,900, which is 70% of the hypothetical
initial level for such underlying
With respect to the EEM Shares: $28.00, which is 70% of the hypothetical
initial level for such underlying
|
Hypothetical Downside Threshold Level:
|
With respect to the NDX Index: 4,900, which is 70% of the hypothetical
initial level for such underlying
With respect to the EEM Shares: $28.00, which is 70% of the hypothetical
initial level for such underlying
|
* The actual contingent semi-annual coupon will be an amount
determined by the calculation agent based on the number of days in the applicable payment period, calculated on a 30/360 basis. The
hypothetical contingent semi-annual coupon of $50.00 is used in these examples for ease of analysis.
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|
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Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
How to determine whether a contingent semi-annual
coupon is payable with respect to an observation date (if the securities have not been previously redeemed):
|
Closing Level
|
Contingent Semi-Annual Coupon
|
|
NDX Index
|
EEM Shares
|
|
Hypothetical Observation Date 1
|
6,100 (
at or above
coupon barrier level)
|
$35.00 (
at or above
coupon barrier level)
|
$50.00
|
Hypothetical Observation Date 2
|
6,400 (
at or above
coupon barrier level)
|
$20.00 (
below
coupon barrier level)
|
$0
|
Hypothetical Observation Date 3
|
4,250 (
below
coupon barrier level)
|
$36.00 (
at or above
coupon barrier level)
|
$0
|
Hypothetical Observation Date 4
|
3,500 (
below
coupon barrier level)
|
$25.00 (
below
coupon barrier level)
|
$0
|
On hypothetical observation date 1, both the NDX Index and EEM
Shares close at or above their respective coupon barrier levels. Therefore a contingent semi-annual coupon of $50.00 is paid on
the relevant coupon payment date.
On each of the hypothetical observation dates 2 and 3, one underlying
closes at or above its coupon barrier level but the other underlying closes below its coupon barrier level. Therefore, no contingent
semi-annual coupon is paid on the relevant coupon payment date.
On hypothetical observation date 4, each underlying closes below
its respective coupon barrier level and accordingly no contingent semi-annual coupon is paid on the relevant coupon payment date.
How to calculate the payment at maturity (if
the securities have not been redeemed early):
|
Final Level
|
Payment at Maturity
|
|
NDX Index
|
EEM Shares
|
|
Example 1:
|
8,700 (
at or above
the downside threshold level)
|
$60.00 (
at or above
the downside threshold level)
|
$1,050.00 (the stated principal amount
plus
the contingent semi-annual coupon with respect to the final observation date)
|
Example 2:
|
5,425 (
at or above
the downside threshold level)
|
$16.00 (
below
the downside threshold level)
|
$1,000 x performance factor of the worst performing underlying = $1,000 x ($16.00 / $40.00) = $400
|
Example 3:
|
2,800 (
below
the downside threshold level)
|
$45.00 (
at or above
the downside threshold level)
|
$1,000 x (2,800 / 7,000) = $400
|
Example 4:
|
2,100 (
below
the downside threshold level)
|
$16.00 (
below
the downside threshold level)
|
$1,000 x (2,100 / 7,000) = $300
|
Example 5:
|
2,800 (
below
the downside threshold level)
|
$12.00 (
below
the downside threshold level)
|
$1,000 x ($12.00 / $40.00) = $300
|
In example 1, the final levels of both the NDX Index and the
EEM Shares are at or above their downside threshold levels. Therefore, investors receive at maturity the stated principal
amount of the securities and the contingent semi-annual coupon with respect to the final observation date. However, investors do
not participate in the appreciation of either underlying.
In examples 2 and 3, the final level of one underlying is at
or above its downside threshold level but the final level of the other underlying is below its downside threshold level. Therefore,
investors are exposed to the downside performance of the worst
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|
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Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
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®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
performing underlying at maturity and receive at maturity an
amount equal to the stated principal amount
times
the performance factor of the worst performing underlying.
Similarly, in examples 4 and 5, the final level of each underlying
is below its respective downside threshold level, and investors receive at maturity an amount equal to the stated principal amount
times
the performance factor of the worst performing underlying. In example 4, the NDX Index has declined 70%
from the respective initial level to the respective final level, while the EEM Shares have declined 60% from the respective initial
level to the respective final level. Therefore, the payment at maturity equals the stated principal amount
times
the performance factor of the NDX Index, which is the worst performing underlying in this example. In example 5, the
NDX Index has declined 60% from the respective initial level, while the EEM Shares have declined 70% from the respective initial
level to the respective final level. Therefore the payment at maturity equals the stated principal amount
times
the performance factor of the EEM Shares, which are the worst performing underlying in this example.
If the securities have not been redeemed prior to maturity
and the final level of EITHER 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 $700 per security and
could be zero.
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|
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Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
Risk Factors
The following is a non-exhaustive list of certain key risk
factors for investors in the securities. For further discussion of these and other risks, you should read the section
entitled “Risk Factors” in the accompanying prospectus supplement, index supplement and prospectus. We also
urge you to consult with your investment, legal, tax, accounting and other advisers in connection with your investment in the securities.
|
§
|
The securities do not guarantee the return of any
principal.
The terms of the securities differ from those of ordinary debt securities in that they do not guarantee
the repayment of principal. If the securities have not been redeemed prior to maturity and the final level of
either
underlying is less than its downside threshold level of 70% of its initial level, you will be exposed to the decline in the closing
level of the worst performing underlying, as compared to its initial level, on a 1-to-1 basis, and you will receive for each security
that you hold at maturity an amount equal to the stated principal amount
times
the performance factor of the worst performing
underlying.
In this case, the payment at maturity will be less than 70% of the stated principal amount and could
be zero.
|
|
§
|
The securities do not provide for regular interest
payments.
The terms of the securities differ from those of ordinary debt securities in that they do not provide
for the regular payment of interest. The securities will pay a contingent semi-annual coupon only if the closing level
of each underlying is at or above 70% of its respective initial level, which we refer to as the respective coupon barrier level,
on the related observation date. If, on the other hand, the closing level of either underlying is lower than the coupon
barrier level for such underlying on the relevant observation date for any interest period, we will pay no coupon on the applicable
coupon payment date. It is possible that the closing level of one or both underlyings will remain below the respective
coupon barrier level(s) for extended periods of time or even throughout the entire term of the securities. If you do
not earn sufficient contingent semi-annual coupons over the term of the securities, the overall return on the securities may be
less than the amount that would be paid on a conventional debt security of ours of comparable maturity.
|
|
§
|
The securities are subject to our redemption right.
The
term of the securities, and thus your opportunity to earn a potentially above-market coupon if the closing level of each underlying
is greater than or equal to the coupon barrier level for such underlying on semi-annual observation dates, may be limited by our
right to redeem the securities based on the output of a risk neutral valuation model on any semi-annual redemption date, beginning
December 31, 2019. The term of your investment in the securities may be limited to as short as six months.
In
accordance with the risk neutral valuation model determination noted herein, it
is more likely that we will redeem the securities
when it would be advantageous for you to continue to hold the securities. As such, we will be more likely to redeem
the securities when the closing level of each underlying on the observation dates is at or above the coupon barrier level for such
underlying, which would otherwise result in an amount of interest payable on the securities that is greater than instruments of
a comparable maturity and credit rating trading in the market. In other words, we will be more likely to redeem the
securities at a time when the securities are paying an above-market coupon. If the securities are redeemed prior to
maturity, you will receive no more contingent semi-annual coupon payments, may be forced to invest in a lower interest rate environment
and may not be able to reinvest at comparable terms or returns.
|
On the other hand, we will be less likely to exercise
our redemption right when the closing level of either underlying is below the respective coupon barrier level and/or when the final
level for either underlying is expected to be below the respective downside threshold level, such that you will receive no contingent
semi-annual coupons and/or that you will suffer a significant loss on your initial investment in the securities at maturity. Therefore,
if we do not exercise our redemption right, it is more likely that you will receive few or no contingent semi-annual coupons and
suffer a significant loss at maturity.
|
§
|
You are exposed to the price risk of both underlyings,
with respect to both the contingent semi-annual coupons, if any, and the payment at maturity, if any.
Your return
on the securities is not linked to a basket consisting of both 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 both underlyings. Poor
performance by
either
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 underlying. To receive any contingent semi-annual coupons,
each
underlying must close at or above its respective coupon barrier level on the applicable observation date. In addition,
if
either
underlying has declined to below its respective
|
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®
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®
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Principal at Risk Securities
|
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 underlying has appreciated or not declined as much. Under this scenario, the value of any such
payment will be less than 70% of the stated principal amount and could be zero. Accordingly, your investment is subject
to the price risk of both underlyings.
|
§
|
Because the securities are linked to the performance
of the worst performing underlying, you are exposed to greater risks of no contingent semi-annual coupons and sustaining a significant
loss on your investment than if the securities were linked to just one index.
The risk that you will not receive
any contingent semi-annual coupons, or that you will suffer a significant loss on your investment, is greater if you invest in
the securities as opposed to substantially similar securities that are linked to the performance of just one underlying. With
two underlyings, it is more likely that either underlying will close below its coupon barrier level on any observation date, or
below its downside threshold level on the final observation date, than if the securities were linked to only one underlying. Therefore,
it is more likely that you will not receive any contingent semi-annual coupons and that you will suffer a significant loss on your
investment.
|
|
§
|
The contingent semi-annual coupon, if any, is based
only on the value of each underlying on the related semi-annual observation date.
Whether the contingent semi-annual
coupon will be paid on any coupon payment date will be determined at the end of the relevant interest period, based on the closing
level of each underlying on the relevant semi-annual observation date. As a result, you will not know whether you will
receive the contingent semi-annual coupon on any coupon payment date until near the end of the relevant semi-annual period. Moreover,
because the contingent semi-annual coupon is based solely on the value of each underlying on semi-annual observation dates, if
the closing level of either underlying on any observation date is below the coupon barrier level for such underlying, you will
receive no coupon for the related interest period, even if the level of such underlying was at or above its respective coupon barrier
level on other days during that interest period and even if the closing level of the other underlying is at or above the coupon
barrier level for such underlying.
|
|
§
|
Investors will not participate
in any appreciation in either underlying.
Investors will not participate in any appreciation in either underlying
from the initial level for such underlying, and the return on the securities will be limited to the contingent semi-annual coupons,
if any, that are paid with respect to each observation date on which the closing level of each underlying is greater than or equal
to its respective coupon barrier level until the securities are redeemed or reach maturity.
|
|
§
|
The securities are subject to our credit risk,
and any actual or anticipated changes to our credit ratings or credit spreads may adversely affect the market value of the securities.
You
are dependent on our ability to pay all amounts due on the securities at maturity or on any coupon payment date, and therefore
you are subject to our credit risk. The securities are not guaranteed by any other entity. If we default
on our obligations under the securities, your investment would be at risk and you could lose some or all of your investment. As
a result, the market value of the securities prior to maturity will be affected by changes in the market’s view of our creditworthiness. Any
actual or anticipated decline in our credit ratings or increase in the credit spreads charged by the market for taking our credit
risk is likely to adversely affect the market value of the securities.
|
|
§
|
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.
|
|
§
|
There are risks associated with investments in
securities linked to the value of foreign (and especially emerging markets) equity securities.
The price of the EEM Shares
tracks the performance of the MSCI Emerging Markets Index
SM
(the “share underlying index”), which
is linked to the value of foreign (and especially emerging markets) equity securities. Investments in securities linked to the
value of foreign equity securities involve risks associated with the securities markets in those countries, including risks of
volatility in those markets, governmental intervention in those markets and cross-shareholdings in companies in certain countries.
Also, there is generally less publicly available information about foreign companies than about U.S. companies that are subject
to the reporting requirements of the
|
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|
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Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
Securities and Exchange Commission, and foreign companies
are subject to accounting, auditing and financial reporting standards and requirements different from those applicable to U.S.
reporting companies. The prices of securities issued in foreign markets may be affected by political, economic, financial and social
factors in those countries, or global regions, including changes in government, economic and fiscal policies and currency exchange
laws. In addition, the stocks included in the MSCI Emerging Markets Index
SM
and that are generally tracked
by the EEM shares have been issued by companies in various emerging markets countries, which pose further risks in addition to
the risks associated with investing in foreign equity markets generally. Countries with emerging markets may have relatively unstable
governments, may present the risks of nationalization of businesses, restrictions on foreign ownership and prohibitions on the
repatriation of assets, and may have less protection of property rights than more developed countries. The economies of countries
with emerging markets may be based on only a few industries, may be highly vulnerable to changes in local or global trade conditions,
and may suffer from extreme and volatile debt burdens or inflation rates. Local securities markets may trade a small number of
securities and may be unable to respond effectively to increases in trading volume, potentially making prompt liquidation of holdings
difficult or impossible at times. Moreover, the economies in such countries may differ unfavorably from the economy in the United
States in such respects as growth of gross national product, rate of inflation, capital reinvestment, resources, self-sufficiency
and balance of payment positions between countries.
|
§
|
The price of the EEM Shares is subject to currency
exchange risk.
Because the price of the EEM Shares is related to the U.S. dollar value of stocks underlying the MSCI Emerging
Markets Index
SM
, holders of the securities will be exposed to currency exchange rate risk with respect to each of the
currencies in which such component securities trade. Exchange rate movements for a particular currency are volatile and are the
result of numerous factors including the supply of, and the demand for, those currencies, as well as relevant government policy,
intervention or actions, but are also influenced significantly from time to time by political or economic developments, and by
macroeconomic factors and speculative actions related to the relevant region. An investor’s net exposure will depend on the
extent to which the currencies of the component securities strengthen or weaken against the U.S. dollar and the relative weight
of each currency. If, taking into account such weighting, the dollar strengthens against the currencies of the component securities
represented in the MSCI Emerging Markets Index
SM
, the price of the EEM Shares will be adversely affected and the payment
on the securities may be reduced.
|
Of particular importance to potential currency exchange
risk are:
|
o
|
existing and expected rates of inflation;
|
|
o
|
existing and expected interest rate levels;
|
|
o
|
the balance of payments; and
|
|
o
|
the extent of governmental surpluses or deficits in the countries represented in the MSCI Emerging Markets IndexSM and the
United States.
|
All of these factors are in turn sensitive to the
monetary, fiscal and trade policies pursued by the governments of various countries represented in the MSCI Emerging Markets Index
SM
and
the United States and other countries important to international trade and finance.
|
§
|
The market price will be influenced by many unpredictable
factors.
Several factors, many of which are beyond our control, will influence the value of the securities in the
secondary market and the price at which MS & Co. may be willing to purchase or sell the securities in the secondary market. We
expect that generally the level of interest rates available in the market and the value of each underlying on any day, including
in relation to its respective coupon barrier level and downside threshold level, will affect the value of the securities more than
any other factors. Other factors that may influence the value of the securities include:
|
|
o
|
the volatility (frequency and magnitude of changes in value) of each underlying and of the stocks composing the NDX Index and
the share underlying index,
|
|
o
|
whether the closing level of either underlying has been below its respective coupon barrier level on any observation date,
|
|
o
|
geopolitical conditions and economic, financial, political, regulatory or judicial events that affect the component stocks
of the underlyings or securities markets generally and which may affect the value of each underlying,
|
|
o
|
dividend rates on the securities underlying the NDX Index and the share underlying index,
|
Morgan Stanley Finance LLC
|
Callable Contingent Income Securities due June 28, 2022
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
|
o
|
the time remaining until the securities mature,
|
|
o
|
interest and yield rates in the market,
|
|
o
|
the availability of comparable instruments,
|
|
o
|
the composition of the underlyings and changes in the constituent stocks of the NDX Index and the share underlying index,
|
|
o
|
the occurrence of certain events affecting the EEM Shares 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. In particular, if either underlying has closed near or below
its coupon barrier level and downside threshold level, the market value of the securities is expected to decrease substantially
and you may have to sell your securities at a substantial discount from the stated principal amount of $1,000 per security.
You cannot predict the future performance of either
underlying based on its historical performance. The value of either underlying may decrease and be below the coupon
barrier level for such underlying on each observation date so that you will receive no return on your investment, and one or both
underlyings may close below the respective downside threshold level(s) on the final observation date so that you lose more than
30% or all of your initial investment in the securities. There can be no assurance that the closing level of each underlying
will be at or above the respective coupon barrier level on any observation date so that you will receive a coupon payment on the
securities for the applicable interest period or that they will be at or above their respective downside threshold levels on the
final observation date so that you do not suffer a significant loss on your initial investment in the securities. See
“NASDAQ-100 Index
®
Historical Performance” and “iShares
®
MSCI Emerging Markets
ETF Historical Performance” below.
|
§
|
The antidilution adjustments the calculation agent
is required to make do not cover every event that could affect the EEM Shares.
MS & Co., as calculation agent,
will adjust the adjustment factor for certain events affecting the EEM Shares. However, the calculation agent will not
make an adjustment for every event that could affect the EEM Shares. If an event occurs that does not require the calculation
agent to adjust the adjustment factor, the market price of the securities may be materially and adversely affected.
|
|
§
|
Adjustments to the EEM Shares or the share underlying
index could adversely affect the value of the securities.
As the investment adviser to the iShares
®
MSCI
Emerging Markets ETF, BlackRock Fund Advisors (the “Investment Adviser”), seeks investment results that correspond
generally to the price and yield performance, before fees and expenses, of the MSCI Emerging Markets Index
SM
. Pursuant
to its investment strategy or otherwise, the Investment Adviser may add, delete or substitute the stocks composing the iShares
®
MSCI
Emerging Markets ETF. Any of these actions could adversely affect the price of the EEM Shares and, consequently, the value of the
securities. MSCI Inc. (“MSCI”) is responsible for calculating and maintaining the MSCI Emerging Markets Index
SM
.
MSCI may add, delete or substitute the stocks constituting the MSCI Emerging Markets Index
SM
or make other methodological
changes that could change the value of the MSCI Emerging Markets Index
SM
. MSCI may discontinue or suspend calculation
or publication of the MSCI Emerging Markets 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 MSCI Emerging Markets Index
SM
and
is 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 EEM Shares,
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 EEM Shares.
The EEM Shares
do 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 EEM Shares 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 EEM Shares and the share underlying index. In addition, corporate actions (such as mergers and spin-offs)
with respect to the equity securities underlying the EEM Shares may impact the variance between the performances of EEM Shares
and the share underlying index. Finally, because the shares of the EEM Shares are traded on an exchange and are subject
to
|
Morgan Stanley Finance LLC
|
Callable Contingent Income Securities due June 28, 2022
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
market supply and investor demand, the market price
of one share of the EEM Shares may differ from the net asset value per share of the EEM Shares.
In particular, during periods of market volatility,
or unusual trading activity, trading in the securities underlying the EEM Shares may be disrupted or limited, or such securities
may be unavailable in the secondary market. Under these circumstances, the liquidity of the EEM Shares may be adversely
affected, market participants may be unable to calculate accurately the net asset value per share of the EEM Shares, and their
ability to create and redeem shares of the EEM Shares may be disrupted. Under these circumstances, the market price of shares of
the EEM Shares may vary substantially from the net asset value per share of the EEM Shares or the level of the share underlying
index.
For all of the foregoing reasons, the performance
of the EEM Shares 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 EEM Shares. Any of these events could materially
and adversely affect the price of the shares of the EEM Shares 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 may
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 on the published closing price per share of the EEM Shares on the final
observation date, even if the EEM Shares’ 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 EEM Shares.
|
§
|
Investing in the securities
is not equivalent to investing in the underlyings or the stocks composing the NDX Index or the share underlying index.
Investing
in the securities is not equivalent to investing in either underlying or the component stocks of the NDX Index or the share underlying
index. Investors in the securities will not participate in any positive performance of either underlying, and will not
have voting rights or rights to receive dividends or other distributions or any other rights with respect to stocks that constitute
the NDX Index or the share underlying index.
|
|
§
|
The securities will not be listed on any securities
exchange and secondary trading may be limited. Accordingly, you should be willing to hold your securities for the entire 3-year
term of the securities
.
The securities will not be listed on any securities exchange. Therefore,
there may be little or no secondary market for the securities. MS & Co. may, but is not obligated to, make a market
in the securities and, if it once chooses to make a market, may cease doing so at any time. When it does make a market,
it will generally do so for transactions of routine secondary market size at prices based on its estimate of the current value
of the securities, taking into account its bid/offer spread, our credit spreads, market volatility, the notional size of the proposed
sale, the cost of unwinding any related hedging positions, the time remaining to maturity and the likelihood that it will be able
to resell the securities. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade
or sell the securities easily. Since other broker-dealers may not participate significantly in the secondary market
for the securities, the price at which you may be able to trade your securities is likely to depend on the price, if any, at which
MS & Co. is willing to transact. If, at any time, MS & Co. were to cease making a market in the securities,
it is likely that there would be no secondary market for the securities. Accordingly, you should be willing to hold
your securities to maturity.
|
|
§
|
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.
Morgan Stanley Finance LLC
|
Callable Contingent Income Securities due June 28, 2022
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
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 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 and the share underlying index), including trading in the EEM Shares, the stocks that constitute the NDX Index or the
share underlying index as well as in other instruments related to the underlyings. 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. Some of our affiliates also trade the underlyings
and other financial instruments related to the underlyings and the share underlying index on a regular basis as part of their general
broker-dealer and other businesses. Any of these hedging or trading activities on or prior to the pricing date could
have increased the initial level of an underlying, and, therefore, could have increased (i) the coupon barrier level for such underlying,
which, if the securities have not been redeemed, is the value at or above which such underlying must close on the observation dates
in order for you to earn a contingent semi-annual coupon (depending also on the performance of the other underlying), and (ii)
the downside threshold level for such underlying, which, if the securities have not been redeemed prior to maturity, is the value
at or above which the underlying must close on 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 underlying). Additionally,
such hedging or trading activities during the term of the securities could affect the value of an underlying on the observation
dates, and, accordingly, whether we pay a contingent semi-annual coupon on the securities and the amount of cash you receive at
maturity, if any (depending also on the performance of the other underlying).
|
|
§
|
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 level, coupon barrier level and downside threshold level for each underlying and
will determine the payment at maturity, if any, whether you receive a contingent semi-annual coupon on each coupon payment date
and whether to make any adjustments to the adjustment factor. Moreover, certain determinations made by MS & Co.,
in its capacity as calculation agent, may require it to exercise discretion and make subjective judgments, such as with respect
to the occurrence or non-occurrence of market disruption events and the selection of a successor index or calculation of the closing
price or index closing value, as applicable, of any underlying in the event of a market disruption event or discontinuance of the
NDX Index or the share underlying index. These potentially subjective determinations may affect the payout to you upon
a contingent early redemption or at maturity, if any. For further information regarding these types of determinations,
see “Additional Terms of the Securities—Additional Terms—Calculation agent,” “—Market disruption
event,” “—Postponement of observation dates,” “—Discontinuance of the NDX Index; alteration
of method of calculation,” “—Discontinuance of the EEM Shares and/or the share underlying index; alteration of
method of calculation” and “—Alternate exchange calculation in case of an event of default” below. In
addition, MS & Co. has determined the estimated value of the securities on the pricing date.
|
|
§
|
Adjustments to the NDX Index could adversely affect
the value of the securities.
The publisher of the NDX Index may add, delete or substitute the component stocks of
such underlying or make other methodological changes that could change the value of such underlying. Any of these actions
could adversely affect the value of the securities. The publisher of the NDX Index may also discontinue or suspend calculation
or publication of such underlying at any time. In these
|
Morgan Stanley Finance LLC
|
Callable Contingent Income Securities due June 28, 2022
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
circumstances, MS & Co., as the calculation agent,
will have the sole discretion to substitute a successor index that is comparable to the discontinued index. MS &
Co. could have an economic interest that is different than that of investors in the securities insofar as, for example, MS &
Co. is permitted to consider indices that are calculated and published by MS & Co. or any of its affiliates. If
MS & Co. determines that there is no appropriate successor index on any observation date, the determination of whether a contingent
semi-annual coupon will be payable on the securities on the applicable coupon payment date, and/or the amount payable at maturity,
will be based on the value of such underlying, based on the closing prices of the stocks constituting such underlying at the time
of such discontinuance, without rebalancing or substitution, computed by MS & Co. as calculation agent in accordance with the
formula for calculating such underlying last in effect prior to such discontinuance, as compared to the coupon barrier level or
downside threshold level, as applicable (depending also on the performance of the other underlying).
|
§
|
The U.S. federal income tax consequences of an
investment in the securities are uncertain.
There is no direct legal authority as to the proper treatment of the
securities for U.S. federal income tax purposes, and, therefore, significant aspects of the tax treatment of the securities are
uncertain.
|
Please read the discussion under “Additional
Information—Tax considerations” in this document concerning the U.S. federal income tax consequences of an investment
in the securities. We intend to treat a security for U.S. federal income tax purposes as a single financial contract
that provides for a coupon that will be treated as gross income to you at the time received or accrued, in accordance with your
regular method of tax accounting. Under this treatment, the ordinary income treatment of the coupon payments, in conjunction
with the capital loss treatment of any loss recognized upon the sale, exchange or settlement of the securities, could result in
adverse tax consequences to holders of the securities because the deductibility of capital losses is subject to limitations. We
do not plan to request a ruling from the Internal Revenue Service (the “IRS”) regarding the tax treatment of the securities,
and the IRS or a court may not agree with the tax treatment described herein. If the IRS were successful in asserting
an alternative treatment for the securities, the timing and character of income or loss on the securities might differ significantly
from the tax treatment described herein. For example, under one possible treatment, the IRS could seek to recharacterize
the securities as debt instruments. In that event, U.S. Holders (as defined below) would be required to accrue into
income original issue discount on the securities every year at a “comparable yield” determined at the time of issuance
(as adjusted based on the difference, if any, between the actual and the projected amount of any contingent payments on the securities)
and recognize all income and gain in respect of the securities as ordinary income. The risk that financial instruments
providing for buffers, triggers or similar downside protection features, such as the securities, would be recharacterized as debt
is greater than the risk of recharacterization for comparable financial instruments that do not have such features.
Non-U.S. Holders (as defined below) should note
that we currently intend to withhold on any coupon paid to Non-U.S. Holders generally at a rate of 30%, or at a reduced rate specified
by an applicable income tax treaty under an “other income” or similar provision, and will not be required to pay any
additional amounts with respect to amounts withheld.
In 2007, the U.S. Treasury Department and the IRS
released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar
instruments. While it is not clear whether the securities would be viewed as similar to the prepaid forward contracts
described in the notice, it is possible that any Treasury regulations or other guidance promulgated after consideration of these
issues could materially and adversely affect the tax consequences of an investment in the securities, possibly with retroactive
effect. The notice focuses on a number of issues, the most relevant of which for holders of the securities are the character
and timing of income or loss and the degree, if any, to which income realized by non-U.S. investors should be subject to withholding
tax. Both U.S. and Non-U.S. Holders should consult their tax advisers regarding the U.S. federal income tax consequences
of an investment in the securities, including possible alternative treatments, the issues presented by this notice and any tax
consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
Morgan Stanley Finance LLC
|
Callable Contingent Income Securities due June 28, 2022
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
NASDAQ-100 Index
®
Historical Performance
The following graph sets forth the daily closing values of the
NDX Index for the period from January 1, 2014 through June 21, 2019. The related table sets forth the published high
and low closing values, as well as end-of-quarter closing values, of the NDX Index for each quarter in the same period. The
closing value of the NDX Index on June 21, 2019 was 7,728.782. We obtained the information in the table and graph below
from Bloomberg Financial Markets, without independent verification. The NDX Index has at times experienced periods of
high volatility, and you should not take the historical values of the NDX Index as an indication of its future performance. No
assurance can be given as to the level of the NDX Index on any observation date, including the final observation date.
NDX Index Daily Closing
Values
January 1, 2014 to June
21, 2019
|
|
*The black solid line in the graph indicates the coupon barrier level and the downside threshold level of 5,410.147, which is approximately 70% of the initial level.
|
Morgan Stanley Finance LLC
|
Callable Contingent Income Securities due June 28, 2022
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
NASDAQ-100 Index
®
|
High
|
Low
|
Period End
|
2014
|
|
|
|
First Quarter
|
3,727.185
|
3,440.502
|
3,595.736
|
Second Quarter
|
3,849.479
|
3,446.845
|
3,849.479
|
Third Quarter
|
4,103.083
|
3,857.938
|
4,049.445
|
Fourth Quarter
|
4,337.785
|
3,765.281
|
4,236.279
|
2015
|
|
|
|
First Quarter
|
4,483.049
|
4,089.648
|
4,333.688
|
Second Quarter
|
4,548.740
|
4,311.257
|
4,396.761
|
Third Quarter
|
4,679.675
|
4,016.324
|
4,181.060
|
Fourth Quarter
|
4,719.053
|
4,192.963
|
4,593.271
|
2016
|
|
|
|
First Quarter
|
4,497.857
|
3,947.804
|
4,483.655
|
Second Quarter
|
4,565.421
|
4,201.055
|
4,417.699
|
Third Quarter
|
4,891.363
|
4,410.747
|
4,875.697
|
Fourth Quarter
|
4,965.808
|
4,660.457
|
4,863.620
|
2017
|
|
|
|
First Quarter
|
5,439.742
|
4,911.333
|
5,436.232
|
Second Quarter
|
5,885.296
|
5,353.586
|
5,646.917
|
Third Quarter
|
6,004.380
|
5,596.956
|
5,979.298
|
Fourth Quarter
|
6,513.269
|
5,981.918
|
6,396.422
|
2018
|
|
|
|
First Quarter
|
7,131.121
|
6,306.100
|
6,581.126
|
Second Quarter
|
7,280.705
|
6,390.837
|
7,040.802
|
Third Quarter
|
7,660.180
|
7,014.554
|
7,627.650
|
Fourth Quarter
|
7,645.453
|
5,899.354
|
6,329.964
|
2019
|
|
|
|
First Quarter
|
7,493.270
|
6,147.128
|
7,378.771
|
Second Quarter (through June 21, 2019)
|
7,845.729
|
6,978.018
|
7,728.782
|
|
|
|
|
“Nasdaq
®
,” “NASDAQ-100
®
”
and “NASDAQ-100 Index
®
” are trademarks of Nasdaq, Inc. For more information, see “NASDAQ-100 Index
®
”
in the accompanying index supplement.
Morgan Stanley Finance LLC
|
Callable Contingent Income Securities due June 28, 2022
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
iShares
®
MSCI Emerging Markets
ETF Historical Performance
The following graph sets forth the daily closing prices of the
EEM Shares for the period from January 1, 2014 through June 21, 2019. The related table sets forth the published high
and low closing prices, as well as end-of-quarter closing prices, of the EEM Shares for each quarter in the same period. The
closing price of the EEM Shares on June 21, 2019 was $42.77. We obtained the information in the table and graph below
from Bloomberg Financial Markets, without independent verification. The EEM Shares have at times experienced periods
of high volatility, and you should not take the historical closing prices of the EEM Shares as an indication of their future performance. No
assurance can be given as to the closing level of the EEM Shares on any observation date, including the final observation date.
EEM Shares Daily Closing Prices
January 1, 2014 to June 21, 2019
|
|
*The black solid line in the graph indicates the coupon barrier level and the downside threshold level of $29.939, which is 70% of the initial level.
|
Morgan Stanley Finance LLC
|
Callable Contingent Income Securities due June 28, 2022
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
iShares
®
MSCI Emerging Markets ETF (CUSIP 464287234)
|
High ($)
|
Low ($)
|
Period End ($)
|
2014
|
|
|
|
First Quarter
|
40.99
|
37.09
|
40.99
|
Second Quarter
|
43.95
|
40.82
|
43.23
|
Third Quarter
|
45.85
|
41.56
|
41.56
|
Fourth Quarter
|
42.44
|
37.73
|
39.29
|
2015
|
|
|
|
First Quarter
|
41.07
|
37.92
|
40.13
|
Second Quarter
|
44.09
|
39.04
|
39.62
|
Third Quarter
|
39.78
|
31.32
|
32.78
|
Fourth Quarter
|
36.29
|
31.55
|
32.19
|
2016
|
|
|
|
First Quarter
|
34.28
|
28.25
|
34.25
|
Second Quarter
|
35.26
|
31.87
|
34.36
|
Third Quarter
|
38.20
|
33.77
|
37.45
|
Fourth Quarter
|
38.10
|
34.08
|
35.01
|
2017
|
|
|
|
First Quarter
|
39.99
|
35.43
|
39.39
|
Second Quarter
|
41.93
|
38.81
|
41.39
|
Third Quarter
|
45.85
|
41.05
|
44.81
|
Fourth Quarter
|
47.81
|
44.82
|
47.12
|
2018
|
|
|
|
First Quarter
|
52.08
|
45.69
|
48.28
|
Second Quarter
|
48.14
|
42.33
|
43.33
|
Third Quarter
|
45.03
|
41.14
|
42.92
|
Fourth Quarter
|
42.93
|
38.00
|
39.06
|
2019
|
|
|
|
First Quarter
|
43.71
|
38.45
|
42.92
|
Second Quarter (through June 21, 2019)
|
44.59
|
39.91
|
42.77
|
Morgan Stanley Finance LLC
|
Callable Contingent Income Securities due June 28, 2022
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets 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 pricing supplement.
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.
|
Day count convention:
|
Interest will be computed on the basis of a 360-day year of twelve 30-day months.
|
NDX Index publisher:
|
Nasdaq, Inc. or any successor thereof
|
Share underlying index:
|
MSCI Emerging Markets Index
SM
|
Share underlying index publisher:
|
MSCI Inc. or any successor thereof
|
Denominations:
|
$1,000 per security and integral multiples thereof
|
Interest period:
|
The semi-annual 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.
|
Senior security or subordinated security:
|
Senior
|
Specified currency:
|
U.S. dollars
|
Record date:
|
One business day prior to the related scheduled coupon payment date;
provided
that any contingent semi-annual coupon payable at maturity shall be payable to the person to whom the payment at maturity shall be payable.
|
Postponement of observation dates:
|
The observation dates are subject to postponement due to non-index
business days and non-trading days, as applicable, or certain market disruption events, as described in the following paragraph.
If a market disruption event with respect to either underlying
occurs on any scheduled observation date, or if any such observation date is not an index business day with respect to the NDX
Index or a trading day with respect to the EEM Shares, the index closing value or the closing price, as applicable, solely for
such underlying for such date will be determined on the immediately succeeding index business day or trading day, as applicable,
on which no market disruption event will have occurred with respect to such affected underlying;
provided
that the closing
level for either underlying will not be determined on a date later than the fifth scheduled index business day or trading day,
as applicable, after the scheduled observation date and if such date is not an index business day or trading day, as applicable,
or if there is a market disruption event on such date, the calculation agent will (i) if the affected underlying is the NDX Index,
determine the index closing value of such underlying on such date in accordance with the formula for calculating such underlying
last in effect prior to the commencement of the market disruption event (or prior to the non-index business day), without rebalancing
or substitution, using the closing price (or, if trading in the relevant securities has been materially suspended or materially
limited, its good faith estimate of the closing price that would have prevailed but for such suspension, limitation or non-index
business day) on such date of each security most recently constituting such underlying, and (ii) if the affected underlying is
the EEM Shares, determine the closing price of the EEM Shares on such fifth trading day based on the mean, as determined by the
calculation agent, of the bid prices for the EEM Shares for such date obtained from as many recognized dealers in such security,
but not exceeding three, as will make such bid prices available to the calculation agent. Bids of MS & Co. or any of its affiliates
may be included in the calculation of such mean, but only to the extent that any such bid is the highest of the bids obtained.
If no bid prices are provided from any third-party dealers, the closing price will be determined by the calculation agent in its
sole and absolute discretion (acting in good faith) taking into account any information that it deems relevant.
|
Postponement of coupon payment dates (including
the maturity date and redemption dates):
|
If any scheduled coupon payment date is not a business day, that semi-annual coupon, if any, shall be paid on the next succeeding business day;
provided
that the contingent semi-annual coupon, if any, with respect to the final observation date shall be paid on the maturity date;
provided further
that if, due to a market disruption event or otherwise, any observation date with respect to either underlying is postponed so that it falls less than two business days prior to the scheduled coupon payment date, maturity date or redemption date, as applicable, the coupon payment date, maturity date or redemption date, as applicable, shall be postponed to the second business day following the observation date as postponed, by which date the index closing value or closing price, as applicable, of each underlying has been determined. In any of these cases, no adjustment shall be made to any contingent semi-annual coupon payment, payment at maturity or redemption payment made on that postponed date.
|
Relevant exchange:
|
With respect to the NDX Index or its successor index, the share underlying index or its successor index, the primary exchange(s) or market(s) of trading for (i) any security then included in such index and (ii) any futures or options contracts related to such index or to any security then included in such index.
|
Business day:
|
Any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking
|
Morgan Stanley Finance LLC
|
Callable Contingent Income Securities due June 28, 2022
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
|
institutions are authorized or required by law or regulation to close in The City of New York.
|
Index business day:
|
With respect to the SPX index, a day, as determined by the calculation agent, on which trading is generally conducted on each of the relevant exchange(s) for such underlying, other than a day on which trading on such exchange(s) is scheduled to close prior to the time of the posting of its regular final weekday closing price.
|
Trading day:
|
With respect to the EEM Shares, a day, as determined by the calculation agent, on which trading is generally conducted on the New York Stock Exchange, The Nasdaq Stock Market LLC (the “Nasdaq”), the Chicago Mercantile Exchange and the Chicago Board of Options Exchange and in the over-the-counter market for equity securities in the United States.
|
Index closing value:
|
With respect to the NDX Index, index closing value on any index business day means the official closing value of such underlying, or any successor index as defined under “Discontinuance of the NDX Index; alteration of method of calculation” below), published at the regular official weekday close of trading on such index business day by the underlying index publisher for the NDX Index, as determined by the calculation agent. In certain circumstances, the index closing value for the NDX Index will be based on the alternate calculation of such underlying as described under “Discontinuance of the NDX Index; alteration of method of calculation” below.
|
Closing price:
|
Subject to the provisions set out under “Discontinuance
of the EEM Shares and/or the share underlying index; alteration of method of calculation” below, the closing price for one
share of the EEM Shares (or one unit of any other security for which a closing price must be determined) on any trading day means:
(i)
if the EEM Shares (or any such other security) are
listed on a national securities exchange (other than the Nasdaq), the last reported sale price, regular way, of the principal trading
session on such day on the principal national securities exchange registered under the Securities Exchange Act of 1934, as amended,
on which the EEM Shares (or any such other security) are listed,
(ii)
if the EEM Shares (or any such other security) are
securities of the Nasdaq, the official closing price of the EEM Shares published by the Nasdaq on such day, or
(iii)
if the EEM Shares (or any such other security) are
not listed on any national securities exchange but are included in the OTC Bulletin Board Service (the “OTC Bulletin Board”)
operated by the Financial Industry Regulatory Authority, Inc. (“FINRA”), the last reported sale price of the principal
trading session on the OTC Bulletin Board on such day for the EEM Shares.
If the EEM Shares (or any such other security) are listed on
any national securities exchange but the last reported sale price or the official closing price published by such exchange, or
by the Nasdaq, as applicable, is not available pursuant to the preceding sentence, then the closing price for one share of the
EEM Shares (or one unit of any such other security) on any trading day will mean the last reported sale price of the principal
trading session on the over-the-counter market as reported on the Nasdaq or the OTC Bulletin Board on such day. If a
market disruption event (as defined below) occurs with respect to the EEM Shares (or any such other security) or the last reported
sale price or the official closing price published by the Nasdaq, as applicable, for the EEM Shares (or any such other security)
is not available pursuant to either of the two preceding sentences, then the closing price for any trading day will be the mean,
as determined by the calculation agent, of the bid prices for the EEM Shares (or any such other security) for such trading day
obtained from as many recognized dealers in such security, but not exceeding three, as will make such bid prices available to the
calculation agent. Bids of MS & Co. and its successors or any of its affiliates may be included in the calculation
of such mean, but only to the extent that any such bid is the highest of the bids obtained. If no bid prices are provided
from any third-party dealers, such closing price will be determined by the calculation agent in its sole and absolute discretion
(acting in good faith) taking into account any information that it deems relevant. The term “OTC Bulletin Board
Service” will include any successor service thereto, or, if applicable, the OTC Reporting Facility operated by FINRA. See
“Discontinuance of the EEM Shares and/or the share underlying index; alteration of method of calculation” below.
|
Market disruption event:
|
With respect to the NDX Index, market disruption event means:
(i)
the occurrence or existence of any of:
(a) a suspension, absence or material limitation of
trading of securities then constituting 20 percent or more of the value of such underlying (or a successor index) on the relevant
exchange(s) for such securities for more than two hours of trading or during the one-half hour period preceding the close of the
principal trading session on such relevant exchange(s), or
(b) a breakdown or failure in the price and trade reporting
systems of any relevant exchange as a result of which the reported trading prices for securities then constituting 20 percent or
more of the value of such underlying (or a successor index) during the last one-half hour preceding the close of the principal
trading session on such relevant exchange(s) are materially inaccurate, or
(c) the suspension, material limitation or absence
of trading on any major U.S. securities market for trading in futures or options contracts or exchange-traded funds related to
such underlying (or a
|
Morgan Stanley Finance LLC
|
Callable Contingent Income Securities due June 28, 2022
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
|
successor index) for more than two hours of trading
or during the one-half hour period preceding the close of the principal trading session on such market,
in each case as determined by the calculation agent
in its sole discretion; and
(ii)
a determination by the calculation agent in its sole
discretion that any event described in clause (i) above materially interfered with our ability or the ability of any of our affiliates
to unwind or adjust all or a material portion of the hedge position with respect to the securities.
For the purpose of determining whether a market disruption event
exists at any time with respect to the NDX Index, if trading in a security included in such underlying is materially suspended
or materially limited at that time, then the relevant percentage contribution of that security to the value of such underlying
shall be based on a comparison of (x) the portion of the value of such underlying attributable to that security relative to (y)
the overall value of such underlying, in each case immediately before that suspension or limitation.
For the purpose of determining whether a market disruption event
exists at any time with respect to the NDX Index: (1) a limitation on the hours or number of days of trading will not constitute
a market disruption event if it results from an announced change in the regular business hours of the relevant exchange or market,
(2) a decision to permanently discontinue trading in the relevant futures or options contract or exchange-traded fund will not
constitute a market disruption event, (3) a suspension of trading in futures or options contracts or exchange-traded funds on such
underlying by the primary securities market trading in such contracts or funds by reason of (a) a price change exceeding limits
set by such securities exchange or market, (b) an imbalance of orders relating to such contracts or funds or (c) a disparity in
bid and ask quotes relating to such contracts or funds will constitute a suspension, absence or material limitation of trading
in futures or options contracts or exchange-traded funds related to such underlying and (4) a “suspension, absence or material
limitation of trading” on any relevant exchange or on the primary market on which futures or options contracts or exchange-traded
funds related to such underlying are traded will not include any time when such securities market is itself closed for trading
under ordinary circumstances.
With respect to the EEM Shares, market disruption event means:
(i) the occurrence or existence of any of:
(a) a suspension, absence or material limitation
of trading of the EEM Shares on the primary market for the EEM Shares for more than two hours of trading or during the one-half
hour period preceding the close of the principal trading session in such market; or a breakdown or failure in the price and trade
reporting systems of the primary market for the EEM Shares as a result of which the reported trading prices for the EEM Shares
during the last one-half hour preceding the close of the principal trading session in such market are materially inaccurate; or
the suspension, absence or material limitation of trading on the primary market for trading in futures or options contracts related
to the EEM Shares, if available, during the one-half hour period preceding the close of the principal trading session in the applicable
market, in each case as determined by the calculation agent in its sole discretion; or
(b) a suspension, absence or material limitation
of trading of stocks then constituting 20 percent or more of the value of the share underlying index for the EEM Shares on the
relevant exchange(s) for such securities for more than two hours of trading or during the one-half hour period preceding the close
of the principal trading session on such relevant exchange(s), in each case as determined by the calculation agent in its sole
discretion; or
(c) the suspension, material limitation or absence
of trading on any major U.S. securities market for trading in futures or options contracts related to the share underlying index
or the underlying shares for more than two hours of trading or during the one-half hour period preceding the close of the principal
trading session on such market,
in each case as determined by the calculation agent in its sole
discretion; and
(ii) a determination by the calculation agent in its sole discretion
that any event described in clause (i) above materially interfered with our ability or the ability of any of our affiliates to
unwind or adjust all or a material portion of the hedge position with respect to the securities.
For the purpose of determining whether a market disruption event
exists at any time, if trading in a security included in the share underlying index is materially suspended or materially limited
at that time, then the relevant percentage contribution of that security to the level of the share underlying index will be based
on a comparison of (x) the portion of the level of the share underlying index attributable to that security relative to (y) the
overall level of the share underlying index, in each case immediately before that suspension or limitation.
For the purpose of determining whether a market disruption event
has occurred with respect to the underlying
|
Morgan Stanley Finance LLC
|
Callable Contingent Income Securities due June 28, 2022
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
|
shares: (1) a limitation on the hours or number of days of trading will not constitute a market disruption event if it results from an announced change in the regular business hours of the relevant exchange or market, (2) a decision to permanently discontinue trading in the underlying shares or in the futures or options contract related to the share underlying index or the EEM Shares will not constitute a market disruption event, (3) a suspension of trading in futures or options contracts on the share underlying index or the EEM Shares by the primary securities market trading in such contracts by reason of (a) a price change exceeding limits set by such securities exchange or market, (b) an imbalance of orders relating to such contracts or (c) a disparity in bid and ask quotes relating to such contracts will constitute a suspension, absence or material limitation of trading in futures or options contracts related to the share underlying index or the EEM Shares and (4) a “suspension, absence or material limitation of trading” on any relevant exchange or on the primary market on which futures or options contracts related to the share underlying index or the EEM Shares are traded will not include any time when such securities market is itself closed for trading under ordinary circumstances. Regarding any permanent discontinuance of trading in the EEM Shares, see “Discontinuance of the EEM Shares and/or the share underlying index; alteration of method of calculation” below.
|
Discontinuance of the NDX Index; alteration
of method of calculation:
|
If the NDX Index publisher discontinues publication of the NDX
Index and the NDX Index publisher or another entity (including MS & Co.) publishes a successor or substitute index that the
calculation agent determines, in its sole discretion, to be comparable to such discontinued NDX Index (such index being referred
to herein as the “Successor Index”), then any subsequent index closing value for such affected NDX Index will be determined
by reference to the published value of such successor index at the regular weekday close of trading on any index business day that
such index closing value is to be determined, and to the extent the index closing value of the successor index differs from the
index closing value of the NDX Index at the time of such substitution, proportionate adjustments will be made by the calculation
agent to the relevant initial level, coupon barrier level and downside threshold level.
Upon any selection by the calculation agent of a successor index,
the calculation agent will cause written notice thereof to be furnished to the trustee, to us and to the depositary, as holder
of the securities, within three business days of such selection. We expect that such notice will be made available to
you, as a beneficial owner of the securities, in accordance with the standard rules and procedures of the depositary and its direct
and indirect participants.
If the NDX Index publisher discontinues publication of the NDX
Index or the successor index prior to, and such discontinuance is continuing on, any observation date and the calculation agent
determines, in its sole discretion, that no successor index is available at such time, then the calculation agent will determine
the index closing value for the NDX Index for such date. The index closing value of the NDX Index or the successor index will be
computed by the calculation agent in accordance with the formula for and method of calculating such index last in effect prior
to such discontinuance, using the closing price (or, if trading in the relevant securities has been materially suspended or materially
limited, its good faith estimate of the closing price that would have prevailed but for such suspension or limitation) at the close
of the principal trading session of the relevant exchange on such date of each security most recently constituting such index without
any rebalancing or substitution of such securities following such discontinuance. Notwithstanding these alternative arrangements,
discontinuance of the publication of an underlying may adversely affect the value of the securities.
If at any time, the method of calculating the NDX Index or the
successor index, or the value thereof, is changed in a material respect, or if the NDX Index or the successor index is in any other
way modified so that such index does not, in the opinion of the calculation agent, fairly represent the value of such index had
such changes or modifications not been made, then, from and after such time, the calculation agent will, at the close of business
in New York City on each date on which the index closing value for the NDX Index is to be determined, make such calculations and
adjustments as, in the good faith judgment of the calculation agent, may be necessary in order to arrive at a value of a stock
index comparable to the NDX Index or the successor index, as the case may be, as if such changes or modifications had not been
made, and the calculation agent will calculate the index closing value of the NDX Index with reference to the NDX Index or the
successor index, as adjusted. Accordingly, if the method of calculating the NDX Index or the successor index is modified so that
the value of such index is a fraction of what it would have been if it had not been modified (e.g., due to a split in the index),
then the calculation agent will adjust such index in order to arrive at a value of the NDX Index or the successor index as if it
had not been modified (e.g., as if such split had not occurred).
|
Discontinuance of the EEM Shares and/or the share underlying index; alteration of method of calculation:
|
If trading in the EEM Shares on every applicable national securities
exchange, on the OTC Bulletin Board and in the over-the-counter market is permanently discontinued or the iShares® MSCI Emerging
Markets ETF is liquidated or otherwise terminated (a “discontinuance or liquidation event”), the closing price of the
EEM Shares on any trading day following the discontinuance or liquidation event will be determined by the calculation agent and
will be deemed to equal the product of (i) the closing value of the share underlying index for the EEM Shares (or any successor
index, as described below) on such date (taking into account any material changes in the method of calculating the share underlying
index following such discontinuance or
|
Morgan Stanley Finance LLC
|
Callable Contingent Income Securities due June 28, 2022
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
|
liquidation event) and (ii) a fraction, the numerator of which
is the closing price of the EEM Shares and the denominator of which is the closing value of the share underlying index (or any
successor index, as described below), each determined as of the last day prior to the occurrence of the discontinuance or liquidation
event on which a closing price was available.
If, subsequent to a discontinuance or liquidation event, the
share underlying index publisher discontinues publication of the share underlying index and the share underlying index publisher
or another entity (including MS & Co.) publishes a successor or substitute index that the calculation agent determines, in
its sole discretion, to be comparable to the discontinued the share underlying index (such index being referred to herein as a
“successor index”), then any subsequent closing price for the EEM Shares on any trading day following a discontinuance
or liquidation event will be determined by reference to the published value of such successor index at the regular weekday close
of trading on such trading day, and, to the extent the value of the successor index differs from the value of the share underlying
index at the time of such substitution, proportionate adjustments shall be made by the calculation agent for purposes of calculating
payments on the securities.
Upon any selection by the calculation agent of a successor index,
the calculation agent will cause written notice thereof to be furnished to the trustee, to us and to the depositary, as holder
of the securities, within three business days of such selection. We expect that such notice will be made available to
you, as a beneficial owner of the securities, in accordance with the standard rules and procedures of the depositary and its direct
and indirect participants.
If, subsequent to a discontinuance or liquidation event, the
share underlying index publisher discontinues publication of the share underlying index prior to, and such discontinuance is continuing
on, an observation date, and the calculation agent determines, in its sole discretion, that no successor index is available at
such time, then the calculation agent will determine the closing price for the EEM Shares for such date. Such closing
price will be computed by the calculation agent in accordance with the formula for and method of calculating such share underlying
index last in effect prior to such discontinuance, using the closing price (or, if trading in the relevant securities has been
materially suspended or materially limited, its good faith estimate of the closing price that would have prevailed but for such
suspension or limitation) at the close of the principal trading session of the relevant exchange on such date of each security
most recently composing the share underlying index without any rebalancing or substitution of such securities following such discontinuance.
|
Antidilution adjustments:
|
The adjustment factor with respect to the EEM Shares shall be
adjusted as follows:
If the EEM Shares are subject to a stock split or reverse stock
split, then once such split has become effective, the adjustment factor for the EEM Shares will be adjusted by the calculation
agent to equal the product of the prior adjustment factor and the number of shares issued in such stock split or reverse stock
split with respect to one share of the EEM Shares.
No adjustment to the adjustment factor pursuant to the paragraph
above will be required unless such adjustment would require a change of at least 0.1% in the amount being adjusted as then in effect. Any
number so adjusted will be rounded to the nearest one hundred-thousandth with five one-millionths being rounded upward.
The calculation agent will 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 its determinations and calculations with respect thereto will be conclusive in the absence of manifest error.
|
Alternate exchange calculation in case of
an event of default:
|
If an event of default with respect to the securities shall have
occurred and be continuing, the amount declared due and payable upon any acceleration of the securities (the “Acceleration
Amount”) will be an amount, determined by the calculation agent in its sole discretion, that is equal to the cost of having
a qualified financial institution, of the kind and selected as described below, expressly assume all our payment and other obligations
with respect to the securities as of that day and as if no default or acceleration had occurred, or to undertake other obligations
providing substantially equivalent economic value to you with respect to the securities. That cost will equal:
·
the
lowest amount that a qualified financial institution would charge to effect this assumption or undertaking, plus
·
the
reasonable expenses, including reasonable attorneys’ fees, incurred by the holders of the securities in preparing any documentation
necessary for this assumption or undertaking.
During the default quotation period for the securities, which
we describe below, the holders of the securities and/or we may request a qualified financial institution to provide a quotation
of the amount it would charge to
|
Morgan Stanley Finance LLC
|
Callable Contingent Income Securities due June 28, 2022
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
|
effect this assumption or undertaking. If either party
obtains a quotation, it must notify the other party in writing of the quotation. The amount referred to in the first
bullet point above will equal the lowest—or, if there is only one, the only—quotation obtained, and as to which notice
is so given, during the default quotation period. With respect to any quotation, however, the party not obtaining the
quotation may object, on reasonable and significant grounds, to the assumption or undertaking by the qualified financial institution
providing the quotation and notify the other party in writing of those grounds within two business days after the last day of the
default quotation period, in which case that quotation will be disregarded in determining the Acceleration Amount.
Notwithstanding the foregoing, if a voluntary or involuntary
liquidation, bankruptcy or insolvency of, or any analogous proceeding is filed with respect to MSFL or Morgan Stanley, then depending
on applicable bankruptcy law, your claim may be limited to an amount that could be less than the Acceleration Amount.
If the maturity of the securities is accelerated because of an
event of default as described above, we shall, or shall cause the calculation agent to, provide written notice to the trustee at
its New York office, on which notice the trustee may conclusively rely, and to the depositary of the Acceleration Amount and the
aggregate cash amount due, if any, with respect to the securities as promptly as possible and in no event later than two business
days after the date of such acceleration.
Default quotation period
The default quotation period is the period beginning on the day
the Acceleration Amount first becomes due and ending on the third business day after that day, unless:
·
no
quotation of the kind referred to above is obtained, or
·
every
quotation of that kind obtained is objected to within five business days after the due date as described above.
If either of these two events occurs, the default quotation period
will continue until the third business day after the first business day on which prompt notice of a quotation is given as described
above. If that quotation is objected to as described above within five business days after that first business day,
however, the default quotation period will continue as described in the prior sentence and this sentence.
In any event, if the default quotation period and the subsequent
two business day objection period have not ended before the final observation date, then the Acceleration Amount will equal the
principal amount of the securities.
Qualified financial institutions
For the purpose of determining the Acceleration Amount at any
time, a qualified financial institution must be a financial institution organized under the laws of any jurisdiction in the United
States or Europe, which at that time has outstanding debt obligations with a stated maturity of one year or less from the date
of issue and rated either:
·
A-2
or higher by Standard & Poor’s Ratings Services or any successor, or any other comparable rating then used by that rating
agency, or
·
P-2
or higher by Moody’s Investors Service or any successor, or any other comparable rating then used by that rating agency.
|
Trustee:
|
The Bank of New York Mellon, a New York banking corporation
|
Calculation agent:
|
The calculation agent for the securities will be MS & Co. All
determinations made by the calculation agent will be at the sole discretion of the calculation agent and will, in the absence of
manifest error, be conclusive for all purposes and binding on you, the trustee and us.
All calculations with respect to the contingent semi-annual coupon,
the redemption payment and the payment at maturity, if any, shall be made by the calculation agent and shall be rounded to the
nearest one hundred-thousandth, with five one-millionths rounded upward (e.g., .876545 would be rounded to .87655); all dollar
amounts related to determination of the amount of cash payable per stated principal amount, if any, shall be rounded to the nearest
ten-thousandth, with five one hundred-thousandths rounded upward (e.g., .76545 would be rounded up to .7655); and all dollar amounts
paid on the aggregate principal amount of the securities shall be rounded to the nearest cent, with one-half cent rounded upward.
Because the calculation agent is our affiliate, the economic
interests of the calculation agent and its affiliates may be adverse to your interests as an investor in the securities, including
with respect to certain determinations and judgments that the calculation agent must make in determining the payment that you will
|
Morgan Stanley Finance LLC
|
Callable Contingent Income Securities due June 28, 2022
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
|
receive, if any, on each coupon payment date, upon early redemption or at maturity or whether a market disruption event has occurred. See “Market disruption event,” “Discontinuance of the NDX Index; alteration of method of calculation” and “Discontinuance of the EEM Shares and/or the share underlying index; alteration of method of calculation.” MS & Co. is obligated to carry out its duties and functions as calculation agent in good faith and using its reasonable judgment.
|
Issuer notices to registered security holders, the trustee and the depositary:
|
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 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.
The issuer shall, or shall cause the calculation agent to, (i)
provide written notice to the trustee, on which notice the trustee may conclusively rely, and to the depositary of the amount of
cash to be delivered as contingent semi-annual coupon, if any, with respect to the securities on or prior to 10:30 a.m. (New York
City time) on the business day preceding each coupon payment date, and (ii) deliver the aggregate cash amount due with respect
to the applicable coupon to the trustee for delivery to the depositary, as holder of the securities, on the applicable coupon payment
date.
In the event that any coupon payment date is postponed due to
the postponement of the relevant observation date, the issuer shall give notice of such postponement and, once it has been determined,
of the date to which the applicable coupon payment date has been rescheduled (i) to each registered holder of the securities by
mailing notice of such postponement by first class mail, postage prepaid, to such registered holder’s last address as it
shall appear upon the registry books, (ii) to the trustee by facsimile confirmed by mailing such notice to the trustee by first
class mail, postage prepaid, at its New York office and (iii) to the depositary by telephone or facsimile confirmed by mailing
such notice to the depositary by first class mail, postage prepaid. Any notice that is mailed to a registered holder of the securities
in the manner herein provided shall be conclusively presumed to have been duly given to such registered holder, whether or not
such registered holder receives the notice. The issuer shall give such notice as promptly as possible, and in no case later than
(i) with respect to notice of postponement of any coupon payment date, the business day immediately preceding the applicable scheduled
coupon payment date and (ii) with respect to notice of the date to which the applicable coupon payment date has been rescheduled,
the business day immediately following the applicable observation date as postponed.
The issuer shall, or shall cause the calculation agent to, (i)
provide written notice to the trustee, on which notice the trustee may conclusively rely, and to the depositary of the amount of
cash, if any, to be delivered with respect to the securities, on or prior to 10:30 a.m. (New York City time) on the business day
preceding the redemption date or the business day preceding the maturity date, as applicable, and (ii) deliver the aggregate cash
amount due with respect to the securities, if any, to the trustee for delivery to the depositary, as holder of the securities,
on the redemption date or maturity date, as applicable.
|
Morgan Stanley Finance LLC
|
Callable Contingent Income Securities due June 28, 2022
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
Additional Information About the Securities
Minimum ticketing size:
|
$1,000 / 1 security
|
Book entry security or certificated security:
|
Book entry. The securities will be issued in the form of one or more fully registered global securities which will be deposited with, or on behalf of, the depositary and will be registered in the name of a nominee of the depositary. The depositary’s nominee will be the only registered holder of the securities. Your beneficial interest in the securities will be evidenced solely by entries on the books of the securities intermediary acting on your behalf as a direct or indirect participant in the depositary. In this pricing supplement, all references to payments or notices to you will mean payments or notices to the depositary, as the registered holder of the securities, for distribution to participants in accordance with the depositary’s procedures. For more information regarding the depositary and book entry notes, please read “The Depositary” in the accompanying prospectus supplement and “Forms of Securities—Global Securities—Registered Global Securities” in the accompanying prospectus.
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Tax considerations:
|
Prospective investors should note that the discussion under
the section called “United States Federal Taxation” in the accompanying prospectus supplement does not apply to the
securities issued under this document and is superseded by the following discussion.
The following is a general discussion of the material U.S. federal
income tax consequences and certain estate tax consequences of the ownership and disposition of the securities. This
discussion applies only to investors in the securities who:
·
purchase
the securities in the original offering; and
·
hold
the securities as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”).
This discussion does not describe all of the tax consequences
that may be relevant to a holder in light of the holder’s particular circumstances or to holders subject to special rules,
such as:
·
certain
financial institutions;
·
insurance
companies;
·
certain
dealers and traders in securities or commodities;
·
investors
holding the securities as part of a “straddle,” wash sale, conversion transaction, integrated transaction or constructive
sale transaction;
·
U.S.
Holders (as defined below) whose functional currency is not the U.S. dollar;
·
partnerships
or other entities classified as partnerships for U.S. federal income tax purposes;
·
regulated
investment companies;
·
real
estate investment trusts; or
·
tax-exempt
entities, including “individual retirement accounts” or “Roth IRAs” as defined in Section 408 or 408A of
the Code, respectively.
If an entity that is classified as a partnership for U.S. federal
income tax purposes holds the securities, the U.S. federal income tax treatment of a partner will generally depend on the status
of the partner and the activities of the partnership. If you are a partnership holding the securities or a partner in such a partnership,
you should consult your tax adviser as to the particular U.S. federal tax consequences of holding and disposing of the securities
to you.
As the law applicable to the U.S. federal income taxation of
instruments such as the securities is technical and complex, the discussion below necessarily represents only a general summary.
The effect of any applicable state, local or non-U.S. tax laws is not discussed, nor are any alternative minimum tax consequences
or consequences resulting from the Medicare tax on investment income. Moreover, the discussion below does not address the consequences
to taxpayers subject to special tax accounting rules under Section 451(b) of the Code.
This discussion is based on the Code, administrative pronouncements,
judicial decisions and final, temporary and proposed Treasury regulations, all as of the date hereof, changes to any of which subsequent
to the date hereof may affect the tax consequences described herein. Persons considering the purchase of the securities
should consult their tax advisers with regard to the application of the U.S. federal income tax laws to their particular situations
as well as any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
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Morgan Stanley Finance LLC
|
Callable Contingent Income Securities due June 28, 2022
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
|
General
Due to the absence of statutory, judicial or administrative authorities
that directly address the treatment of the securities or instruments that are similar to the securities for U.S. federal income
tax purposes, no assurance can be given that the IRS or a court will agree with the tax treatment described herein. We
intend to treat a security for U.S. federal income tax purposes as a single financial contract that provides for a coupon that
will be treated as gross income to you at the time received or accrued in accordance with your regular method of tax accounting. In
the opinion of our counsel, Davis Polk & Wardwell LLP, this treatment of the securities is reasonable under current law; however,
our counsel has advised us that it is unable to conclude affirmatively that this treatment is more likely than not to be upheld,
and that alternative treatments are possible.
You should consult your tax adviser regarding all aspects
of the U.S. federal tax consequences of an investment in the securities (including possible alternative treatments of the securities). Unless
otherwise stated, the following discussion is based on the treatment of each security as described in the previous paragraph.
Tax Consequences to U.S. Holders
This section applies to you only if you are a U.S. Holder. As
used herein, the term “U.S. Holder” means a beneficial owner of a security that is, for U.S. federal income tax purposes:
·
a
citizen or individual resident of the United States;
·
a
corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state
thereof or the District of Columbia; or
·
an
estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.
Tax Treatment of the Securities
Assuming the treatment of the securities as set forth above is
respected, the following U.S. federal income tax consequences should result.
Tax Basis
. A U.S. Holder’s
tax basis in the securities should equal the amount paid by the U.S. Holder to acquire the securities.
Tax Treatment of Coupon Payments
. Any
coupon payment on the securities should be taxable as ordinary income to a U.S. Holder at the time received or accrued, in accordance
with the U.S. Holder’s regular method of accounting for U.S. federal income tax purposes.
Sale, Exchange or Settlement of the
Securities
. Upon a sale, exchange or settlement of the securities, a U.S. Holder should recognize gain or loss equal
to the difference between the amount realized on the sale, exchange or settlement and the U.S. Holder’s tax basis in the
securities sold, exchanged or settled. For this purpose, the amount realized does not include any coupon paid at settlement
and may not include sale proceeds attributable to an accrued coupon, which may be treated as a coupon payment. Any such
gain or loss recognized should be long-term capital gain or loss if the U.S. Holder has held the securities for more than one year
at the time of the sale, exchange or settlement, and should be short-term capital gain or loss otherwise. 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.
Possible Alternative Tax Treatments of an Investment in
the Securities
Due to the absence of authorities that directly address the proper
tax treatment of the securities, no assurance can be given that the IRS will accept, or that a court will uphold, the treatment
described above. In particular, the IRS could seek to analyze the U.S. federal income tax consequences of owning the securities
under Treasury regulations governing contingent payment debt instruments (the “Contingent Debt Regulations”). If the
IRS were successful in asserting that the Contingent Debt Regulations applied to the securities, the timing and character of income
thereon would be significantly affected. Among other things, a U.S. Holder would be required to accrue into income original issue
discount on the securities every year at a “comparable yield” determined at the time of their issuance, adjusted upward
or downward to reflect the difference, if any, between the actual and the projected amount of any contingent payments on the securities.
|
Morgan Stanley Finance LLC
|
Callable Contingent Income Securities due June 28, 2022
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
|
Furthermore, any gain realized by a U.S. Holder at maturity or
upon a sale, exchange or other disposition of the securities would be treated as ordinary income, and any loss realized would be
treated as ordinary loss to the extent of the U.S. Holder’s prior accruals of original issue discount and as capital loss
thereafter. The risk that financial instruments providing for buffers, triggers or similar downside protection features,
such as the securities, would be recharacterized as debt is greater than the risk of recharacterization for comparable financial
instruments that do not have such features.
Other alternative federal income tax treatments of the securities
are possible, which, if applied, could significantly affect the timing and character of the income or loss with respect to the
securities. 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. The notice focuses on whether
to require holders of “prepaid forward contracts” and similar instruments to accrue income over the term of their investment. It
also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments;
whether short-term instruments should be subject to any such accrual regime; the relevance of factors such as the exchange–traded
status of the instruments and the nature of the underlying property to which the instruments are linked; whether these instruments
are or should be subject to the “constructive ownership” rule, which very generally can operate to recharacterize certain
long-term capital gain as ordinary income and impose an interest charge; and appropriate transition rules and effective dates. While
it is not clear whether instruments such as the securities would be viewed as similar to the prepaid forward contracts described
in the notice, 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. 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 and the issues presented by this notice.
Backup Withholding and Information Reporting
Backup withholding may apply in respect of payments on the securities
and the payment of proceeds from a sale, exchange or other disposition of the securities, unless a U.S. Holder provides proof of
an applicable exemption or a correct taxpayer identification number and otherwise complies with applicable requirements of the
backup withholding rules. The amounts withheld under the backup withholding rules are not an additional tax and may
be refunded, or credited against the U.S. Holder’s U.S. federal income tax liability, provided that the required information
is timely furnished to the IRS. In addition, information returns will be filed with the IRS in connection with payments
on the securities and the payment of proceeds from a sale, exchange or other disposition of the securities, unless the U.S. Holder
provides proof of an applicable exemption from the information reporting rules.
Tax Consequences to Non-U.S. Holders
This section applies to you only if you are a Non-U.S. Holder. As
used herein, the term “Non-U.S. Holder” means a beneficial owner of a security that is for U.S. federal income tax
purposes:
·
an
individual who is classified as a nonresident alien;
·
a
foreign corporation; or
·
a
foreign estate or trust.
The term “Non-U.S. Holder” does not include any of
the following holders:
·
a
holder who is an individual present in the United States for 183 days or more in the taxable year of disposition and who is not
otherwise a resident of the United States for U.S. federal income tax purposes;
·
certain
former citizens or residents of the United States; or
·
a
holder for whom income or gain in respect of the securities is effectively connected with the conduct of a trade or business in
the United States.
Such holders should consult their tax advisers regarding the
U.S. federal income tax consequences of an investment in the securities.
Although significant aspects of the tax treatment of each security
are uncertain, we intend to withhold on any coupon paid to a Non-U.S. Holder generally at a rate of 30% or at a reduced rate specified
by an applicable income tax treaty under an “other income” or similar provision. We will not be required
to pay any additional amounts with respect to amounts withheld. In order to claim an exemption from, or a reduction
in, the 30%
|
Morgan Stanley Finance LLC
|
Callable Contingent Income Securities due June 28, 2022
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
|
withholding tax, a Non-U.S. Holder of the securities must comply
with certification requirements to establish that it is not a U.S. person and is eligible for such an exemption or reduction under
an applicable tax treaty. If you are a Non-U.S. Holder, you should consult your tax adviser regarding the tax treatment
of the securities, including the possibility of obtaining a refund of any withholding tax and the certification requirement described
above.
Section 871(m) Withholding Tax on Dividend Equivalents
Section 871(m) of the Code and Treasury regulations promulgated
thereunder (“Section 871(m)”) generally impose a 30% (or a lower applicable treaty rate) withholding tax on dividend
equivalents paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments linked to U.S. equities or indices
that include U.S. equities (each, an “Underlying Security”). Subject to certain exceptions, Section 871(m)
generally applies to securities that substantially replicate the economic performance of one or more Underlying Securities, as
determined based on tests set forth in the applicable Treasury regulations (a “Specified Security”). However,
pursuant to an IRS notice, Section 871(m) will not apply to securities issued before January 1, 2021 that do not have a delta of
one with respect to any Underlying Security. Based on our determination that the securities do not have a delta of one
with respect to any Underlying Security, our counsel is of the opinion that the securities should not be Specified Securities and,
therefore, should not be subject to Section 871(m).
Our determination is not binding on the IRS, and the IRS may
disagree with this determination. Section 871(m) is complex and its application may depend on your particular circumstances,
including whether you enter into other transactions with respect to an Underlying Security. If Section 871(m) withholding
is required, we will not be required to pay any additional amounts with respect to the amounts so withheld. You should
consult your tax adviser regarding the potential application of Section 871(m) to the securities.
U.S. Federal Estate Tax
Individual Non-U.S. Holders and entities the property of which
is potentially includible in such an individual’s gross estate for U.S. federal estate tax purposes (for example, a trust
funded by such an individual and with respect to which the individual has retained certain interests or powers) should note that,
absent an applicable treaty exemption, the securities may be treated as U.S.-situs property subject to U.S. federal estate tax. Prospective
investors that are non-U.S. individuals, or are entities of the type described above, should consult their tax advisers regarding
the U.S. federal estate tax consequences of an investment in the securities.
Backup Withholding and Information Reporting
Information returns will be filed with the IRS in connection
with any coupon payment and may be filed with the IRS in connection with the payment at maturity on the securities and the payment
of proceeds from a sale, exchange or other disposition. A Non-U.S. Holder may be subject to backup withholding in respect
of amounts paid to the Non-U.S. Holder, unless such Non-U.S. Holder complies with certification procedures to establish that it
is not a U.S. person for U.S. federal income tax purposes or otherwise establishes an exemption. The amount of any backup
withholding from a payment to a Non-U.S. Holder will be allowed as a credit against the Non-U.S. Holder’s U.S. federal income
tax liability and may entitle the Non-U.S. Holder to a refund, provided that the required information is timely furnished to the
IRS.
FATCA
Legislation commonly referred to as “FATCA” generally
imposes a withholding tax of 30% on payments to certain non-U.S. entities (including financial intermediaries) with respect to
certain financial instruments, unless various U.S. information reporting and due diligence requirements have been satisfied. An
intergovernmental agreement between the United States and the non-U.S. entity’s jurisdiction may modify these requirements. FATCA
generally applies to certain financial instruments that are treated as paying U.S.-source interest or other U.S.-source “fixed
or determinable annual or periodical” income (“FDAP income”). Withholding (if applicable) applies
to payments of U.S.-source FDAP income and to payments of gross proceeds of the disposition (including upon retirement) of certain
financial instruments treated as providing for U.S.-source interest or dividends. Under recently proposed regulations
(the preamble to which specifies that taxpayers are permitted to rely on them pending finalization), no withholding will apply
on payments of gross proceeds. While the treatment of the securities is unclear, you should assume that any coupon payment
with respect to the securities will be subject to the FATCA rules. If withholding applies to the securities, we will
not be required to pay any additional amounts with respect to amounts withheld. Both U.S. and Non-U.S. Holders should
consult their tax advisers regarding the potential application of FATCA to the securities.
The discussion in the preceding paragraphs, insofar as it
purports to describe provisions of U.S.
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Morgan Stanley Finance LLC
|
Callable Contingent Income Securities due June 28, 2022
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
|
federal income tax laws or legal conclusions with respect thereto, constitutes the full opinion of Davis Polk & Wardwell LLP regarding the material U.S. federal tax consequences of an investment in the securities.
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Use of proceeds and hedging:
|
The proceeds from the sale of the securities will be by us used
for general corporate purposes. We will receive, in aggregate, $1,000 per security issued, because, when we enter into
hedging transactions in order to meet our obligations under the securities, our hedging counterparty will reimburse the cost of
the agent’s commissions. The costs of the securities borne by you and described beginning on page 3 above comprise
the agent’s commissions and the cost of issuing, structuring and hedging the securities. See also “Use of
Proceeds” in the accompanying prospectus.
On or prior to the pricing date, we hedged our anticipated exposure
in connection with the securities by entering into hedging transactions with our affiliates and/or third-party dealers. We
expect our hedging counterparties to have taken positions in the EEM Shares, in stocks constituting the NDX Index or the share
underlying index and in futures and/or options contracts on the EEM Shares, the NDX Index, the share underlying index or their
component stocks listed on major securities markets. Such purchase activity could have increased the initial level of
an underlying, and, as a result, could have increased (i) the coupon barrier level for such underlying, which, if the securities
have not been redeemed, is the level at or above which such underlying must close on each observation date in order for you to
earn a contingent semi-annual coupon (depending also on the performance of the other underlying), and (ii) the downside threshold
level for such underlying, which, if the securities are not redeemed prior to maturity, is the level at or above which such underlying
must close on 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 underlying). 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. Additionally, our hedging activities, as well as our other trading activities,
during the term of the securities could potentially affect the value of such underlying on the observation dates, and, accordingly,
whether we pay a contingent semi-annual coupon on the securities and the amount of cash you receive at maturity, if any (depending
also on the performance of the other underlying).
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Benefit plan investor considerations:
|
Each fiduciary of a pension, profit-sharing or other employee
benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (a “Plan”),
should consider the fiduciary standards of ERISA in the context of the Plan’s particular circumstances before authorizing
an investment in the securities. Accordingly, among other factors, the fiduciary should consider whether the investment
would satisfy the prudence and diversification requirements of ERISA and would be consistent with the documents and instruments
governing the Plan.
In addition, we and certain of our affiliates, including
MS & Co., may each be considered a “party in interest” within the meaning of ERISA, or a “disqualified person”
within the meaning of the Internal Revenue Code of 1986, as amended (the “Code”), with respect to many Plans, as well
as many individual retirement accounts and Keogh plans (such accounts and plans, together with other plans, accounts and arrangements
subject to Section 4975 of the Code, also “Plans”). ERISA Section 406 and Code Section 4975 generally prohibit
transactions between Plans and parties in interest or disqualified persons. Prohibited transactions within the meaning
of ERISA or the Code would likely arise, for example, if the securities are acquired by or with the assets of a Plan with respect
to which MS & Co. or any of its affiliates is a service provider or other party in interest, unless the securities are acquired
pursuant to an exemption from the “prohibited transaction” rules. A violation of these “prohibited
transaction” rules could result in an excise tax or other liabilities under ERISA and/or Section 4975 of the Code for such
persons, unless exemptive relief is available under an applicable statutory or administrative exemption.
The U.S. Department of Labor has issued five prohibited
transaction class exemptions (“PTCEs”) that may provide exemptive relief for direct or indirect prohibited transactions
resulting from the purchase or holding of the securities. Those class exemptions are PTCE 96-23 (for certain transactions
determined by in-house asset managers), PTCE 95-60 (for certain transactions involving insurance company general accounts), PTCE
91-38 (for certain transactions involving bank collective investment funds), PTCE 90-1 (for certain transactions involving insurance
company separate accounts) and PTCE 84-14 (for certain transactions determined by independent qualified professional asset managers). In
addition, ERISA Section 408(b)(17) and Code Section 4975(d)(20) provide an exemption for the purchase and sale of securities and
the related lending transactions, provided that neither the issuer of the securities nor any of its affiliates has or exercises
any discretionary authority or control or renders any investment advice with respect to the assets of the Plan involved in the
transaction and provided further that the Plan pays no more, and receives no less, than “adequate consideration” in
connection with the transaction (the so-called “service provider” exemption). There can be no assurance
that any of these class or statutory exemptions will be available with respect to transactions involving the securities.
Because we may be considered a party in interest with
respect to many Plans, the securities may not be purchased, held or disposed of by any Plan, any entity whose underlying assets
include “plan assets” by
|
Morgan Stanley Finance LLC
|
Callable Contingent Income Securities due June 28, 2022
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
|
reason of any Plan’s investment in the entity
(a “Plan Asset Entity”) or any person investing “plan assets” of any Plan, unless such purchase, holding
or disposition is eligible for exemptive relief, including relief available under PTCEs 96-23, 95-60, 91-38, 90-1, 84-14 or the
service provider exemption or such purchase, holding or disposition is otherwise not prohibited. Any purchaser, including
any fiduciary purchasing on behalf of a Plan, transferee or holder of the securities will be deemed to have represented, in its
corporate and its fiduciary capacity, by its purchase and holding of the securities that either (a) it is not a Plan or a Plan
Asset Entity and is not purchasing such securities on behalf of or with “plan assets” of any Plan or with any assets
of a governmental, non-U.S. or church plan that is subject to any federal, state, local or non-U.S. law that is substantially similar
to the provisions of Section 406 of ERISA or Section 4975 of the Code (“Similar Law”) or (b) its purchase, holding
and disposition of these securities will not constitute or result in a non-exempt prohibited transaction under Section 406 of ERISA
or Section 4975 of the Code or violate any Similar Law.
Due to the complexity of these rules and the penalties
that may be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries
or other persons considering purchasing the securities on behalf of or with “plan assets” of any Plan consult with
their counsel regarding the availability of exemptive relief.
The securities are contractual financial instruments. The
financial exposure provided by the securities is not a substitute or proxy for, and is not intended as a substitute or proxy for,
individualized investment management or advice for the benefit of any purchaser or holder of the securities. The securities
have not been designed and will not be administered in a manner intended to reflect the individualized needs and objectives of
any purchaser or holder of the securities.
Each purchaser or holder of any securities acknowledges and agrees
that:
(i)
the purchaser or holder or its fiduciary has made and
shall make all investment decisions for the purchaser or holder and the purchaser or holder has not relied and shall not rely in
any way upon us or our affiliates to act as a fiduciary or adviser of the purchaser or holder with respect to (A) the design and
terms of the securities, (B) the purchaser or holder’s investment in the securities, or (C) the exercise of or failure to
exercise any rights we have under or with respect to the securities;
(ii)
we and our affiliates have acted
and will act solely for our own account in connection with (A) all transactions relating to the securities and (B) all hedging
transactions in connection with our obligations under the securities;
(iii)
any and all assets and positions
relating to hedging transactions by us or our affiliates are assets and positions of those entities and are not assets and positions
held for the benefit of the purchaser or holder;
(iv)
our interests are adverse to
the interests of the purchaser or holder; and
(v)
neither we nor any of our affiliates
is a fiduciary or adviser of the purchaser or holder in connection with any such assets, positions or transactions, and any information
that we or any of our affiliates may provide is not intended to be impartial investment advice.
Each purchaser and holder of the securities has exclusive
responsibility for ensuring that its purchase, holding and disposition of the securities do not violate the prohibited transaction
rules of ERISA or the Code or any Similar Law. The sale of any securities to any Plan or plan subject to Similar Law
is in no respect a representation by us or any of our affiliates or representatives that such an investment meets all relevant
legal requirements with respect to investments by plans generally or any particular plan, or that such an investment is appropriate
for plans generally or any particular plan. In this regard, neither this discussion nor anything provided in this document is or
is intended to be investment advice directed at any potential Plan purchaser or at Plan purchasers generally and such purchasers
of these securities should consult and rely on their own counsel and advisers as to whether an investment in these securities is
suitable.
However, individual retirement accounts, individual retirement
annuities and Keogh plans, as well as employee benefit plans that permit participants to direct the investment of their accounts,
will not be permitted to purchase or hold the securities if the account, plan or annuity is for the benefit of an employee of Morgan
Stanley or Morgan Stanley Wealth Management or a family member and the employee receives any compensation (such as, for example,
an addition to bonus) based on the purchase of the securities by the account, plan or annuity.
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Additional considerations:
|
Client accounts over which Morgan Stanley, Morgan Stanley Wealth Management or any of their respective subsidiaries have investment discretion are not permitted to purchase the securities, either directly or indirectly.
|
Morgan Stanley Finance LLC
|
Callable Contingent Income Securities due June 28, 2022
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
Supplemental information regarding plan of distribution; conflicts of interest:
|
Selected dealers and their financial advisors will receive a
structuring fee of $2.50 for each security. MS & Co. will not receive a sales commission with respect to the securities.
MS & Co. is an affiliate of MSFL and a wholly owned subsidiary
of Morgan Stanley, and it and other affiliates of ours expect to make a profit by selling, structuring and, when applicable, hedging
the securities.
MS & Co. will conduct this offering in compliance with the
requirements of FINRA Rule 5121 of the Financial Industry Regulatory Authority, Inc., which is commonly referred to as FINRA, regarding
a FINRA member firm’s distribution of the securities of an affiliate and related conflicts of interest. MS &
Co. or any of our other affiliates may not make sales in this offering to any discretionary account.
In order to facilitate the offering of the securities, the agent
may engage in transactions that stabilize, maintain or otherwise affect the price of the securities. Specifically, the
agent may sell more securities than it is obligated to purchase in connection with the offering, creating a naked short position
in the securities, for its own account. The agent must close out any naked short position by purchasing the securities
in the open market. A naked short position is more likely to be created if the agent is concerned that there may be
downward pressure on the price of the securities in the open market after pricing that could adversely affect investors who purchase
in the offering. As an additional means of facilitating the offering, the agent may bid for, and purchase, the securities
or the securities underlying the underlyings in the open market to stabilize the price of the securities. Any of these
activities may raise or maintain the market price of the securities above independent market levels or prevent or retard a decline
in the market price of the securities. The agent is not required to engage in these activities, and may end any of these
activities at any time. An affiliate of the agent has entered into a hedging transaction with us in connection with
this offering of securities. See “Plan of Distribution (Conflicts of Interest)” in the accompanying prospectus
supplement and “Use of Proceeds and Hedging” above.
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Validity of the securities:
|
In the opinion of Davis Polk & Wardwell LLP, as special counsel to MSFL and Morgan Stanley, when the securities offered by this pricing supplement have been executed and issued by MSFL, authenticated by the trustee pursuant to the MSFL Senior Debt Indenture (as defined in the accompanying prospectus) and delivered against payment as contemplated herein, such securities will be valid and binding obligations of MSFL and the related guarantee will be a valid and binding obligation of Morgan Stanley, enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, concepts of reasonableness and equitable principles of general applicability (including, without limitation, concepts of good faith, fair dealing and the lack of bad faith),
provided
that such counsel expresses no opinion as to (i) the effect of fraudulent conveyance, fraudulent transfer or similar provision of applicable law on the conclusions expressed above and (ii) any provision of the MSFL Senior Debt Indenture that purports to avoid the effect of fraudulent conveyance, fraudulent transfer or similar provision of applicable law by limiting the amount of Morgan Stanley’s obligation under the related guarantee. This opinion is given as of the date hereof and is limited to the laws of the State of New York, the General Corporation Law of the State of Delaware and the Delaware Limited Liability Company Act. In addition, this opinion is subject to customary assumptions about the trustee’s authorization, execution and delivery of the MSFL Senior Debt Indenture and its authentication of the securities and the validity, binding nature and enforceability of the MSFL Senior Debt Indenture with respect to the trustee, all as stated in the letter of such counsel dated November 16, 2017, which is Exhibit 5-a to the Registration Statement on Form S-3 filed by Morgan Stanley on November 16, 2017.
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Selling restrictions:
|
General
No action has been or will be taken by us, the agent or any dealer
that would permit a public offering of the securities or possession or distribution of this pricing supplement or the accompanying
prospectus supplement, index supplement or prospectus in any jurisdiction, other than the United States, where action for that
purpose is required. No offers, sales or deliveries of the securities, or distribution of this pricing supplement or
the accompanying prospectus supplement, index supplement or prospectus or any other offering material relating to the securities,
may be made in or from any jurisdiction except in circumstances which will result in compliance with any applicable laws and regulations
and will not impose any obligations on us, the agent or any dealer.
The agent has represented and agreed, and each dealer through
which we may offer the securities has represented and agreed, that it (i) will comply with all applicable laws and regulations
in force in each non-U.S. jurisdiction in which it purchases, offers, sells or delivers the securities or possesses or distributes
this pricing supplement and the accompanying prospectus supplement, index supplement and prospectus and (ii) will obtain any consent,
approval or permission required by it for the purchase, offer or sale by it of the securities under the laws and regulations in
force in each non-U.S. jurisdiction to which it is subject or in which it makes purchases, offers or sales of the securities. We
shall not have responsibility for the agent’s or any dealer’s compliance with the applicable laws and regulations or
obtaining any required consent, approval or permission.
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Morgan Stanley Finance LLC
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Callable Contingent Income Securities due June 28, 2022
Payments on the Securities Based on the Worst Performing of the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
|
In addition to the selling restrictions set forth in “Plan
of Distribution (Conflicts of Interest)” in the accompanying prospectus supplement, the following selling restrictions also
apply to the securities:
Brazil
The securities have not been and will not be registered with
the Comissão de Valores Mobiliários (The Brazilian Securities Commission). The securities may not be offered
or sold in the Federative Republic of Brazil except in circumstances which do not constitute a public offering or distribution
under Brazilian laws and regulations.
Chile
The securities have not been registered with the Superintendencia
de Valores y Seguros in Chile and may not be offered or sold publicly in Chile. No offer, sales or deliveries of the
securities or distribution of this pricing supplement or the accompanying prospectus supplement, index supplement or prospectus,
may be made in or from Chile except in circumstances which will result in compliance with any applicable Chilean laws and regulations.
Mexico
The securities have not been registered with the National Registry
of Securities maintained by the Mexican National Banking and Securities Commission and may not be offered or sold publicly in Mexico. This
pricing supplement, the accompanying prospectus supplement, the accompanying index supplement and the accompanying prospectus may
not be publicly distributed in Mexico.
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Where you can find more information:
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MSFL and Morgan Stanley have filed a registration statement (including
a prospectus, as supplemented by the prospectus supplement and the index supplement) with the Securities and Exchange Commission,
or SEC, for the offering to which this communication relates. You should read the prospectus in that registration statement,
the prospectus supplement, the index supplement and any other documents relating to this offering that MSFL and Morgan Stanley
have filed with the SEC for more complete information about MSFL, Morgan Stanley and this offering. You may get these
documents without cost by visiting EDGAR on the SEC web site at
.
www.sec.gov. Alternatively,
MSFL, Morgan Stanley, any underwriter or any dealer participating in the offering will arrange to send you the prospectus, the
prospectus supplement and the index supplement if you so request by calling toll-free 800-584-6837.
You may access these documents on the SEC web site at
.
www.sec.gov
as follows:
Prospectus Supplement dated November 16, 2017
Index Supplement dated November 16, 2017
Prospectus dated November 16, 2017
Terms used but not defined in this pricing supplement are defined
in the prospectus supplement, in the index supplement or in the prospectus.
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