CALCULATION OF REGISTRATION FEE
|
|
Maximum Aggregate
|
|
Amount of Registration
|
Title of Each Class of Securities Offered
|
|
Offering Price
|
|
Fee
|
|
|
|
|
|
Contingent Income Auto-Callable Securities due 2020
|
|
$250,000
|
|
$30.30
|
|
|
|
|
|
June 2019
Pricing Supplement No. 2,108
Registration Statement Nos. 333-221595; 333-221595-01
Dated June 25, 2019
Filed pursuant to Rule 424(b)(2)
M
organ
S
tanley
F
inance
LLC
STRUCTURED INVESTMENTS
Opportunities in U.S. Equities
Contingent Income Auto-Callable Securities due
December 31, 2020, With 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst
Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Fully
and Unconditionally Guaranteed by Morgan Stanley
Principal at Risk Securities
The securities are unsecured obligations of Morgan Stanley Finance
LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley. The securities have the terms described
in the accompanying product supplement, index supplement and prospectus, as supplemented or modified by this document. The
securities do not guarantee the repayment of principal and do not provide for the regular payment of interest. Instead,
the securities will pay a contingent monthly coupon
but only if
the index closing value of
each of
the Russell 2000
®
Index
and
the S&P 500
®
Index is
at or above
its coupon barrier level of 70% of its respective
initial index value on the related observation date. If, however, the index closing value of
either
underlying
index is less than its coupon barrier level on any observation date, we will pay no interest for the related monthly period. In
addition, the securities will be automatically redeemed if the index closing value
of each
underlying index is greater than
or equal to its respective initial index value on any of the four quarterly redemption determination dates (beginning approximately
six months after the original issue date) for the early redemption payment equal to the sum of the stated principal amount plus
the related contingent monthly coupon. At maturity, if the securities have not previously been redeemed and the index
closing value of each underlying index has remained greater than or equal to 70% of the respective initial index value, which we
refer to as the downside threshold level, on
each index business day
during the term of the securities, the payment at maturity
will be the stated principal amount and the related contingent monthly coupon. If, however, the index closing value
of
either
underlying index is less than its respective downside threshold level on
any index business day
during
the term of the securities, a trigger event will have occurred and investors will be fully exposed to the decline in the worst
performing underlying index on a 1-to-1 basis and, if the final index value of
either
underlying index is less than its
initial index value, investors will receive a payment at maturity that is less than the stated principal amount of the securities
and could be zero.
Accordingly,
i
nvestors in the securities must be willing to accept the risk of losing their
entire initial investment and also the risk of not receiving any contingent monthly coupons throughout the 1.5-year term of the
securities.
Because all payments on the securities are based on the worst performing of the underlying indices,
a decline beyond the respective coupon barrier level or respective downside threshold level, as applicable, of either underlying
index will result in few or no contingent coupon payments and a potentially significant loss of your investment, even if the other
underlying index has appreciated or has not declined as much. 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 monthly coupons over the entire 1.5-year term. Investors will not participate in any appreciation of either underlying
index. 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
|
Underlying indices:
|
Russell 2000
®
Index (the “RTY Index”) and S&P 500
®
Index (the “SPX Index”)
|
Aggregate principal amount:
|
$250,000
|
Stated principal amount:
|
$1,000 per security
|
Issue price:
|
$1,000 per security
|
Pricing date:
|
June 25, 2019
|
Original issue date:
|
June 28, 2019 (3 business days after the pricing date)
|
Maturity date:
|
December 31, 2020
|
Early redemption:
|
The securities are not subject to automatic early redemption
until six months after the original issue date.
Following this initial 6-month non-call period, if, on any of the four redemption
determination dates, beginning on December 26, 2019, the index closing value of each underlying index is
greater than or equal
to
its respective initial index value, the securities will be automatically redeemed for an early redemption payment on the
related early redemption date. No further payments will be made on the securities once they have been redeemed.
The securities will not be redeemed early on any early redemption
date if the index closing value of either underlying index is below the respective initial index value for such underlying index
on the related redemption determination date.
|
Early redemption payment:
|
The early redemption payment will be an amount equal to (i) the stated principal amount for each security you hold plus (ii) the contingent monthly coupon with respect to the related observation date.
|
Contingent monthly coupon:
|
A
contingent
coupon at an annual rate of 6.00%
(corresponding
to approximately $5.00 per month per security)
will be paid on the securities on each coupon payment date
but only if
the closing value of
each underlying index
is at or above its respective coupon barrier level on the related observation
date.
If, on any observation date, the closing value of either underlying
index is less than the respective coupon barrier level for such underlying index, we will pay no coupon for the applicable monthly
period. It is possible that one or both underlying indices will remain below their respective coupon barrier levels for extended
periods of time or even throughout the entire 1.5-year term of the securities so that you will receive few or no contingent monthly
coupons.
|
Trigger event:
|
A trigger event occurs if, on any index business day from but excluding the pricing date to and including the final observation date, the closing level of
either
underlying index is less than its respective downside threshold level. If a trigger event occurs on
any index business day
during the term of the securities, you will be exposed to the downside performance of the worst performing underlying index at maturity.
|
Payment at maturity:
|
At maturity, investors will receive, in addition to the final
contingent monthly coupon payment, if payable, a payment at maturity determined as follows:
If a trigger event HAS NOT occurred on any index business
day from but excluding the pricing date to and including the final observation date
: the stated principal amount
If a trigger event HAS occurred on any index business day
from but excluding the pricing date to and including the final observation date:
(i) the stated principal amount
multiplied
by
(ii) the index performance factor of the worst performing underlying index, subject to a maximum payment at maturity of
the stated principal amount.
If a trigger event occurs and the final index value of
either
underlying index is less than its initial index value, the payment at maturity will be less than the stated principal amount of
the securities and could be zero.
Under no circumstances will investors participate in any appreciation
of either underlying index.
|
|
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:
|
$967.10 per security. See “Investment Summary” beginning on page 3.
|
Commissions and issue price:
|
Price to public
(1)
|
Agent’s commissions and fees
(1)
|
Proceeds to us
(2)
|
Per security
|
$1,000
|
$25
|
$975
|
Total
|
$250,000
|
$6,250
|
$243,750
|
|
(1)
|
Selected dealers and their financial advisors will
collectively receive from the agent, MS & Co., a fixed sales commission of $25 for each security they sell. See “Supplemental
information regarding plan of distribution; conflicts of interest.” For additional information, see “Plan of Distribution
(Conflicts of Interest)” in the accompanying product supplement.
|
|
(2)
|
See “Use of proceeds and hedging” on page
29.
|
The
securities involve risks not associated with an investment in ordinary debt securities. See “Risk Factors”
beginning on page 13.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these securities, or determined if this document or the accompanying product supplement,
index supplement and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The securities are not deposits or savings accounts and are
not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they obligations
of, or guaranteed by, a bank.
You should read this document together with the related product
supplement, index supplement and prospectus, each of which can be accessed via the hyperlinks below. Please also see
“Additional Terms of the Securities” and “Additional Information About the Securities” at the end of this
document.
As
used in this document, “we,” “us” and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley
and MSFL collectively, as the context requires.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due December 31, 2020, With 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
Terms continued from previous page:
|
Redemption determination dates:
|
Beginning after six months, quarterly, on December 26, 2019, March 25, 2020, June 25, 2020 and September 25, 2020, subject to postponement for non-index business days and certain market disruption events.
|
Early redemption dates:
|
Beginning after six months, quarterly, on December 31, 2019, March 30, 2020, June 30, 2020 and September 30, 2020. If any such day is not a business day, that early redemption payment will be made on the next succeeding business day and no adjustment will be made to any early redemption payment made on that succeeding business day.
|
Coupon barrier level:
|
With respect to the RTY Index: 1,064.725, which is approximately
70% of its initial index value
With respect to the SPX Index: 2,042.166, which is 70%
of its initial index value
|
Downside threshold level:
|
With respect to the RTY Index: 1,064.725, which is approximately
70% of its initial index value
With respect to the SPX Index: 2,042.166, which is 70%
of its initial index value
|
Initial index value:
|
With respect to the RTY Index: 1,521.035, which is its index
closing value on the pricing date
With respect to the SPX Index: 2,917.38, which is its
index closing value on the pricing date
|
Final index value:
|
With respect to each index, the respective index closing value on the final observation date
|
Worst performing underlying:
|
The underlying index with the larger percentage decrease from the respective initial index value to the respective final index value
|
Index performance factor:
|
Final index value
divided by
the initial index value
|
Coupon payment dates:
|
Monthly, as set forth under “Observation Dates and Coupon Payment Dates” below;
provided
that if any such day is not a business day, that contingent monthly 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 monthly coupon, if any, with respect to the final observation date will be paid on the maturity date
|
Observation dates:
|
Monthly, as set forth under “Observation Dates, Coupon Payment Dates” below, subject to postponement for non-index business days and certain market disruption events. We also refer to December 28, 2020 as the final observation date.
|
CUSIP / ISIN:
|
61769HGA7 / US61769HGA77
|
Listing:
|
The securities will not be listed on any securities exchange.
|
|
|
Observation Dates and Coupon
Payment Dates
Observation Dates
|
Coupon Payment Dates
|
July 25, 2019
|
July 30, 2019
|
August 26, 2019
|
August 29, 2019
|
September 25, 2019
|
September 30, 2019
|
October 25, 2019
|
October 30, 2019
|
November 25, 2019
|
November 29, 2019
|
December 26, 2019
|
December 31, 2019
|
January 27, 2020
|
January 30, 2020
|
February 25, 2020
|
February 28, 2020
|
March 25, 2020
|
March 30, 2020
|
April 27, 2020
|
April 30, 2020
|
May 26, 2020
|
May 29, 2020
|
June 25, 2020
|
June 30, 2020
|
July 27, 2020
|
July 30, 2020
|
August 25, 2020
|
August 28, 2020
|
September 25, 2020
|
September 30, 2020
|
October 26, 2020
|
October 29, 2020
|
November 25, 2020
|
December 1, 2020
|
December 28, 2020 (final observation date)
|
December 31, 2020 (maturity date)
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due December 31, 2020, With 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
Investment Summary
Contingent Income Auto-Callable Securities
Principal at Risk Securities
Contingent Income Auto-Callable Securities due December 31, 2020,
With 6-month Initial Non-Call Period All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index (the “securities”) do not provide for the regular payment of interest. Instead,
the securities will pay a contingent monthly coupon
but only if
the index closing value of
each
underlying index
is
at or above
70% of its initial index value, which we refer to as the respective coupon barrier level, on the related
observation date. If the index closing value of
either underlying index
is less than the respective coupon barrier
level on any observation date, we will pay no coupon for the related monthly period. It is possible that the index closing
value of either underlying index could remain below the respective coupon barrier level for extended periods of time or even throughout
the entire 1.5-year term of the securities so that you will receive few or no contingent monthly coupons during the term of the
securities.
We refer to these coupons as contingent, because there is no guarantee that you will receive a coupon
payment on any coupon payment date. Even if both underlying indices were to be at or above their respective coupon barrier
levels on some monthly observation dates, one or both underlying indices may fluctuate below the respective coupon barrier level(s)
on others. In addition, if the securities have not been automatically called prior to maturity and the index closing
value of
either
underlying index is less than 70% of the respective initial index value, which we refer to as the downside
threshold level, on
any index business day
during the term of the securities, a trigger event will have occurred and investors
will be fully exposed to the decline in the worst performing underlying index on a 1-to-1 basis and, if the final index value of
either
underlying index is less than its initial index value, investors will receive a payment at maturity that is less
than the stated principal amount of the securities and could be zero. Investors will not participate in any appreciation of either
underlying index.
Accordingly,
i
nvestors in the securities must be willing to accept the risk of losing their entire
initial investment and also the risk of not receiving any contingent monthly coupons throughout the entire 1.5-year term of the
securities.
Maturity:
|
Approximately 1.5 years
|
Contingent monthly coupon:
|
A
contingent monthly coupon
at an annual rate of 6.00% (corresponding to approximately $5.00 per month per security) will be paid on the securities on each coupon payment date
but only if
the closing value of
each
underlying index is at or above the respective coupon barrier level on the related observation date.
If on any observation date, the closing value of either underlying index is less than the respective coupon barrier level, we will pay no coupon for the applicable monthly period.
|
Automatic early redemption (beginning after six months):
|
If the index closing value of
each
underlying index is greater than or equal to its initial index value on any of the four quarterly redemption determination dates, beginning on December 26, 2019 (approximately six months after the original issue date), the securities will be automatically redeemed for an early redemption payment equal to the stated principal amount plus the contingent monthly coupon with respect to the related observation date.
|
Trigger event:
|
A trigger event occurs if, on any index business day from but excluding the pricing date to and including the final observation date, the closing level of
either
underlying index is less than its respective downside threshold level. If a trigger event occurs on
any index business day
during the term of the securities, investors will be exposed to the downside performance of the worst performing underlying index at maturity.
|
Payment at maturity:
|
At maturity, investors will receive, in addition to the final
contingent monthly coupon payment, if payable, a payment at maturity determined as follows:
If a trigger event HAS NOT occurred on any index business
day from but excluding the pricing date to and including the final observation date
, investors will receive at maturity the
stated principal amount.
If a trigger event HAS occurred on any index business day
from but excluding the pricing date to and including the final observation date
, investors will receive a payment at maturity
equal to: (i) the stated principal amount
multiplied by
(ii) the index
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due December 31, 2020, With 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
|
performance factor of the worst performing underlying index,
subject to a maximum payment at maturity of the stated principal amount.
If a trigger event occurs and the final index value of
either
underlying index is less than its initial index value, the payment at maturity will be less than 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. Investors will not participate in any appreciation of either underlying
index.
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due December 31, 2020, With 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
The original issue price of each security is $1,000. This
price includes costs associated with issuing, selling, structuring and hedging the securities, which are borne by you, and, consequently,
the estimated value of the securities on the pricing date is less than $1,000. We estimate that the value of each security
on the pricing date is $967.10.
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 underlying indices. The
estimated value of the securities is determined using our own pricing and valuation models, market inputs and assumptions relating
to the underlying indices, instruments based on the underlying indices, volatility and other factors including current and expected
interest rates, as well as an interest rate related to our secondary market credit spread, which is the implied interest rate at
which our conventional fixed rate debt trades in the secondary market.
What determines the economic terms of the securities?
In determining the economic terms of the securities, including
the contingent monthly 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 underlying indices, 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 underlying
indices, and to our secondary market credit spreads, it would do so based on values higher than the estimated value. We
expect that those higher values will also be reflected in your brokerage account statements.
MS & Co. may, but is not obligated to, make a market in the
securities and, if it once chooses to make a market, may cease doing so at any time.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due December 31, 2020, With 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
Key Investment Rationale
The securities do not provide for the regular payment of interest. Instead,
the securities will pay a contingent monthly coupon
but only if
the index closing value of each underlying index is
at
or above
its respective coupon barrier level on the related observation date. The securities have been designed
for investors who are willing to forgo market floating interest rates and accept the risk of receiving no coupon payments for the
entire 1.5-year term of the securities in exchange for an opportunity to earn interest at a potentially above market rate if each
underlying index closes at or above its respective coupon barrier level on each monthly observation date until the securities are
redeemed early or reach maturity. The following scenarios are for illustrative purposes only to demonstrate how the
coupon and the payment at maturity (if the securities have not previously been redeemed) are calculated, and do not attempt to
demonstrate every situation that may occur. Accordingly, the securities may or may not be redeemed, the contingent coupon
may be payable in none of, or some but not all of, the monthly periods during the 1.5-year term of the securities and the payment
at maturity may be less than the stated principal amount of the securities and may be zero.
Scenario 1: The securities are redeemed prior to maturity
|
This scenario assumes that, prior to early redemption, each underlying
index closes at or above its coupon barrier level on some monthly observation dates, but one or both underlying indices close below
the respective coupon barrier level(s) on the others. Investors receive the contingent monthly coupon for the monthly
periods for which each index closing value is at or above the coupon respective barrier level on the related observation date,
but not for the monthly periods for which either index closing value is below the respective coupon barrier level on the related
observation date.
Starting on December 26, 2019, when each underlying index closes
at or above its initial index value on a quarterly redemption determination date, the securities will be automatically redeemed
for the stated principal amount
plus
the contingent monthly coupon with respect to the related observation date.
|
Scenario 2: The securities are not redeemed prior to maturity and investors receive principal back at maturity
|
This scenario assumes that a trigger event has not occurred, as each underlying index has closed at or above the respective downside threshold level on each index business day during the term of the securities. In addition, each underlying index closes below the respective initial index value on every quarterly redemption determination date. Consequently, the securities are not automatically redeemed, and investors receive the contingent monthly coupon for each monthly period, as each index closing value was at or above the respective coupon barrier level on each observation date. Because a trigger event has not occurred on any index business day during the term of the securities, at maturity, investors will receive the stated principal amount and the contingent monthly coupon with respect to the final observation date.
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due December 31, 2020, With 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
Scenario 3: The securities are not redeemed prior to maturity, a trigger event occurs on any index business day during the term of the securities and investors suffer a loss of principal at maturity
|
This scenario assumes that each underlying index closes at or
above its respective coupon barrier level on some monthly observation dates, but one or both underlying indices close below the
respective coupon barrier level(s) on the others, and each underlying index closes below the respective initial index value on
every quarterly redemption determination date. Consequently, the securities are not automatically redeemed and a trigger
event will have occurred. Investors receive the contingent monthly coupon for the monthly periods for which each index closing
value is at or above the respective coupon barrier level on the related observation date, but not for the monthly periods for which
either index closing value is below the respective coupon barrier level on the related observation date. On the final
observation date, one or both underlying indices close below the respective initial index value(s). At maturity, investors
will receive an amount equal to the stated principal amount multiplied by the index performance factor of the worst performing
underlying index. Under these circumstances, the payment at maturity will be less than the stated principal amount and
could be zero.
If a trigger event occurs on
any
index business day during
the term of the securities, investors will have full downside exposure to the worst performing underlying index at maturity. Under
these circumstances, if the final index value of
either
underlying index is less than its respective initial index value,
investors will lose some or all of their investment in the securities.
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due December 31, 2020, With 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
How the Securities Work
The following diagrams illustrate the potential outcomes for
the securities depending on (1) the index closing values on each monthly observation date, (2) the index closing values on each
quarterly redemption determination date and (3) the final index values. Please see “Hypothetical Examples”
beginning on page 10 for illustration of hypothetical payouts on the securities.
Diagram #1: Contingent Monthly Coupons (Beginning
on the First Coupon Payment Date until Early Redemption or Maturity)
Diagram #2: Automatic Early Redemption (Beginning
Approximately Six Months After the Original Issue Date)
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due December 31, 2020, With 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
Diagram #3: Payment at Maturity
if No Automatic Early Redemption Occurs
For more information about the payout upon an early redemption
or at maturity in different hypothetical scenarios, see “Hypothetical Examples” starting on page 10.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due December 31, 2020, With 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
Hypothetical Examples
The following hypothetical examples illustrate how to determine
whether a contingent monthly coupon is paid with respect to an observation date and how to calculate the payment at maturity if
the securities have not been automatically redeemed early. The following examples are for illustrative purposes only. Whether
you receive a contingent monthly coupon will be determined by reference to the index closing value of each underlying index on
each monthly observation date, and the amount you will receive at maturity, if any, will be determined by reference to the index
closing value of each underlying index throughout the term of the securities. The actual initial index value, coupon
barrier level and downside threshold level for each underlying index are set forth on the cover of this document. All
payments on the securities, if any, are subject to our credit risk. The numbers in the hypothetical examples below may have been
rounded for the ease of analysis. The below examples are based on the following terms:
Contingent Monthly Coupon:
|
6.00% per annum (corresponding to approximately $5.00 per month
per security)*
With respect to each coupon payment date, a contingent monthly
coupon is paid but only if the index closing value of each underlying is at or above its respective coupon barrier level on the
related observation date.
|
Automatic Early Redemption:
|
If the index closing value of
each
underlying index is greater than or equal to its initial index value on any of the four quarterly redemption determination dates (beginning approximately six months after the original issue date), the securities will be automatically redeemed for an early redemption payment equal to the stated principal amount plus the contingent monthly coupon with respect to the related observation date.
|
Trigger Event:
|
A trigger event occurs if, on any index business day from but excluding the pricing date to and including the final observation date, the closing level of
either
underlying index is less than its respective downside threshold level. If a trigger event occurs on
any index business day
during the term of the securities, investors will be exposed to the downside performance of the worst performing underlying index at maturity.
|
Payment at Maturity (if the securities have not been automatically redeemed early):
|
At maturity, investors will receive, in addition to the final
contingent monthly coupon payment, if payable, a payment at maturity determined as follows:
If a trigger event HAS NOT occurred on any index business
day from but excluding the pricing date to and including the final observation date
: the stated principal amount
If a trigger event HAS occurred on any index business day
from but excluding the pricing date to and including the final observation date:
(i) the stated principal amount
multiplied
by
(ii) the index performance factor of the worst performing underlying index, subject to a maximum payment at maturity of
the stated principal amount.
If a trigger event occurs and the final index value of
either
underlying index is less than its initial index value, the payment at maturity will be less than the stated principal amount of
the securities and could be zero.
Under no circumstances will investors participate in any appreciation
of either underlying index.
|
Stated Principal Amount:
|
$1,000
|
Hypothetical Initial Index Value:
|
With respect to the RTY Index: 1,200
With respect to the SPX Index: 2,500
|
Hypothetical Coupon Barrier Level:
|
With respect to the RTY Index: 840, which is 70% of the hypothetical
initial index value for such index
With respect to the SPX Index: 1,750, which is 70% of the hypothetical
initial index value for such index
|
Hypothetical Downside Threshold Level:
|
With respect to the RTY Index: 840, which is 70% of the hypothetical
initial index value for such index
With respect to the SPX Index: 1,750, which is 70% of the hypothetical
initial index value for such index
|
* The actual contingent monthly 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 monthly coupon of $5.00 is used in these examples for ease of analysis.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due December 31, 2020, With 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
How to determine whether a contingent monthly
coupon is payable with respect to an observation date:
|
Closing Level
|
Contingent Monthly Coupon
|
|
RTY Index
|
SPX Index
|
|
Hypothetical Observation Date 1
|
950 (
at or above
coupon barrier level)
|
2,100 (
at or above
coupon barrier level)
|
$5.00
|
Hypothetical Observation Date 2
|
600 (
below
coupon barrier level)
|
2,600 (
at or above
coupon barrier level)
|
$0
|
Hypothetical Observation Date 3
|
1,200 (
at or above
coupon barrier level)
|
1,400 (
below
coupon barrier level)
|
$0
|
Hypothetical Observation Date 4
|
500 (
below
coupon barrier level)
|
1,200 (
below
coupon barrier level)
|
$0
|
On hypothetical observation date 1, both the RTY Index and SPX
Index close at or above their respective coupon barrier levels. Therefore a contingent monthly coupon of $5.00 is paid on the relevant
coupon payment date.
On each of the hypothetical observation dates 2 and 3, one underlying
index closes at or above its coupon barrier level, but the other underlying index closes below its coupon barrier level. Therefore,
no contingent monthly coupon is paid on the relevant coupon payment date.
On hypothetical observation date 4, each underlying index closes
below its respective coupon barrier level, and, accordingly, no contingent monthly coupon is paid on the relevant coupon payment
date.
You will not receive a contingent monthly coupon on any coupon
payment date if the closing level of either underlying index is below its respective coupon barrier level on the related observation
date.
How to calculate the payment at maturity (if
the securities have not been automatically redeemed early):
Example 1: A trigger event HAS NOT occurred.
Final Index Value
|
|
RTY Index: 1,800
|
|
|
SPX Index: 3,000
|
Payment at Maturity
|
=
|
$1,000.00 + $5.00 (contingent monthly coupon for the final monthly period)
|
|
=
|
$1,005.00
|
|
|
|
In example 1, the index closing values of both the RTY Index
and SPX Index are at or above their respective downside threshold levels on
each index business day
during the term of the
securities. Therefore, a trigger event has not occurred and investors receive at maturity the stated principal amount of the securities
and the contingent monthly coupon with respect to the final observation date. However, investors do not participate in any appreciation
of either underlying index.
Example 2: A trigger event HAS occurred.
Final Index Value
|
|
RTY Index: 960
|
|
|
SPX Index: 3,000
|
Payment at Maturity
|
=
|
$5.00 (contingent monthly coupon for the final monthly period) + [$1,000 x index performance factor of the worst performing underlying index, subject to a maximum of the stated principal amount]
|
|
|
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due December 31, 2020, With 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
|
=
|
$5.833 + [$1,000 x (960 / 1,200)]
|
|
=
|
$805.00
|
|
|
|
In example 2, the index closing value of one underlying index
is at or above its downside threshold level on each index business day during the term of the securities, but the index closing
value of the other underlying index is below its downside threshold level on one or more index business days during the term of
the securities. The final index values of both the RTY Index and the SPX Index are at or above the respective coupon barrier levels
on the final observation date. However, because a trigger event has occurred, investors are exposed to the downside performance
of the worst performing underlying index at maturity, even though one of the underlying indices has appreciated. Because the final
index value of each underlying index is greater than its respective coupon barrier level, investors receive the contingent monthly
coupon with respect to the final observation date. The payment at maturity is an amount equal to the contingent monthly coupon
with respect to the final observation date
plus
(i) the stated principal amount
times
(ii) the index performance
factor of the worst performing underlying index.
Example 3: A trigger event HAS occurred.
Final Index Value
|
|
RTY Index: 600
|
|
|
SPX Index: 1,000
|
Payment at Maturity
|
=
|
$1,000 x index performance factor of the worst performing underlying index
|
|
=
|
$1,000 x (1,000 / 2,500) = $400
|
|
=
|
$400
|
|
|
|
In example 3, the index closing values of both the RTY Index
and SPX Index are below the respective downside threshold levels on one or more index business days during the term of the securities.
Therefore, a trigger event has occurred, and investors are exposed to the downside performance of the worst performing underlying
index at maturity. Because the final index value of one or both underlying indices are below the respective coupon barrier levels,
investors do not receive the contingent monthly coupon with respect to the final observation date. The payment at maturity is an
amount equal to the stated principal amount
times
the index performance factor of the worst performing underlying index.
If a trigger event occurs on any index business day during
the term of the securities, investors will have full downside exposure to the worst performing underlying index at maturity. Under
these circumstances, if the final index value of either underlying index is less than its respective initial index value, investors
will lose some or all of their investment in the securities.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due December 31, 2020, With 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
Risk Factors
The following is a list of certain key risk factors for investors
in the securities. For further discussion of these and other risks, you should read the section entitled “Risk
Factors” in the accompanying product supplement, index supplement and prospectus. 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 any principal. If the securities have not been automatically redeemed prior to maturity and the index
closing value of
either
underlying index is less than its respective downside threshold level on
any index business day
during the term of the securities, a trigger event will have occurred and you will be exposed to the decline in the closing value
of the worst performing underlying index, as compared to its initial index value, on a 1-to-1 basis at maturity. If a trigger event
occurs on any index business day during the term of the securities, investors will have full downside exposure to the worst performing
underlying index at maturity. Under these circumstances, if the final index value of either underlying index is less than its respective
initial index value, investors will lose some or all of their investment in the securities. In this case, you will receive for
each security that you hold at maturity an amount equal to the stated principal amount
times
the index performance factor
of the worst performing underlying index, subject to a maximum payment at maturity of the stated principal amount.
In
this case, the payment at maturity will be less than the stated principal amount and could be zero.
|
|
§
|
The securities do not provide for the regular payment
of interest.
The terms of the securities differ from those of ordinary debt securities in that they do not provide
for the regular payment of interest. Instead, the securities will pay a contingent monthly coupon
but only if
the index closing value of
each
underlying index is
at or above
70% of its respective initial index value, which
we refer to as the coupon barrier level, on the related observation date. If, on the other hand, the index closing value
of
either
underlying index is lower than the coupon barrier level for such underlying index on the relevant observation
date for any interest period, we will pay no coupon on the applicable coupon payment date. Moreover, in such a case, a trigger
event will necessarily have occurred, and you will have full downside exposure to the worst performing underlying index at maturity.
It is possible that the index closing value of one or both underlying indices will remain below the respective coupon barrier level(s)
for extended periods of time or even throughout the entire 1.5-year term of the securities so that you will receive few or no contingent
monthly coupons. If you do not earn sufficient contingent monthly coupons over the term of the securities, the overall
return on the securities may be less than the amount that would be paid on a conventional debt security of ours of comparable maturity.
|
|
§
|
You are exposed to the price risk of both underlying
indices, with respect to both the contingent monthly coupons, if any, and the payment at maturity, if any.
Your
return on the securities is not linked to a basket consisting of both underlying indices. Rather, it will be contingent
upon the independent performance of each underlying index. Unlike an instrument with a return linked to a basket of
underlying assets in which risk is mitigated and diversified among all the components of the basket, you will be exposed to the
risks related to both underlying indices. Poor performance by
either
underlying index over the term of the securities
will negatively affect your return and will not be offset or mitigated by any positive performance by the other underlying index. To
receive
any
contingent monthly coupons,
each
underlying index must close at or above its respective coupon barrier
level on the applicable observation date. In addition, if the securities have not been automatically redeemed early
and the index closing value of
either
underlying index is less than its respective downside threshold level on any index
business day during the term of the securities, a trigger event will have occurred and you will be
fully exposed
to the
decline in the worst performing underlying index over the term of the securities on a 1-to-1 basis, even if the other underlying
index has appreciated or has not declined as much, and even if the worst performing underlying index is not the underlying index
that originally caused the occurrence of the trigger event. Under this scenario, the value of any such payment will
be less than the stated principal amount and could be zero. Accordingly, your investment is subject to the price risk
of both underlying indices.
|
|
§
|
Because the securities are linked to the performance
of the worst performing underlying index, you are exposed to greater risks of receiving no contingent monthly 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 monthly coupons, or that you will suffer a loss on your investment, is greater if you invest in the
securities as opposed to substantially similar securities that are linked to the performance of just one underlying index. With
two underlying
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due December 31, 2020, With 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
indices, it is more likely that either underlying
index will close below its coupon barrier level on any observation date, or below its downside threshold level on any index business
day during the term of the securities, which would constitute a trigger event, than if the securities were linked to only one underlying
index. Therefore, it is more likely that you will not receive any contingent monthly coupons and that you will suffer
a loss on your investment. In addition, because each underlying index must close above its initial index value on a
quarterly determination date in order for the securities to be called prior to maturity, the securities are less likely to be called
on any redemption determination date than if the securities were linked to just one underlying index.
|
§
|
The contingent monthly coupon, if any, is based
on the value of each underlying index on only the related monthly observation date at the end of the related interest period.
Whether
the contingent monthly coupon will be paid on any coupon payment date will be determined at the end of the relevant interest period
based on the closing value of each underlying index on the relevant monthly observation date. As a result, you will
not know whether you will receive the contingent monthly coupon on any coupon payment date until near the end of the relevant interest
period. Moreover, because the contingent monthly coupon is based solely on the value of each underlying index on monthly
observation dates, if the closing value of either underlying index on any observation date is below the coupon barrier level for
such index, you will receive no coupon for the related interest period, even if the level of such underlying index was at or above
its respective coupon barrier level on other days during that interest period and even if the closing value of the other underlying
index is at or above the coupon barrier level for such index.
|
|
§
|
Investors will not participate in any appreciation
in either underlying index.
Regardless of whether or not a trigger event occurs, investors will not participate
in any appreciation in either underlying index from the initial index value for such index, and the return on the securities will
be limited to the contingent monthly coupons, if any, that are paid with respect to each observation date on which the index closing
value of each underlying index is greater than or equal to its respective coupon barrier level.
|
|
§
|
The market price will be influenced by many unpredictable
factors.
Several factors, many of which are beyond our control, will influence the value of the securities in the
secondary market and the price at which MS & Co. may be willing to purchase or sell the securities in the secondary market. We
expect that generally the level of interest rates available in the market and the value of each underlying index on any index business
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 the underlying indices,
|
|
o
|
whether a trigger event has occurred on any index business day during the term of the securities,
|
|
o
|
whether the index closing value of either underlying index 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 underlying indices or securities markets generally and which may affect the value of each underlying index,
|
|
o
|
dividend rates on the securities underlying the underlying indices,
|
|
o
|
the time remaining until the securities mature,
|
|
o
|
interest and yield rates in the market,
|
|
o
|
the availability of comparable instruments,
|
|
o
|
the composition of the underlying indices and changes in the constituent stocks of such indices, and
|
|
o
|
any actual or anticipated changes in our credit ratings or credit spreads.
|
Some or all of these factors will influence the price
that you will receive if you sell your securities prior to maturity. In particular, if either underlying index 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.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due December 31, 2020, With 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
You cannot predict the future performance of either
underlying index based on its historical performance. The value of either underlying index may decrease and be below
the coupon barrier level for such index on each observation date so that you will receive no return on your investment, and one
or both underlying indices may close below the respective downside threshold level(s) on any index business day during the term
of the securities so that you are exposed to the negative performance of the worst performing underlying index at maturity. There
can be no assurance that the index closing value of each underlying index 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
it will be at or above its respective downside threshold level on each index business day during the term of the securities so
that you do not suffer a loss on your initial investment in the securities. See “Russell 2000
®
Index Overview” and “S&P 500
®
Index Overview” below.
|
§
|
The securities are subject to our credit risk,
and any actual or anticipated changes to our credit ratings or credit spreads may adversely affect the market value of the securities.
You
are dependent on our ability to pay all amounts due on the securities at maturity, upon early redemption 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.
|
|
§
|
The securities are linked to the Russell 2000
®
Index and are subject to risks associated with small-capitalization companies.
As the Russell 2000
®
Index is one of the underlying indices, and the Russell 2000
®
Index consists of stocks issued by companies with
relatively small market capitalization, the securities are linked to the value of small-capitalization companies. These
companies often have greater stock price volatility, lower trading volume and less liquidity than large-capitalization companies
and therefore the Russell 2000
®
Index may be more volatile than indices that consist of stocks issued by large-capitalization
companies. Stock prices of small-capitalization companies are also more vulnerable than those of large-capitalization
companies to adverse business and economic developments, and the stocks of small-capitalization companies may be thinly traded. In
addition, small capitalization companies are typically less well-established and less stable financially than large-capitalization
companies and may depend on a small number of key personnel, making them more vulnerable to loss of personnel. Such
companies tend to have smaller revenues, less diverse product lines, smaller shares of their product or service markets, fewer
financial resources and less competitive strengths than large-capitalization companies and are more susceptible to adverse developments
related to their products.
|
|
§
|
Not equivalent to investing
in the underlying indices.
Investing in the securities is not equivalent to investing in either underlying index
or the component stocks of either underlying index. Investors in the securities will not participate in any positive
performance of either underlying index, and will not have voting rights or rights to receive dividends or other distributions or
any other rights with respect to stocks that constitute either underlying index.
|
|
§
|
Reinvestment risk.
The term of your
investment in the securities may be shortened due to the automatic early redemption feature of the securities. If the
securities are redeemed prior to maturity, you will receive no more contingent monthly coupons and may be forced to invest in a
lower interest rate environment and may not be able to reinvest at comparable terms or returns. However, under no circumstances
will the securities be redeemed in the first six months of the term of the securities.
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due December 31, 2020, With 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
|
§
|
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
1.5-year term of the securities.
The securities will not be listed on any securities exchange. Therefore,
there may be little or no secondary market for the securities. MS & Co. may, but is not obligated to, make a market
in the securities and, if it once chooses to make a market, may cease doing so at any time. When it does make a market,
it will generally do so for transactions of routine secondary market size at prices based on its estimate of the current value
of the securities, taking into account its bid/offer spread, our credit spreads, market volatility, the notional size of the proposed
sale, the cost of unwinding any related hedging positions, the time remaining to maturity and the likelihood that it will be able
to resell the securities. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade
or sell the securities easily. Since other broker-dealers may not participate significantly in the secondary market
for the securities, the price at which you may be able to trade your securities is likely to depend on the price, if any, at which
MS & Co. is willing to transact. If, at any time, MS & Co. were to cease making a market in the securities,
it is likely that there would be no secondary market for the securities. Accordingly, you should be willing to hold
your securities to maturity.
|
|
§
|
The rate we are willing to pay for securities of
this type, maturity and issuance size is likely to be lower than the rate implied by our secondary market credit spreads and advantageous
to us. Both the lower rate and the inclusion of costs associated with issuing, selling, structuring and hedging the
securities in the original issue price reduce the economic terms of the securities, cause the estimated value of the securities
to be less than the original issue price and will adversely affect secondary market prices.
Assuming no change in
market conditions or any other relevant factors, the prices, if any, at which dealers, including MS & Co., may be willing to
purchase the securities in secondary market transactions will likely be significantly lower than the original issue price, because
secondary market prices will exclude the issuing, selling, structuring and hedging-related costs that are included in the original
issue price and borne by you and because the secondary market prices will reflect our secondary market credit spreads and the bid-offer
spread that any dealer would charge in a secondary market transaction of this type as well as other factors.
|
The inclusion of the costs of issuing, selling, structuring
and hedging the securities in the original issue price and the lower rate we are willing to pay as issuer make the economic terms
of the securities less favorable to you than they otherwise would be.
However, because the costs associated with issuing,
selling, structuring and hedging the securities are not fully deducted upon issuance, for a period of up to 6 months following
the issue date, to the extent that MS & Co. may buy or sell the securities in the secondary market, absent changes in market
conditions, including those related to the underlying indices, and to our secondary market credit spreads, it would do so based
on values higher than the estimated value, and we expect that those higher values will also be reflected in your brokerage account
statements.
|
§
|
The estimated value of the securities is determined
by reference to our pricing and valuation models, which may differ from those of other dealers and is not a maximum or minimum
secondary market price.
These pricing and valuation models are proprietary and rely in part on subjective views
of certain market inputs and certain assumptions about future events, which may prove to be incorrect. As a result,
because there is no market-standard way to value these types of securities, our models may yield a higher estimated value of the
securities than those generated by others, including other dealers in the market, if they attempted to value the securities. In
addition, the estimated value on the pricing date does not represent a minimum or maximum price at which dealers, including MS
& Co., would be willing to purchase your notes in the secondary market (if any exists) at any time. The value of your securities
at any time after the date of this pricing supplement 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
underlying indices or their component stocks), including trading in the stocks that constitute the underlying indices as well as
in other instruments related to the underlying indices. As a result, these entities may be unwinding or adjusting hedge
positions during the term of the securities, and the hedging strategy may involve greater and more frequent dynamic adjustments
to the hedge as the final observation date approaches. Some of our affiliates also trade the stocks that constitute
the underlying indices and other financial instruments related to the underlying indices on a regular basis as part of their general
broker-dealer and other
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due December 31, 2020, With 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
businesses. Any of these hedging or trading
activities on or prior to the pricing date could have increased the initial index value of an underlying index, and, therefore,
could have increased (i) the value at or above which such underlying index must close on the redemption determination dates so
that the securities are redeemed prior to maturity for the early redemption payment (depending also on the performance of the other
underlying index), (ii) the coupon barrier level for such underlying index, which is the value at or above which such underlying
index must close on the observation dates in order for you to earn a contingent monthly coupon (depending also on the performance
of the other underlying index) and (iii) the downside threshold level for such underlying index, which is the value at or above
which such underlying index must close on each index business day during the term of the securities so that you are not exposed
to the negative performance of the worst performing underlying index at maturity (depending also on the performance of the other
underlying index). Additionally, such hedging or trading activities during the term of the securities could affect the
value of an underlying index throughout the term of the securities, and, accordingly, whether we redeem the securities prior to
maturity, whether we pay a contingent monthly coupon on the securities and the amount of cash you receive at maturity, if any (depending
also on the performance of the other underlying index).
|
§
|
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 index value, the coupon barrier level and the downside threshold level for each
underlying index and will determine whether you receive a contingent monthly coupon on each coupon payment date and/or at maturity,
whether the securities will be redeemed on any early redemption date, whether a trigger event has occurred and the payment at maturity,
if any. Moreover, certain determinations made by MS & Co., in its capacity as calculation agent, may require it
to exercise discretion and make subjective judgments, such as with respect to the occurrence or non-occurrence of market disruption
events and the selection of a successor index or calculation of the index closing value in the event of a market disruption event
or discontinuance of an underlying index. These potentially subjective determinations may adversely affect the payout to you at
maturity, if any. For further information regarding these types of determinations, see "Description of Auto-Callable
Securities—Postponement of Determination Dates," "—Alternate Exchange Calculation in Case of an Event of
Default,” "—Discontinuance of Any Underlying Index; Alteration of Method of Calculation” and "—Calculation
Agent and Calculations" in the accompanying product supplement. In addition, MS & Co. has determined the estimated
value of the securities on the pricing date.
|
|
§
|
Adjustments to the underlying indices could adversely
affect the value of the securities.
The publisher of each underlying index may add, delete or substitute the component
stocks of such underlying index or make other methodological changes that could change the value of such underlying index. Any
of these actions could adversely affect the value of the securities. The publisher of each underlying index may also
discontinue or suspend calculation or publication of such underlying index at any time. In these circumstances, MS &
Co., as the calculation agent, will have the sole discretion to substitute a successor index that is comparable to the discontinued
index. MS & Co. could have an economic interest that is different than that of investors in the securities insofar
as, for example, MS & Co. is permitted to consider indices that are calculated and published by MS & Co. or any of its
affiliates. If MS & Co. determines that there is no appropriate successor index on any relevant date of calculation,
the determination of whether a contingent monthly coupon will be payable on the securities on the applicable coupon payment date,
and/or the amount payable at maturity, will be based on the value of such underlying index, based on the closing prices of the
stocks constituting such underlying index at the time of such discontinuance, without rebalancing or substitution, computed by
MS & Co. as calculation agent in accordance with the formula for calculating such underlying index last in effect prior to
such discontinuance, as compared to the coupon barrier level or downside threshold level, as applicable (depending also on the
performance of the other underlying index).
|
|
§
|
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
Morgan Stanley Finance LLC
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Contingent Income Auto-Callable Securities due December 31, 2020, With 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
securities because the deductibility of capital losses
is subject to limitations. We do not plan to request a ruling from the Internal Revenue Service (the “IRS”) regarding
the tax treatment of the securities, and the IRS or a court may not agree with the tax treatment described herein. If
the IRS were successful in asserting an alternative treatment for the securities, the timing and character of income or loss on
the securities might differ significantly from the tax treatment described herein. For example, under one possible treatment,
the IRS could seek to recharacterize the securities as debt instruments. In that event, U.S. Holders (as defined below)
would be required to accrue into income original issue discount on the securities every year at a “comparable yield”
determined at the time of issuance (as adjusted based on the difference, if any, between the actual and the projected amount of
any contingent payments on the securities) and recognize all income and gain in respect of the securities as ordinary income. The
risk that financial instruments providing for buffers, triggers or similar downside protection features, such as the securities,
would be recharacterized as debt is greater than the risk of recharacterization for comparable financial instruments that do not
have such features.
Non-U.S. Holders (as defined below) should note
that we currently intend to withhold on any coupon paid to Non-U.S. Holders generally at a rate of 30%, or at a reduced rate specified
by an applicable income tax treaty under an “other income” or similar provision, and will not be required to pay any
additional amounts with respect to amounts withheld.
In 2007, the U.S. Treasury Department and the IRS
released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar
instruments. While it is not clear whether the securities would be viewed as similar to the prepaid forward contracts
described in the notice, it is possible that any Treasury regulations or other guidance promulgated after consideration of these
issues could materially and adversely affect the tax consequences of an investment in the securities, possibly with retroactive
effect. The notice focuses on a number of issues, the most relevant of which for holders of the securities are the character
and timing of income or loss and the degree, if any, to which income realized by non-U.S. investors should be subject to withholding
tax. Both U.S. and Non-U.S. Holders should consult their tax advisers regarding the U.S. federal income tax consequences
of an investment in the securities, including possible alternative treatments, the issues presented by this notice and any tax
consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due December 31, 2020, With 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
Russell 2000
®
Index Overview
The Russell 2000
®
Index is an index calculated,
published and disseminated by FTSE Russell, and measures the composite price performance of stocks of 2,000 companies incorporated
in the U.S. and its territories. All 2,000 stocks are traded on a major U.S. exchange and are the 2,000 smallest securities
that form the Russell 3000
®
Index. The Russell 3000
®
Index is composed of the 3,000
largest U.S. companies as determined by market capitalization and represents approximately 98% of the U.S. equity market. The
Russell 2000
®
Index consists of the smallest 2,000 companies included in the Russell 3000
®
Index and represents a small portion of the total market capitalization of the Russell 3000
®
Index. The
Russell 2000
®
Index is designed to track the performance of the small capitalization segment of the U.S.
equity market. For additional information about the Russell 2000
®
Index, see the information set forth
under “Russell 2000
®
Index” in the accompanying index supplement.
Information as of market close on June 25, 2019:
Bloomberg Ticker Symbol:
|
RTY
|
52 Week High (on 8/31/2018):
|
1,740.753
|
Current Index Value:
|
1,521.035
|
52 Week Low (on 12/24/2018):
|
1,266.925
|
52 Weeks Ago:
|
1,657.510
|
|
|
|
|
|
|
The following graph sets forth the daily closing values of the
RTY Index for the period from January 1, 2014 through June 25, 2019. The related table sets forth the published high
and low closing values, as well as end-of-quarter closing values, of the RTY Index for each quarter in the same period. The
closing value of the RTY Index on June 25, 2019 was 1,521.035. We obtained the information in the table and graph below
from Bloomberg Financial Markets, without independent verification. The RTY Index has at times experienced periods of
high volatility, and you should not take the historical values of the RTY Index as an indication of its future performance.
RTY Index Daily Closing
Values
January 1, 2014 to June
25, 2019
|
|
*The red solid line indicates both the downside threshold level and the coupon barrier level of 1,064.725, which is approximately 70% of the initial index value.
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due December 31, 2020, With 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
Russell 2000
®
Index
|
High
|
Low
|
Period End
|
2014
|
|
|
|
First Quarter
|
1,208.651
|
1,093.594
|
1,173.038
|
Second Quarter
|
1,192.960
|
1,095.986
|
1,192.960
|
Third Quarter
|
1,208.150
|
1,101.676
|
1,101.676
|
Fourth Quarter
|
1,219.109
|
1,049.303
|
1,204.696
|
2015
|
|
|
|
First Quarter
|
1,266.373
|
1,154.709
|
1,252.772
|
Second Quarter
|
1,295.799
|
1,215.417
|
1,253.947
|
Third Quarter
|
1,273.328
|
1,083.907
|
1,100.688
|
Fourth Quarter
|
1,204.159
|
1,097.552
|
1,135.889
|
2016
|
|
|
|
First Quarter
|
1,114.028
|
953.715
|
1,114.028
|
Second Quarter
|
1,188.954
|
1,089.646
|
1,151.923
|
Third Quarter
|
1,263.438
|
1,139.453
|
1,251.646
|
Fourth Quarter
|
1,388.073
|
1,156.885
|
1,357.130
|
2017
|
|
|
|
First Quarter
|
1,413.635
|
1,345.598
|
1,385.920
|
Second Quarter
|
1,425.985
|
1,345.244
|
1,415.359
|
Third Quarter
|
1,490.861
|
1,356.905
|
1,490.861
|
Fourth Quarter
|
1,548.926
|
1,464.095
|
1,535.511
|
2018
|
|
|
|
First Quarter
|
1,610.706
|
1,463.793
|
1,529.427
|
Second Quarter
|
1,706.985
|
1,492.531
|
1,643.069
|
Third Quarter
|
1,740.753
|
1,653.132
|
1,696.571
|
Fourth Quarter
|
1,672.992
|
1,266.925
|
1,348.559
|
2019
|
|
|
|
First Quarter
|
1,590.062
|
1,330.831
|
1,539.739
|
Second Quarter (through June 25, 2019)
|
1,614.976
|
1,465.487
|
1,521.035
|
|
|
|
|
The “Russell 2000
®
Index” is a trademark
of FTSE Russell. For more information, see “Russell 2000
®
Index” in the accompanying index
supplement.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due December 31, 2020, With 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
S&P 500
®
Index Overview
The S&P 500
®
Index, which is calculated, maintained
and published by S&P Dow Jones Indices LLC (“S&P”), consists of stocks of 500 component companies selected
to provide a performance benchmark for the U.S. equity markets. The calculation of the S&P 500
®
Index
is based on the relative value of the float adjusted aggregate market capitalization of the 500 component companies as of a particular
time as compared to the aggregate average market capitalization of 500 similar companies during the base period of the years 1941
through 1943. For additional information about the S&P 500
®
Index, see the information set forth under “S&P
500
®
Index” in the accompanying index supplement.
Information as of market close on June 25, 2019:
Bloomberg Ticker Symbol:
|
SPX
|
52 Week High (on 6/20/2019):
|
2,954.18
|
Current Index Value:
|
2,917.38
|
52 Week Low (on 12/24/2018):
|
2,351.10
|
52 Weeks Ago:
|
2,717.07
|
|
|
|
|
|
|
The following graph sets forth the daily index closing values
of the SPX Index for each quarter in the period from January 1, 2014 through June 25, 2019. The related table sets forth
the published high and low closing values, as well as end-of-quarter closing values, of the SPX Index for each quarter in the same
period. The closing value of the SPX Index on June 25, 2019 was 2,917.38. We obtained the information in
the table and graph below from Bloomberg Financial Markets, without independent verification. The SPX Index has at times
experienced periods of high volatility and you should not take the historical values of the SPX Index as an indication of its future
performance.
SPX Index Daily Closing Values
January 1, 2014 to June 25, 2019
|
|
*The red solid line indicates both the downside threshold
level and the coupon barrier level of 2,042.166, which is 70% of the initial index value.
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due December 31, 2020, With 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
S&P 500
®
Index
|
High
|
Low
|
Period End
|
2014
|
|
|
|
First Quarter
|
1,878.04
|
1,741.89
|
1,872.34
|
Second Quarter
|
1,962.87
|
1,815.69
|
1,960.23
|
Third Quarter
|
2,011.36
|
1,909.57
|
1,972.29
|
Fourth Quarter
|
2,090.57
|
1,862.49
|
2,058.90
|
2015
|
|
|
|
First Quarter
|
2,117.39
|
1,992.67
|
2,067.89
|
Second Quarter
|
2,130.82
|
2,057.64
|
2,063.11
|
Third Quarter
|
2,128.28
|
1,867.61
|
1,920.03
|
Fourth Quarter
|
2,109.79
|
1,923.82
|
2,043.94
|
2016
|
|
|
|
First Quarter
|
2,063.95
|
1,829.08
|
2,059.74
|
Second Quarter
|
2,119.12
|
2,000.54
|
2,098.86
|
Third Quarter
|
2,190.15
|
2,088.55
|
2,168.27
|
Fourth Quarter
|
2,271.72
|
2,085.18
|
2,238.83
|
2017
|
|
|
|
First Quarter
|
2,395.96
|
2,257.83
|
2,362.72
|
Second Quarter
|
2,453.46
|
2,328.95
|
2,423.41
|
Third Quarter
|
2,519.36
|
2,409.75
|
2,519.36
|
Fourth Quarter
|
2,690.16
|
2,529.12
|
2,673.61
|
2018
|
|
|
|
First Quarter
|
2,872.87
|
2,581.00
|
2,640.87
|
Second Quarter
|
2,786.85
|
2,581.88
|
2,718.37
|
Third Quarter
|
2,930.75
|
2,713.22
|
2,913.98
|
Fourth Quarter
|
2,925.51
|
2,351.10
|
2,506.85
|
2019
|
|
|
|
First Quarter
|
2,854.88
|
2,447.89
|
2,834.40
|
Second Quarter (through June 25, 2019)
|
2,954.18
|
2,744.45
|
2,917.38
|
|
|
|
|
“Standard & Poor’s
®
,” “S&P
®
,”
“S&P 500
®
,” “Standard & Poor’s 500” and “500” are trademarks of
Standard and Poor’s Financial Services LLC. See “S&P 500
®
Index” in the accompanying
index supplement.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due December 31, 2020, With 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
Additional Terms of the Securities
Please read this information in conjunction with the summary
terms on the front cover of this document.
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.
|
Underlying index publishers:
|
With respect to the RTY Index, FTSE Russell, or any successor thereof.
|
|
With respect to the SPX Index, S&P Dow Jones Indices LLC, or any successor thereof.
|
Interest period:
|
The monthly 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.
|
Record date:
|
The record date for each coupon payment date shall be the date one business day prior to such scheduled coupon payment date;
provided
, however, that any coupon payable at maturity (or upon early redemption) shall be payable to the person to whom the payment at maturity or early redemption payment, as the case may be, shall be payable.
|
Index closing value:
|
With respect to the RTY Index, the index closing value on any
index business day shall be determined by the calculation agent and shall equal the closing value of the RTY Index or any successor
index reported by Bloomberg Financial Services, or any successor reporting service the calculation agent may select, on such index
business day. In certain circumstances, the index closing value for the RTY Index will be based on the alternate calculation
of the RTY Index as described under “Discontinuance of Any Underlying Index; Alteration of Method of Calculation” in
the accompanying product supplement. The closing value of the RTY Index reported by Bloomberg Financial Services may be lower or
higher than the official closing value of the RTY Index published by the underlying index publisher for the RTY Index.
With respect to the SPX Index, the index closing value on any
index business day shall be determined by the calculation agent and shall equal the official closing value of the SPX Index, or
any successor index as defined under “Discontinuance of Any Underlying Index; Alteration of Method of Calculation”
in the accompanying product supplement, published at the regular official weekday close of trading on such index business day by
the underlying index publisher for the SPX Index, as determined by the calculation agent. In certain circumstances,
the index closing value for the SPX Index will be based on the alternate calculation of the SPX Index as described under “Discontinuance
of Any Underlying Index; Alteration of Method of Calculation” in the accompanying product supplement.
|
Downside threshold level:
|
The accompanying product supplement refers to the downside threshold level as the “trigger level.”
|
Day count convention:
|
Interest will be computed on the basis of a 360-day year of twelve 30-day months.
|
Postponement of coupon payment dates (including the maturity date) and early redemption dates:
|
If any observation date or redemption determination date is postponed due to a non-index business day or certain market disruption events so that it falls less than two business days prior to the relevant scheduled coupon payment date (including the maturity date) or early redemption date, as applicable, the coupon payment date (or the maturity date) or the early redemption date will be postponed to the second business day following that observation date or redemption determination date as postponed, and no adjustment will be made to any coupon payment or early redemption payment made on that postponed date.
|
Denominations:
|
$1,000 per security and integral multiples thereof
|
Trustee:
|
The Bank of New York Mellon
|
Calculation agent:
|
MS & Co.
|
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 Depository Trust Company (the “depositary”) by telephone or facsimile confirmed by
mailing such notice to the depositary by first class mail, postage prepaid. Any notice that is mailed to a registered
holder of the securities in the manner herein provided shall be conclusively presumed to have been duly given to such registered
holder, whether or not such registered holder receives the notice. The issuer shall give such notice as promptly as
possible, and in no case later than (i) with respect to notice of
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due December 31, 2020, With 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
|
postponement of the maturity date, the business day immediately
preceding the scheduled maturity date and (ii) with respect to notice of the date to which the maturity date has been rescheduled,
the business day immediately following the final observation date as postponed.
In the event that the securities are subject to early redemption,
the issuer shall, (i) on the business day following the applicable determination date, give notice of the early redemption and
the early redemption payment, including specifying the payment date of the amount due upon the early redemption, (x) to each registered
holder of the securities by mailing notice of such early redemption by first class mail, postage prepaid, to such registered holder’s
last address as it shall appear upon the registry books, (y) to the trustee by facsimile confirmed by mailing such notice to the
trustee by first class mail, postage prepaid, at its New York office and (z) to the depositary by telephone or facsimile confirmed
by mailing such notice to the depositary by first class mail, postage prepaid, and (ii) on or prior to the early redemption date,
deliver the aggregate cash amount due with respect to the securities to the trustee for delivery to the depositary, as holder of
the securities. Any notice that is mailed to a registered holder of the securities in the manner herein provided shall
be conclusively presumed to have been duly given to such registered holder, whether or not such registered holder receives the
notice. This notice shall be given by the issuer or, at the issuer’s request, by the trustee in the name and at the expense
of the issuer, with any such request to be accompanied by a copy of the notice to be given.
The issuer shall, or shall cause the calculation agent to, (i)
provide written notice to the trustee, on which notice the trustee may conclusively rely, and to the depositary of the amount of
cash to be delivered as contingent monthly coupon, if any, with respect to each security 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, if any, with respect
to the contingent monthly coupon to the trustee for delivery to the depositary, as holder of the securities, on the applicable
coupon payment date.
The issuer shall, or shall cause the calculation agent to, (i)
provide written notice to the trustee, on which notice the trustee may conclusively rely, and to the depositary of the amount of
cash to be delivered with respect to each stated principal amount of the securities, on or prior to 10:30 a.m. (New York City time)
on the business day preceding the maturity date, and (ii) deliver the aggregate cash amount due with respect to the securities
to the trustee for delivery to the depositary, as holder of the securities, on the maturity date.
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due December 31, 2020, With 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|