CALCULATION
OF REGISTRATION FEE
|
|
Maximum
Aggregate
|
|
Amount
of Registration
|
Title
of Each Class of Securities Offered
|
|
Offering
Price
|
|
Fee
|
Contingent
Income Auto-
|
|
$8,202,000
|
|
$994.08
|
Callable
Securities due 2021
|
|
|
|
|
July 2019
Pricing Supplement No. 2,251
Registration Statement Nos. 333-221595;
333-221595-01
Dated July 12, 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
July 15, 2021
All Payments on the Securities Based on the Worst
Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust
Fully and Unconditionally Guaranteed by Morgan
Stanley
Principal at Risk Securities
The securities are unsecured obligations of Morgan Stanley Finance
LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley. The securities
have
the terms described in the accompanying product supplement, index supplement and prospectus, as supplemented or modified by this
document. The securities do not guarantee the repayment of principal and do not provide for the regular payment of interest. Instead,
the securities will pay a contingent quarterly coupon
but only if
the closing level of
each
of the Russell 2000
®
Index, the
NASDAQ-100 Index
®
and
the
SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust
is
at or above
80% of its respective initial level, which we refer to as the respective
coupon threshold level
, on
the related observation date. However, if the closing level of
any
underlying is
less than
its
coupon threshold
level
on any observation date, we will pay no interest for the related quarterly period. In addition, the securities will
be automatically redeemed if the closing level of
each
underlying is
greater than or equal to
its respective
initial
level
on any quarterly redemption determination date, for the early redemption payment equal to the sum of the stated principal
amount plus the related contingent quarterly coupon. No further payments will be made on the securities once they have been redeemed.
At maturity, i
f the securities have not previously been redeemed and the final level of
each
underlying is
greater
than or equal to
80% of its respective initial level, which we refer to as the respective downside threshold level, the payment
at maturity will be the stated principal amount and the related contingent quarterly coupon. If, however, the final level of
any
underlying is
less than
its respective downside threshold level, investors will be fully 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
80% of the stated
principal amount of the securities and could be zero.
Accordingly,
i
nvestors in the securities must be willing to accept
the risk of losing their entire initial investment and also the risk of not receiving any contingent quarterly coupons throughout
the 2-year term of the securities.
Because all payments on the securities are based on the worst performing of the underlyings,
a decline beyond the respective coupon threshold level or respective downside threshold level, as applicable, of any underlying
will result in few or no contingent coupon payments or a significant loss of your investment, even if one or both of the other
underlyings have appreciated or have not declined as much. The securities are for investors who are willing to risk their principal
based on the worst performing of three underlyings and who seek an opportunity to earn interest at a potentially above-market
rate in exchange for the risk of receiving no quarterly coupons over the entire 2-year term. Investors will not participate in
any appreciation of any underlying.
The securities are notes issued as
part of MSFL’s Series A Global Medium-Term Notes program.
All payments are subject to our credit risk. If we default
on our obligations, you could lose some or all of your investment. These securities are not secured obligations and you will not
have any security interest in, or otherwise have any access to, any underlying reference asset or assets.
FINAL TERMS
|
Issuer:
|
Morgan Stanley Finance LLC
|
Guarantor:
|
Morgan Stanley
|
Underlyings:
|
Russell 2000
®
Index (the “RTY Index”), NASDAQ-100 Index
®
(the “NDX Index”) and SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust (the “DIA Shares”)
|
Aggregate principal amount:
|
$8,202,000
|
Stated principal amount:
|
$1,000 per security
|
Issue price:
|
$1,000 per security (see “Commissions and issue price” below)
|
Pricing date:
|
July 12, 2019
|
Original issue date:
|
July 19, 2019 (5 business days after the pricing date)
|
Maturity date:
|
July 15, 2021
|
Contingent quarterly coupon:
|
A
contingent
coupon will be paid on the securities on each
coupon payment date
but only if
the closing level of
each
underlying is at or above its respective
coupon
threshold level
on the related observation date. If payable, the contingent quarterly coupon will be an amount in cash per
stated principal amount corresponding to a return of 9.95%
per annum
for each interest payment period for each applicable
observation date.
If, on any observation date, the closing level of any underlying
is less than its respective coupon threshold level, we will pay no coupon for the applicable quarterly period. It is
possible that any underlying will remain below its respective coupon threshold level for extended periods of time or even throughout
the entire 2-year term of the securities so that you will receive few or no contingent quarterly coupons.
|
Payment at maturity:
|
If the securities have not been automatically redeemed prior to
maturity, the payment at maturity will be determined as follows:
If the final level of
each
underlying is
greater than
or equal to
its respective downside threshold level, investors will receive the stated principal amount and the contingent
quarterly coupon with respect to the final observation date.
If the final level of
any
underlying is
less than
its
respective downside threshold level, investors will receive (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 80% 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:
|
$979.20 per security. See “Investment Summary” beginning on page 3.
|
Commissions and issue price:
|
Price to public
(1)
|
Agent’s commissions
(2)
|
Proceeds to us
(3)
|
Per security
|
$1,000
|
$17.50
|
$982.50
|
Total
|
$8,202,000
|
$143,535
|
$8,058,465
|
|
(1)
|
Selected dealers and their financial advisors will collectively
receive from the agent, MS & Co., a fixed sales commission of $17.50 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
32.
|
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 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.
Product Supplement for Auto-Callable Securities dated November 16, 2017
Index
Supplement dated November 16, 2017
Prospectus
dated November 16, 2017
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due July 15, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust
Principal at Risk Securities
Terms continued from previous page:
|
Early redemption:
|
If, on any redemption determination date, beginning on October
14, 2019, the closing level of
each
underlying is
greater than or equal to
its respective initial level, the securities
will be automatically redeemed for an early redemption payment on the related early redemption date. No further payments will be
made on the securities once they have been redeemed.
The securities will not be redeemed early on any early redemption
date if the closing level of any underlying is below the respective initial level for such underlying on the related redemption
determination date.
|
Early redemption payment:
|
The early redemption payment will be an amount equal to the stated principal amount for each security you hold
plus
the contingent quarterly coupon with respect to the related observation date.
|
Redemption determination dates:
|
Quarterly, as set forth under “Observation Dates, Redemption Determination Dates, Coupon Payment Dates and Early Redemption Dates” below, subject to postponement for non-index business days and non-trading days, as applicable, and certain market disruption events.
|
Early redemption dates:
|
Beginning on October 17, 2019, quarterly. See “Observation Dates, Redemption Determination Dates, Coupon Payment Dates and Early Redemption Dates” below. 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
|
Downside threshold level:
|
With respect to the RTY Index: 1,255.998, which is approximately
80% of its initial level
With respect to the NDX Index: 6,354.593, which is approximately
80% of its initial level
With respect to the DIA Shares: $218.712, which is 80% of its
initial level
|
Coupon threshold level:
|
With respect to the RTY Index: 1,255.998, which is approximately
80% of its initial level
With respect to the NDX Index: 6,354.593, which is approximately
80% of its initial level
With respect to the DIA Shares: $218.712, which is 80% of its
initial level
|
Initial level:
|
With respect to the RTY Index: 1,569.998, which is its closing
level on the pricing date
With respect to the NDX Index: 7,943.241, which is its closing
level on the pricing date
With respect to the DIA Shares: $273.39, which is its closing
level 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 each of the RTY Index and the NDX Index, on any
index business day, the respective index closing value on such day
With respect to the DIA Shares, on any trading day, the closing
price of one DIA Share on such day times the adjustment factor on such day
|
Worst performing underlying:
|
The underlying with the largest percentage decrease from the respective initial level to the respective final level
|
Performance factor:
|
Final level
divided by
the initial level
|
Coupon payment dates:
|
Quarterly, beginning October 17, 2019, as set forth under “Observation Dates, Redemption Determination Dates, Coupon Payment Dates and Early Redemption Dates” below;
provided
that if any such day is not a business day, that coupon payment will be made on the next succeeding business day and no adjustment will be made to any coupon payment made on that succeeding business day. The contingent quarterly coupon, if any, with respect to the final observation date will be paid on the maturity date
|
Observation dates:
|
Quarterly, as set forth under “Observation Dates, Redemption Determination Dates, Coupon Payment Dates and Early 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 the observation date immediately prior to the scheduled maturity date as the final observation date.
|
Adjustment factor:
|
With respect to the DIA Shares, 1.0, subject to adjustment in the event of certain events affecting the DIA Shares
|
CUSIP / ISIN:
|
61769HLH6 / US61769HLH65
|
Listing:
|
The securities will not be listed on any securities exchange.
|
|
|
Observation Dates, Redemption
Determination Dates, Coupon Payment Dates and Early Redemption Dates
Observation Dates / Redemption Determination Dates
|
Coupon Payment Dates / Early Redemption Dates
|
October 14, 2019
|
October 17, 2019
|
January 13, 2020
|
January 16, 2020
|
April 13, 2020
|
April 16, 2020
|
July 13, 2020
|
July 16, 2020
|
October 12, 2020
|
October 15, 2020
|
January 12, 2021
|
January 15, 2021
|
April 12, 2021
|
April 15, 2021
|
July 12, 2021 (final observation date)
|
July 15, 2021 (maturity date)
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due July 15, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust
Principal at Risk Securities
Investment Summary
Contingent Income Auto-Callable Securities
Principal at Risk Securities
Contingent Income Auto-Callable Securities due July 15, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust (the “securities”)
do not provide for the regular payment of interest. Instead, the securities will pay a contingent quarterly coupon
but only
if
the closing level of
each
underlying is
at or above
its respective
coupon threshold level
on the related
observation date. However, if the closing level of
any
underlying is
less than
its respective
coupon threshold
level
on any observation date, we will pay no interest for the related quarterly period. If the closing level of
any
underlying is
less than
its respective
coupon threshold level
on each observation date, you will not receive any
contingent quarterly coupon for the entire 2-year 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 each underlying were to be at or above
its respective coupon threshold level on some quarterly observation dates, they may not all close at or above their respective
coupon threshold levels on other observation dates, in which case you will not receive some contingent quarterly coupon payments.
In addition, if the securities have not been automatically called prior to maturity and the final level of
any underlying
is
less than
its respective downside threshold level, investors will be fully 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 80% of the stated principal amount of the
securities and could be zero.
Accordingly,
i
nvestors in the securities must be willing to accept the risk of losing their
entire initial investment and also the risk of not receiving any contingent quarterly coupons throughout the entire 2-year term
of the securities.
Maturity:
|
Approximately 2 years
|
|
|
Contingent quarterly coupon:
|
A
contingent
quarterly coupon will be paid on the securities on each coupon payment date
but only if
the closing level of
each
underlying is at or above its respective
coupon threshold level
on the related observation date. If payable, the contingent quarterly coupon will be an amount in cash per stated principal amount corresponding to a return of 9.95%
per annum
for each interest payment period for each applicable observation date.
If, on any observation date, the closing level of any underlying is less than the respective coupon threshold level, we will pay no coupon for the applicable quarterly period.
|
|
|
Automatic early redemption:
|
If the closing level of
each
underlying is
greater than or equal to
its
initial level
on any quarterly redemption determination date, beginning on October 14, 2019, the securities will be automatically redeemed for an early redemption payment equal to the stated principal amount
plus
the contingent quarterly coupon with respect to the related observation date. No further payments will be made on the securities once they have been redeemed.
|
|
|
Payment at maturity:
|
If the securities have not been automatically redeemed prior
to maturity, the payment at maturity will be determined as follows:
If the final level of
each
underlying is
greater than
or equal to
its respective downside threshold level, investors will receive the stated principal amount and the contingent
quarterly coupon with respect to the final observation date.
If the final level of
any
underlying is
less than
its threshold level, investors will receive a payment at maturity equal to the stated principal amount
times
the performance
factor of the worst performing underlying. Under these circumstances, the payment at maturity will be less than 80% of the stated
principal amount of the securities and could be zero. No quarterly coupon will be payable at maturity.
Accordingly, investors
in the securities must be willing to accept the risk of losing their entire initial investment.
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due July 15, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust
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 $979.20.
What goes into the estimated value on the pricing date?
In valuing the securities on the pricing date, we take into account
that the securities comprise both a debt component and a performance-based component linked to the underlyings. The estimated value
of the securities is determined using our own pricing and valuation models, market inputs and assumptions relating to the underlyings,
instruments based on the underlyings, volatility and other factors including current and expected interest rates, as well as an
interest rate related to our secondary market credit spread, which is the implied interest rate at which our conventional fixed
rate debt trades in the secondary market.
What determines the economic terms of the securities?
In determining the economic terms of the securities, including
the contingent quarterly coupon rate, the coupon threshold levels and the downside threshold levels, we use an internal funding
rate, which is likely to be lower than our secondary market credit spreads and therefore advantageous to us. If the issuing, selling,
structuring and hedging costs borne by you were lower or if the internal funding rate were higher, one or more 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
Contingent Income Auto-Callable Securities due July 15, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust
Principal at Risk Securities
Key Investment Rationale
The securities do not provide for the regular payment of interest.
Instead, the securities will pay a contingent quarterly coupon
but only if
the closing level of
each
underlying is
at or above
its respective
coupon threshold level
on the related observation date. However, if the closing level
of
any
underlying is
less than
its respective
coupon threshold level
on any observation date, we will pay
no interest for the related quarterly period. 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 2-year term of the securities in exchange for
an opportunity to earn interest at a potentially above-market rate if each underlying closes at or above its respective coupon
threshold level on the quarterly observation dates 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
quarterly coupon may be payable in none of, or some but not all of, the quarterly periods during the 2-year term of the securities
and the payment at maturity may be less than 80% of the stated principal amount of the securities and may be zero.
Scenario 1: The securities are redeemed prior to maturity
|
This scenario assumes that, prior to early redemption, each underlying
closes at or above its
coupon threshold level
on some quarterly observation dates, but one or more underlyings close below
the respective coupon threshold level(s) on the others. Investors receive the contingent quarterly coupon, corresponding to a return
of 9.95%
per annum
, for the quarterly periods for which each closing level is at or above the respective coupon threshold
level on the related observation date, but not for the quarterly periods for which any closing level is below the respective coupon
threshold level on the related observation date.
When
each
underlying closes at or above its respective
initial level
on a quarterly redemption determination date, the securities will be automatically redeemed for the stated
principal amount
plus
the contingent quarterly coupon with respect to the related observation date.
|
Scenario 2: The securities are not redeemed prior to maturity, and investors receive principal back at maturity
|
This scenario assumes that each underlying closes at or above
the respective coupon threshold level on some quarterly observation dates, but one or more underlyings close below the respective
coupon threshold level(s) on the others, and each underlying closes below its respective initial level on every quarterly redemption
determination date. Consequently, the securities are not automatically redeemed, and investors receive the contingent quarterly
coupon, corresponding to a return of 9.95%
per annum
, for the quarterly periods for which each closing level is at or above
the respective coupon threshold level on the related observation date, but not for the quarterly periods for which any closing
level is below the respective coupon threshold level on the related observation date.
On the final observation date, each underlying closes at or above
its downside threshold level. At maturity, investors will receive the stated principal amount and the contingent quarterly coupon
with respect to the final observation date.
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due July 15, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust
Principal at Risk Securities
Scenario 3: The securities are not redeemed prior to maturity, and investors suffer a substantial loss of principal at maturity
|
This scenario assumes that each underlying closes at or above
its respective coupon threshold level on some quarterly observation dates, but one or more underlyings close below the respective
coupon threshold level(s) on the others, and each underlying closes below its respective initial level on every quarterly redemption
determination date. Consequently, the securities are not automatically redeemed, and investors receive the contingent quarterly
coupon, corresponding to a return of 9.95%
per annum
, for the quarterly periods for which each closing level is at or above
the respective coupon threshold level on the related observation date, but not for the quarterly periods for which any closing
level is below the respective coupon threshold level on the related observation date.
On the final observation date, one or more underlyings close
below the respective downside threshold level(s). At maturity, investors will receive an amount equal to the stated principal amount
multiplied by the performance factor of the worst performing underlying. Under these circumstances, the payment at maturity will
be less than 80% of the stated principal amount and could be zero. No coupon will be paid at maturity in this scenario.
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due July 15, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust
Principal at Risk Securities
How the Securities Work
The following diagrams illustrate the potential outcomes for
the securities depending on (1) the closing levels on each quarterly observation date, (2) the closing levels on each quarterly
redemption determination date and (3) the final levels. Please see “Hypothetical Examples” beginning on page 9 for
illustration of hypothetical payouts on the securities.
Diagram #1: Contingent Quarterly Coupons
(Beginning on the First Coupon Payment Date until Early Redemption or Maturity)
Diagram #2: Automatic Early Redemption
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due July 15, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust
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 9.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due July 15, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust
Principal at Risk Securities
Hypothetical Examples
The following hypothetical examples illustrate how to determine
whether a contingent quarterly coupon is paid with respect to an observation date and how to calculate the payment at maturity,
if any, if the securities have not been automatically redeemed early. The following examples are for illustrative purposes only.
Whether you receive a contingent quarterly coupon will be determined by reference to the closing level of each underlying on each
quarterly 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 threshold 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 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 Quarterly Coupon:
|
A
contingent
quarterly coupon will be paid on the securities on each coupon payment date
but only if
the closing level of
each
underlying is at or above its respective
coupon threshold level
on the related observation date. If payable, the contingent quarterly coupon will be an amount in cash per stated principal amount corresponding to a return of 9.95%
per annum
for each interest payment period for each applicable observation date. These hypothetical examples reflect the contingent quarterly coupon rate of 9.95%
per annum
(corresponding to approximately $24.875 per quarter per security*).
|
Automatic Early Redemption:
|
If the closing level of
each
underlying is greater than or equal to its respective
initial level
on any quarterly redemption determination date, the securities will be automatically redeemed for an early redemption payment equal to the stated principal amount
plus
the contingent quarterly coupon with respect to the related observation date.
|
Payment at Maturity (if the securities have not been automatically redeemed early):
|
If the final level of
each
underlying is
greater than
or equal to
its respective downside threshold level, investors will receive the stated principal amount and the contingent
quarterly coupon with respect to the final observation date.
If the final level of
any
underlying is
less than
its respective downside threshold level, investors will receive a payment at maturity 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 80% of the stated principal amount of the securities and could be zero.
|
Stated Principal Amount:
|
$1,000
|
Hypothetical Initial Level:
|
With respect to the RTY Index: 1,200
With respect to the NDX Index: 6,500
With respect to the DIA Shares: $250
|
Hypothetical Coupon Threshold Level:
|
With respect to the RTY Index: 960, which is 80% of the hypothetical
initial level for such underlying
With respect to the NDX Index: 5,200, which is 80% of the hypothetical
initial level for such underlying
With respect to the DIA Shares: $200, which is 80% of the hypothetical
initial level for such underlying
|
Hypothetical Downside Threshold level:
|
With respect to the RTY Index: 960, which is 80% of the hypothetical
initial level for such underlying
With respect to the NDX Index: 5,200, which is 80% of the hypothetical
initial level for such underlying
With respect to the DIA Shares: $200, which is 80% of the hypothetical
initial level for such underlying
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due July 15, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust
Principal at Risk Securities
* The actual contingent quarterly coupon will be an amount determined
by the calculation agent based on the number of days in the applicable payment period, calculated on a 30/360 basis. The hypothetical
contingent quarterly coupon of $24.875 is used in these examples for ease of analysis.
How to determine whether a contingent quarterly
coupon is payable with respect to an observation date:
|
Closing Level
|
Contingent Quarterly Coupon
|
|
RTY Index
|
NDX Index
|
DIA Shares
|
Hypothetical Observation Date 1
|
1,750 (
at or above
the coupon threshold level)
|
7,280 (
at or above
the coupon threshold level)
|
$265 (
at or above
the coupon threshold level)
|
$24.875
|
Hypothetical Observation Date 2
|
800 (
below
the coupon threshold level)
|
5,525 (
at or above
the coupon threshold level)
|
$265 (
at or above
the coupon threshold level)
|
$0
|
Hypothetical Observation Date 3
|
1,400 (
at or above
the coupon threshold level)
|
1,950 (
below
the coupon threshold level)
|
$180 (
below
the coupon threshold level)
|
$0
|
Hypothetical Observation Date 4
|
700 (
below
the coupon threshold level)
|
2,080 (
below
the coupon threshold level)
|
$150 (
below
the coupon threshold level)
|
$0
|
On hypothetical observation date 1, each underlying closes at
or above its respective coupon threshold level. Therefore, a contingent quarterly coupon of $24.875 is paid on the relevant coupon
payment date.
On each of hypothetical observation dates 2 and 3, at least one
underlying closes at or above its respective coupon threshold level, but one or both of the other underlyings close below their
respective coupon threshold levels. Therefore, no contingent quarterly coupon is paid on the relevant coupon payment date.
On hypothetical observation date 4, each underlying closes below
its respective coupon threshold level, and, accordingly, no contingent quarterly coupon is paid on the relevant coupon payment
date.
If the closing level of any underlying is less than its respective
coupon threshold level on each observation date, you will not receive any contingent quarterly coupons for the entire 2-year term
of the securities.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due July 15, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust
Principal at Risk Securities
How to calculate the payment at maturity (if
the securities have not been automatically redeemed):
If the closing level of each underlying is greater than or equal
to its initial level on any quarterly redemption determination date, the securities will be automatically redeemed for an early
redemption payment equal to the stated principal amount for each security you hold
plus
the contingent quarterly coupon
with respect to the related observation date.
The examples below illustrate how to calculate the payment at
maturity if the securities have not been automatically redeemed prior to maturity.
|
Final Level
|
Payment at Maturity
|
|
RTY Index
|
NDX Index
|
DIA Shares
|
Example 1:
|
540 (
below
the downside threshold level)
|
3,900 (
below
the downside threshold level)
|
$210 (
at or above
the downside threshold level)
|
$1,000 x performance factor of the worst performing underlying =
$1,000 x (540 / 1,200) = $450
|
Example 2:
|
1,200 (
at or above
the downside threshold level)
|
5,500 (
at or above
the downside threshold level)
|
$100 (
below
the downside threshold level)
|
$1,000 x ($100 / $250) = $400
|
Example 3:
|
540 (
below
the downside threshold level)
|
3,900 (
below
the downside threshold level)
|
$75 (
below
the downside threshold level)
|
$1,000 x ($75 / $250) = $300
|
Example 4:
|
360 (
below
the threshold level)
|
2,600 (
below
the threshold level)
|
$100 (
below
the downside threshold level)
|
$1,000 x (360 / 1,200) = $300
|
Example 5:
|
1,300 (
at or above
the downside threshold level)
|
7,500 (
at or above
the downside threshold level)
|
$275 (
at or above
the downside threshold level)
|
The stated principal amount + the contingent
quarterly coupon with respect to the final observation date.
For more information, please see above under
“How to determine whether a contingent quarterly coupon is payable with respect to an observation date.”
|
In examples 1 and 2, the final level(s) of one or two of the
underlyings are at or above the respective downside threshold level(s), but the final level(s) of one or both of the other underlyings
are below the respective downside threshold level(s). Therefore, investors are exposed to the downside performance of the worst
performing underlying at maturity and receive at maturity an amount equal to the stated principal amount
multiplied by
the
performance factor of the worst performing underlying. Moreover, investors do not receive any contingent quarterly coupon for the
final quarterly period.
Similarly, in examples 3 and 4, 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 3, the RTY Index has declined 55% from its initial
level to its final level, the NDX Index has declined 40% from its initial level to its final level and the DIA Shares have declined
70% from their initial level to their final level. Therefore, the payment at maturity equals the stated principal amount
multiplied
by
the performance factor of the DIA Shares, which represent the worst performing underlying in this example. In example 4,
the RTY Index has declined 70% from its initial level to its final level, the NDX Index has declined 60% from its initial level
to its final level and the DIA Shares have declined 60% from their initial level to their final level. Therefore, the payment at
maturity equals the stated principal amount
times
the performance factor of the RTY Index, which is the worst performing
underlying in this example. Moreover, investors do not receive the contingent quarterly coupon for the final quarterly period.
In example 5, the final level of each underlying is at or above
its respective downside threshold level. Therefore, investors receive at maturity the stated principal amount of the securities
plus
the contingent quarterly coupon with respect to the final observation date. However, investors do not participate in
any appreciation of the underlyings.
If the final level of ANY underlying is below its respective
downside threshold level, you will be exposed to the downside performance of the worst performing underlying at maturity, and your
payment at maturity will be less than $800 per security and could be zero.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due July 15, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust
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 if the final level of
any
underlying is less
than its threshold level of 80% of its initial level, you will be exposed to the decline in the final 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
multiplied by
the performance factor of the worst performing underlying.
In this case, the payment at maturity will be less than 80% of 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 quarterly coupon
but only if
the closing level of
each
underlying is
at or above
its respective
coupon threshold level
on the related observation date. If the closing level
of
any
underlying is lower than its
coupon threshold level
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 any underlying will be less
than its respective
coupon threshold level
for extended periods of time or even throughout the entire term of the securities
so that you will receive few or no contingent quarterly coupons
.
If you do not earn sufficient contingent quarterly 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 each underlying, with respect
to both the contingent quarterly coupons, if any, and the payment at maturity, if any.
Your
return on the securities is not linked to a basket consisting of the underlyings. Rather, it will be contingent upon the independent
performance of each underlying. Unlike an instrument with a return linked to a basket of underlying assets, in which risk is mitigated
and diversified among all the components of the basket, you will be exposed to the risks related to each underlying. Poor performance
by
any
underlying 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 underlyings. To receive
any
contingent
quarterly coupons,
each
underlying must close at or above its respective coupon
threshold level on the applicable observation date. In addition, if
the securities have not been automatically redeemed
early and
any
underlying has declined
to below its respective downside threshold level as of the final observation date, you will be
fully exposed
to
the decline in the worst performing underlying over the term of the securities on a 1-to-1 basis, even if one or both of the other
underlyings have appreciated or have not declined as much. Under this scenario, the value of any such payment will be less than
80% of the stated principal amount and could be zero. Accordingly, your investment is subject to the price risk of each underlying.
|
|
§
|
Because the securities are linked to the performance of the worst performing underlying, you are exposed to greater risks
of receiving no contingent quarterly coupons and sustaining a significant loss on your investment than if the securities were linked
to just one underlying.
The risk that you will not receive any contingent quarterly 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 three underlyings, it is more likely that any underlying will close below its coupon
threshold level on any observation date, and 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 quarterly coupons and
that you will suffer a significant loss on your investment. In addition, because each underlying must close above its initial level
on a quarterly redemption determination date in order for the securities to be called prior to maturity, the securities are less
likely to be called on any early redemption date than if the securities were linked to just one underlying.
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due July 15, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust
Principal at Risk Securities
|
§
|
The contingent quarterly coupon, if any, is based on the value of each underlying on only the related quarterly observation
date at the end of the related interest period
.
Whether the
contingent quarterly 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 quarterly observation date. As a result, you will not know whether
you will receive the contingent quarterly coupon on any coupon payment date until near the end of the relevant interest period.
Moreover, because the contingent quarterly coupon is based solely on the value of each underlying on quarterly observation dates,
if the closing level of any underlying on any observation date is below the coupon threshold level for such underlying, you will
not receive the contingent quarterly coupon for the related interest period, even if the level of such underlying was at or above
its respective coupon threshold level on other days during that interest period, and even if the closing level(s) of one or both
of the other underlyings are at or above their respective coupon threshold level(s).
|
|
§
|
Investors will not participate in any appreciation in any underlying.
Investors will not participate in any appreciation
in any underlying from the initial level for such underlying, and the return on the securities will be limited to the contingent
quarterly 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 threshold level, if any.
|
|
§
|
The market price will be influenced by many unpredictable factors.
Several factors, many of which are beyond our control, will influence the value of the securities
in the secondary market and the price at which MS & Co. may be willing to purchase or sell the securities in the secondary
market. We expect that generally the level of interest rates available in the market and the value of each
underlying
on any day, including in relation to its respective
coupon threshold level, downside threshold level and initial 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 RTY Index,
the NDX Index and the share underlying index,
|
|
o
|
whether the closing level of any underlying has been below its respective coupon threshold level on any observation date,
|
|
o
|
geopolitical conditions and economic, financial, political, regulatory or judicial events that affect the component stocks
of the RTY Index, the NDX Index and the share underlying index or securities markets generally and which may affect the value of
each underlying,
|
|
o
|
dividend rates on the securities underlying the RTY Index, the NDX Index and the share underlying index,
|
|
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 RTY Index, the NDX Index and the share underlying
index,
|
|
o
|
the occurrence of certain events affecting the DIA 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 any underlying has closed near or below its coupon threshold 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 any underlying based on its historical performance. The value of any underlying may decrease and be below the respective coupon
threshold level for such underlying on each observation date so that you will receive no return on your investment, and any or
all of the underlyings may close below the respective downside threshold level(s) on the final observation date so that you will
lose more than 20% or all of your
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due July 15, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust
Principal at Risk Securities
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 threshold 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 the final observation date so that you do not suffer a significant
loss on your initial investment in the securities. See “Russell 2000
®
Index Overview,” “NASDAQ-100
Index
®
Overview” and “SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust Overview” below.
|
§
|
The antidilution adjustments the calculation agent is required to make do not cover every event that could affect the DIA
Shares.
MS & Co., as calculation agent, will adjust the adjustment factor for certain events affecting the DIA Shares.
However, the calculation agent will not make an adjustment for every event that could affect the DIA 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 DIA Shares or the share underlying index could adversely affect the value of the securities.
The
investment adviser to the DIA Shares (the “Investment Adviser”) seeks investment results that correspond generally
to the total return performance, before fees and expenses, of the Dow Jones Industrial Average
SM
(the “share underlying
index”). Pursuant to its investment strategy or otherwise, the Investment Adviser may add, delete or substitute the stocks
composing the DIA Shares. Any of these actions could adversely affect the price of the DIA Shares and, consequently, the value
of the securities. S&P Dow Jones Indices LLC (“S&P”) is responsible for calculating and maintaining the Dow
Jones Industrial Average
SM
. S&P may add, delete or substitute the stocks constituting the Dow Jones Industrial Average
SM
or make other methodological changes that could change the value of the Dow Jones Industrial Average
SM
. S&P may
discontinue or suspend calculation or publication of the Dow Jones Industrial Average
SM
at any time. Any of these actions
could adversely affect the value of the Dow Jones Industrial Average
SM
, and, consequently, the price of the DIA Shares
and the value of the securities.
|
|
§
|
The performance and market price of the DIA 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 DIA Shares.
The DIA 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 DIA 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 DIA Shares and the share underlying index. In addition,
corporate actions (such as mergers and spin-offs) with respect to the equity securities underlying the DIA Shares may impact the
variance between the performances of DIA Shares and the share underlying index. Finally, because the shares of the DIA Shares are
traded on an exchange and are subject to market supply and investor demand, the market price of one share of the DIA Shares may
differ from the net asset value per share of the DIA Shares.
|
In particular, during periods of
market volatility, or unusual trading activity, trading in the securities underlying the DIA Shares may be disrupted or limited,
or such securities may be unavailable in the secondary market. Under these circumstances, the liquidity of the DIA Shares may be
adversely affected, market participants may be unable to calculate accurately the net asset value per share of the DIA Shares,
and their ability to create and redeem shares of the DIA Shares may be disrupted. Under these circumstances, the market price of
shares of the DIA Shares may vary substantially from the net asset value per share of the DIA Shares or the level of the share
underlying index.
For all of the foregoing reasons,
the performance of the DIA 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 DIA Shares. Any of these events could
materially and adversely affect the price of the shares of the DIA 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 DIA Shares on the final observation
date, even
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due July 15, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust
Principal at Risk Securities
if the DIA 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 DIA Shares.
|
§
|
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 underlyings, 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.
|
|
§
|
Investing in the securities is not equivalent to investing in the underlyings or the
stocks composing the RTY Index, the NDX Index or the share underlying index.
Investing in the securities is not equivalent
to investing in any of the underlyings or the component stocks of the RTY Index, the NDX Index or the share underlying index. Investors
in the securities will not participate in any positive performance of any 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 RTY Index, the NDX Index
or the share 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 quarterly coupons and may be forced to invest in a lower interest
rate environment and may not be able to reinvest at comparable terms or returns.
|
|
§
|
The securities will not be listed on any securities exchange and secondary trading may be limited
.
A
ccordingly, you should be willing to hold your securities for the entire 2-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
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due July 15, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust
Principal at Risk Securities
secondary market size at prices
based on its estimate of the current value of the securities, taking into account its bid/offer spread, our credit spreads, market
volatility, the notional size of the proposed sale, the cost of unwinding any related hedging positions, the time remaining to
maturity and the likelihood that it will be able to resell the securities. Even if there is a secondary market, it may not provide
enough liquidity to allow you to trade or sell the securities easily. Since other broker-dealers may not participate significantly
in the secondary market for the securities, the price at which you may be able to trade your securities is likely to depend on
the price, if any, at which MS & Co. is willing to transact. If, at any time, MS & Co. were to cease making a market in
the securities, it is likely that there would be no secondary market for the securities. Accordingly, you should be willing to
hold your securities to maturity.
|
§
|
The rate we are willing to pay for securities of this type, maturity and issuance size is likely to be lower than the rate
implied by our secondary market credit spreads and advantageous to us. Both the lower rate and the inclusion of costs associated
with issuing, selling, structuring and hedging the securities in the original issue price reduce the economic terms of the securities,
cause the estimated value of the securities to be less than the original issue price and will adversely affect secondary market
prices.
Assuming no change in market conditions or any other relevant factors, the prices, if any, at which dealers, including
MS & Co., may be willing to purchase the securities in secondary market transactions will likely be significantly lower than
the original issue price, because secondary market prices will exclude the issuing, selling, structuring and hedging-related costs
that are included in the original issue price and borne by you and because the secondary market prices will reflect our secondary
market credit spreads and the bid-offer spread that any dealer would charge in a secondary market transaction of this type as well
as other factors.
|
The inclusion of the costs of issuing,
selling, structuring and hedging the securities in the original issue price and the lower rate we are willing to pay as issuer
make the economic terms of the securities less favorable to you than they otherwise would be.
However, because the costs associated
with issuing, selling, structuring and hedging the securities are not fully deducted upon issuance, for a period of up to 6 months
following the issue date, to the extent that MS & Co. may buy or sell the securities in the secondary market, absent changes
in market conditions, including those related to the underlyings, and to our secondary market credit spreads, it would do so based
on values higher than the estimated value, and we expect that those higher values will also be reflected in your brokerage account
statements.
|
§
|
The estimated value of the securities is determined by reference to our pricing and valuation models, which may differ from
those of other dealers and is not a maximum or minimum secondary market price.
These 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 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 DIA Shares, the stocks
that constitute the RTY Index, 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 level at or
above which such
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due July 15, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust
Principal at Risk Securities
underlying must close on any
redemption determination date so that the securities are redeemed prior to maturity for the early redemption payment (depending
also on the performance of the other underlyings), (ii) the level at or above which such underlying must close on each observation
date in order for you to earn a contingent quarterly coupon (depending also on the performance of the other underlyings) and (iii)
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 underlyings). Additionally,
such hedging or trading activities during the term of the securities could affect the value of an underlying on the redemption
determination dates and the observation dates, and, accordingly, whether we redeem the securities prior to maturity, whether we
pay a contingent quarterly coupon on the securities and the amount of cash you receive at maturity, if any (depending also on the
performance of the other underlyings).
|
§
|
The calculation agent, which is a subsidiary of Morgan Stanley and an affiliate of MSFL, will make determinations with respect
to the securities.
As calculation agent, MS & Co. has determined the initial level, coupon threshold level and downside
threshold level for each underlying and will determine whether you receive a contingent quarterly coupon on each coupon payment
date and/or at maturity, whether the securities will be redeemed on any early redemption date 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, any adjustments
to the adjustment factor and the selection of a successor index or calculation of the closing level of any underlying in the event
of a market disruption event or discontinuance of the RTY Index, the NDX Index or the share 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; Alternation of
Method of Calculation,” “Discontinuance of the Underlying Shares of an Exchange-Traded Fund and/or Share Underlying
Index; Alteration of Method of Calculation,” “—Antidilution Adjustments” 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 RTY Index or the NDX Index could adversely affect the value of the securities.
The publisher of each
of the RTY Index or 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 each of the RTY Index or the NDX Index may also discontinue or suspend calculation or publication of such underlying
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 observation
date, the determination of whether a contingent quarterly coupon will be payable on the securities on the applicable coupon payment
date, whether the securities will be redeemed and/or the amount payable at maturity, if any, 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 relevant initial level, coupon threshold level or downside
threshold level, as applicable (depending also on the performance of the other underlyings).
|
|
§
|
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
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due July 15, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust
Principal at Risk Securities
ordinary income treatment of the
coupon payments, in conjunction with the capital loss treatment of any loss recognized upon the sale, exchange or settlement of
the securities, could result in adverse tax consequences to holders of the securities because the deductibility of capital losses
is subject to limitations. We do not plan to request a ruling from the Internal Revenue Service (the “IRS”) regarding
the tax treatment of the securities, and the IRS or a court may not agree with the tax treatment described herein. If the IRS were
successful in asserting an alternative treatment for the securities, the timing and character of income or loss on the securities
might differ significantly from the tax treatment described herein. For example, under one possible treatment, the IRS could seek
to recharacterize the securities as debt instruments. In that event, U.S. Holders (as defined below) would be required to accrue
into income original issue discount on the securities every year at a “comparable yield” determined at the time of
issuance (as adjusted based on the difference, if any, between the actual and the projected amount of any contingent payments on
the securities) and recognize all income and gain in respect of the securities as ordinary income. The risk that financial instruments
providing for buffers, triggers or similar downside protection features, such as the securities, would be recharacterized as debt
is greater than the risk of recharacterization for comparable financial instruments that do not have such features.
Non-U.S. Holders (as defined
below) should note that we currently intend to withhold on any coupon paid to Non-U.S. Holders generally at a rate of 30%, or at
a reduced rate specified by an applicable income tax treaty under an “other income” or similar provision, and will
not be required to pay any additional amounts with respect to amounts withheld.
In 2007, the U.S. Treasury Department
and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts”
and similar instruments. While it is not clear whether the securities would be viewed as similar to the prepaid forward contracts
described in the notice, it is possible that any Treasury regulations or other guidance promulgated after consideration of these
issues could materially and adversely affect the tax consequences of an investment in the securities, possibly with retroactive
effect. The notice focuses on a number of issues, the most relevant of which for holders of the securities are the character and
timing of income or loss and the degree, if any, to which income realized by non-U.S. investors should be subject to withholding
tax. Both U.S. and Non-U.S. Holders should consult their tax advisers regarding the U.S. federal income tax consequences of an
investment in the securities, including possible alternative treatments, the issues presented by this notice and any tax consequences
arising under the laws of any state, local or non-U.S. taxing jurisdiction.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due July 15, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust
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 July 12, 2019:
Bloomberg Ticker Symbol:
|
RTY
|
52 Week High (on 8/31/2018):
|
1,740.753
|
Current Index Value:
|
1,569.998
|
52 Week Low (on 12/24/2018):
|
1,266.925
|
52 Weeks Ago:
|
1,690.277
|
|
|
|
|
|
|
The following graph sets forth the daily index closing values
of the RTY Index for the period from January 1, 2014 through July 12, 2019. The related table sets forth the published high and
low index closing values, as well as end-of-quarter index closing values, of the RTY Index for each quarter for the period from
January 1, 2014 through July 12, 2019. The index closing value of the RTY Index on July 12, 2019 was 1,569.998. We obtained the
information in the table below from Bloomberg Financial Markets, without independent verification. The RTY Index has 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 Index Closing
Values
January 1, 2014 to July
12, 2019
|
|
* The red line in the graph indicates both the downside threshold level and the coupon threshold level of 1,255.998, each of which is approximately 80% of the initial level.
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due July 15, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust
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
|
1,192.964
|
1,095.986
|
1,192.964
|
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
|
1,614.976
|
1,465.487
|
1,566.572
|
Third Quarter (through July 12, 2019)
|
1,575.625
|
1,557.921
|
1,569.998
|
|
|
|
|
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 July 15, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust
Principal at Risk Securities
The NASDAQ-100 Index
®
Overview
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. For additional information about the NASDAQ-100 Index
®
, see the information set
forth under “NASDAQ-100 Index
®
” in the accompanying index supplement.
Information as of market close on July 12, 2019:
Bloomberg Ticker Symbol:
|
NDX
|
52 Week High (on 7/12/2019):
|
7,943.241
|
Current Index Value:
|
7,943.241
|
52 Week Low (on 12/24/2018):
|
5,899.354
|
52 Weeks Ago:
|
7,366.250
|
|
|
|
|
|
|
The following graph sets forth the daily index closing values
of the NDX Index for in the period from January 1, 2014 through July 12, 2019. The related table sets forth the published high
and low index closing values, as well as end-of-quarter index closing values, of the NDX Index for each quarter for the period
from January 1, 2014 to July 12, 2019. The index closing value of the NDX Index on July 12, 2019 was 7,943.241. 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.
NDX Index Daily Index Closing
Values
January 1, 2014 to July
12, 2019
|
|
* The red line in the graph indicates both the downside threshold level and the coupon threshold level of 6,354.593, each of which is approximately 80% of the initial level.
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due July 15, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust
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
|
7,845.729
|
6,978.018
|
7,671.075
|
Third Quarter (through July 12, 2019)
|
7,943.241
|
7,768.138
|
7,943.241
|
|
|
|
|
“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
Contingent Income Auto-Callable Securities due July 15, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust
Principal at Risk Securities
SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust Overview
The SPDR
®
Dow Jones
®
Industrial
Average
SM
ETF Trust is an exchange-traded fund that seeks to provide investment results that correspond generally to
the price and yield performance, before fees and expenses, of the Dow Jones Industrial Average
SM
(the “share underlying
index”). The SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust is managed by State
Street Bank and Trust Company (“SSBTC”), a registered investment company that consists of numerous separate investment
portfolios, including the SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust. Information
provided to or filed with the Securities and Exchange Commission by SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust pursuant to the Securities Act of 1933 and the Investment Company Act of 1940 can be located by reference to Commission
file numbers 333-31247 and 811-09170, 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 any such
publicly available information regarding the SPDR
®
Dow Jones
®
Industrial Average
SM
ETF
Trust is accurate or complete.
Information as of market close on July 12, 2019:
Bloomberg Ticker Symbol:
|
DIA
|
52 Week High (on 7/12/2019):
|
$273.39
|
Current Share Price:
|
$273.39
|
52 Week Low (on 12/24/2018):
|
$218.10
|
52 Weeks Ago:
|
$249.30
|
|
|
|
|
|
|
The following graph sets forth the daily closing prices of the
DIA Shares for the period from January 1, 2014 through July 12, 2019. The related table sets forth the published high and low closing
prices, as well as end-of-quarter closing prices, of the DIA Shares for each quarter for the period from January 1, 2014 through
July 12, 2019. The closing price of the DIA Shares on July 12, 2019 was $273.39. We obtained the information in the table and graph
below from Bloomberg Financial Markets, without independent verification. The DIA Shares have experienced periods of high volatility,
and you should not take the historical prices of the DIA Shares as an indication of their future performance.
DIA Shares Daily Index Closing Prices
January 1, 2014 to July 12, 2019
|
|
* The red line in the graph indicates both the downside threshold
level and the coupon threshold level of $218.712, each of which is 80% of the initial level.
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due July 15, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust
Principal at Risk Securities
SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust (CUSIP: 78467X109)
|
High ($)
|
Low ($)
|
Period End ($)
|
2014
|
|
|
|
First Quarter
|
164.96
|
153.39
|
164.28
|
Second Quarter
|
169.35
|
160.02
|
167.89
|
Third Quarter
|
172.61
|
163.55
|
170.07
|
Fourth Quarter
|
180.19
|
160.98
|
177.88
|
2015
|
|
|
|
First Quarter
|
182.68
|
171.48
|
177.58
|
Second Quarter
|
182.93
|
175.64
|
175.82
|
Third Quarter
|
181.07
|
156.49
|
162.62
|
Fourth Quarter
|
179.14
|
162.49
|
173.99
|
2016
|
|
|
|
First Quarter
|
176.95
|
156.78
|
176.64
|
Second Quarter
|
180.75
|
171.17
|
179.08
|
Third Quarter
|
186.51
|
178.21
|
182.78
|
Fourth Quarter
|
199.42
|
178.71
|
197.51
|
2017
|
|
|
|
First Quarter
|
211.02
|
197.28
|
206.34
|
Second Quarter
|
214.92
|
203.85
|
213.24
|
Third Quarter
|
223.90
|
213.14
|
223.82
|
Fourth Quarter
|
248.13
|
225.24
|
247.38
|
2018
|
|
|
|
First Quarter
|
265.91
|
235.13
|
241.40
|
Second Quarter
|
253.39
|
236.15
|
242.73
|
Third Quarter
|
267.12
|
241.66
|
264.40
|
|
267.95
|
218.10
|
233.20
|
2019
|
|
|
|
First Quarter
|
260.89
|
226.72
|
259.13
|
Second Quarter
|
268.08
|
248.22
|
265.85
|
Third Quarter (through July 12, 2019)
|
273.39
|
266.97
|
273.39
|
|
|
|
|
This document relates only to the securities referenced hereby
and does not relate to the DIA Shares. We have derived all disclosures contained in this document regarding SSBTC 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 SSBTC. Neither we nor the agent makes any
representation that such publicly available documents or any other publicly available information regarding SSBTC 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 DIA Shares (and therefore the price of the DIA Shares at the time we priced the securities) have been publicly disclosed. Subsequent
disclosure of any such events or the disclosure of or failure to disclose material future events concerning SSBTC 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 DIA Shares.
We and/or our affiliates may presently or from time to time engage
in business with SSBTC. In the course of such business, we and/or our affiliates may acquire non-public information with respect
to SSBTC, 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 DIA 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 SSBTC as in your judgment is appropriate to make an informed decision with respect
to an investment linked to the DIA Shares.
“S&P
®
”, “SPDR
®
”
and “S&P
®
Oil & Gas Exploration & Production Select Industry Index
®
” are
trademarks of Standard & Poor’s Financial Services LLC (“S&P”), an affiliate of The McGraw-Hill Companies,
Inc. (“MGH”). The securities are not
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due July 15, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust
Principal at Risk Securities
sponsored, endorsed, sold, or promoted by S&P, MGH or
SSBTC. S&P, MGH and SSBTC make no representations or warranties to the owners of the securities or any member of the public
regarding the advisability of investing in the securities. S&P, MGH and SSBTC have no obligation or liability in connection
with the operation, marketing, trading or sale of the securities.
The Dow Jones Industrial Average
SM
.
The Dow
Jones Industrial Average
SM
is a price-weighted index composed of 30 common stocks that is published by S&P Dow Jones
Indices LLC, the marketing name and a licensed trademark of CME Group Index Services LLC, as representative of the broad market
of U.S. industry. For additional information about the Dow Jones Industrial Average
SM
, see the information set forth
under “Dow Jones Industrial Average
SM
” in the accompanying index supplement.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due July 15, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust
Principal at Risk Securities
Additional Terms of the Securities
Please read this information in conjunction with the summary
terms on the front cover of this document.
Additional Terms:
|
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 NDX Index, Nasdaq, Inc. or any successor
thereof.
|
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 NDX 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 NDX 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 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 the NDX Index as described under “Discontinuance of
Any Underlying Index; Alteration of Method of Calculation” in the accompanying product supplement.
|
Share underlying index:
|
The Dow Jones Industrial Average
SM
|
Share underlying index publisher:
|
S&P Dow Jones Indices LLC or any successor thereof
|
Interest period:
|
The quarterly period from and including the original issue date (in the case of the first interest period) or the previous scheduled coupon payment date, as applicable, to but excluding the following scheduled coupon payment date, with no adjustment for any postponement thereof.
|
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.
|
Threshold level:
|
The accompanying product supplement refers to the 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 non-trading day, as applicable, 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
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due July 15, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust
Principal at Risk Securities
|
telephone or facsimile confirmed by
mailing such notice to the depositary by first class mail, postage prepaid. Any notice that is mailed to a registered holder of
the securities in the manner herein provided shall be conclusively presumed to have been duly given to such registered holder,
whether or not such registered holder receives the notice. The issuer shall give such notice as promptly as possible, and in no
case later than (i) with respect to notice of postponement of the maturity date, the business day immediately preceding the scheduled
maturity date and (ii) with respect to notice of the date to which the maturity date has been rescheduled, the business day immediately
following the final observation date as postponed.
In
the event that the securities are subject to early redemption, the issuer shall, (i) on the business day following the applicable
redemption determination date, give notice of the early redemption and the early redemption payment, including specifying the payment
date of the amount due upon the early redemption, (x) to each registered holder of the securities by mailing notice of such early
redemption by first class mail, postage prepaid, to such registered holder’s last address as it shall appear upon the registry
books, (y) to the trustee by facsimile confirmed by mailing such notice to the trustee by first class mail, postage prepaid, at
its New York office and (z) to the depositary by telephone or facsimile confirmed by mailing such notice to the depositary by first
class mail, postage prepaid, and (ii) on or prior to the early redemption date, deliver the aggregate cash amount due with respect
to the securities to the trustee for delivery to the depositary, as holder of the securities. Any notice that is mailed to a registered
holder of the securities in the manner herein provided shall be conclusively presumed to have been duly given to such registered
holder, whether or not such registered holder receives the notice. This notice shall be given by the issuer or, at the issuer’s
request, by the trustee in the name and at the expense of the issuer, with any such request to be
accompanied by a copy
of the notice to be given.
The issuer shall, or
shall cause the calculation agent to, (i) provide written notice to the trustee, on which notice the trustee may conclusively rely,
and to the depositary of the amount of cash to be delivered as contingent quarterly coupon, if any, with respect to each security
on or prior to 10:30 a.m. (New York City time) on the business day preceding each coupon payment date, and (ii) deliver the aggregate
cash amount due, if any, with respect to the contingent quarterly coupon to the trustee for delivery to the depositary, as holder
of the securities, on the applicable coupon payment date.
The issuer shall, or
shall cause the calculation agent to, (i) provide written notice to the trustee, on which notice the trustee may conclusively rely,
and to the depositary of the amount of cash, if any, to be delivered with respect to 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, if any, as holder of the securities,
on the maturity date.
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due July 15, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the SPDR
®
Dow Jones
®
Industrial Average
SM
ETF Trust
Principal at Risk Securities