CALCULATION
OF REGISTRATION FEE
|
|
Maximum Aggregate
|
|
Amount of Registration
|
Title of Each Class of Securities Offered
|
|
Offering Price
|
|
Fee
|
|
|
|
|
|
Call Warrants due 2020
|
|
$59,899
|
|
$7.26
|
July 2019
Pricing Supplement No. W-28
Registration Statement Nos. 333-221595;
333-221595-01
Dated July 19, 2019
Filed pursuant to Rule 424(b)(2)
M
organ
S
tanley
F
inance
LLC
Structured Investments
Opportunities in U.S. Equities
3,010 Put Warrants Due January 23, 2020 Based
on the Inverse Performance of the S&P 500
®
Index
Fully and Unconditionally Guaranteed by Morgan
Stanley
Principal at Risk Warrants
The put warrants (the “warrants”) are European-style
cash-settled put warrants issued by Morgan Stanley Finance LLC (“MSFL”) and fully and unconditionally guaranteed by
Morgan Stanley. The warrants provide the opportunity to gain inverse exposure to the performance of the S&P 500
®
Index (the “index”), as follows: if the arithmetic average of the index closing values on each of the five averaging
dates (the “final index level”) is less than 95% of the initial index level, which we refer to as the strike level,
the warrants will be automatically exercised on the expiration date (which will be the last averaging date), and we will pay a
cash settlement amount on the cash settlement date equal to the product of (i) the notional amount and (ii) the bearish index return,
subject to the maximum cash settlement amount. If the final index level, as measured on the five averaging dates, is greater than
or equal to the strike level, the warrants will not be exercised and will expire worthless on the expiration date. The warrants
may not be exercised by either you or us prior to the expiration date.
The warrants are highly risky and involve risks not associated
with an investment in conventional securities. If the level of the index does not decline below the strike level, you will lose
your entire investment in the warrants. In addition, even if the level of the index has decreased to below the strike level, if
the final index level is not sufficiently less than the strike level to offset the premium amount, you will lose a portion of your
initial investment. In order to receive a positive return on your investment, the final index level must be less than the strike
index level by a percentage greater than the warrant premium percentage
.
There is no minimum payment on the warrants. Accordingly,
you may lose some or all of your initial investment in the warrants.
The warrants are for investors who are willing to risk
their invested premium in exchange for the opportunity to gain leveraged returns for any depreciation of the index beyond the strike
level when the warrants are automatically exercised on the expiration date. You will not be able to purchase the warrants unless
you have an options-approved brokerage account. The warrants are issued as part of MSFL’s Series A Global Warrants 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 warrants 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
|
Index:
|
S&P 500
®
Index
|
Aggregate
premium amount:
|
$59,899
|
Premium
amount and original issue price:
|
$19.90 per warrant
|
Notional
amount:
|
$1,000 per warrant
|
Minimum
initial investment:
|
$10,000, resulting in a minimum initial purchase of 503 warrants (after rounding)
|
Pricing
date:
|
July 19, 2019
|
Original
issue date:
|
July 24, 2019 (3 business days after the pricing date)
|
Averaging
dates:
|
January 13, 2020, January 14, 2020, January 15, 2020, January 16, 2020 and January 17, 2020, subject to adjustment for non-index business days and certain market disruption events. We also refer to January 17, 2020 as the expiration date.
|
Cash
settlement date:
|
January 23, 2020
|
Exercise
of warrants; cash settlement amount:
|
The warrants will either be automatically exercised or will expire
worthless on the expiration date, as follows:
·
if the final index level, as measured on the five averaging dates, is
less than
the strike level, the warrants will
be automatically exercised on the expiration date. On the cash settlement date, we will pay with respect to the $19.90 premium
amount of each warrant an amount in cash equal to the product of (x) the notional amount and (y) the bearish index return.
In no event will the cash settlement amount exceed
the maximum cash settlement amount. Therefore, investors will not benefit from any depreciation in the final index level beyond
the barrier level.
Even if the bearish index return is positive
(meaning that the final index level is less than the strike level), if the bearish index return is less than the warrant premium
percentage (meaning that the final index level is not sufficiently less than the strike level to offset the warrant premium), you
will receive a cash settlement amount that is less than the premium amount and, therefore, you will lose a portion of your initial
investment in the warrants.
·
if the final index level, as measured on the five averaging dates, is
greater than or equal to
the strike level,
the warrants will expire worthless and the cash settlement amount will be $0.
The warrants are highly risky, and there is no
minimum payment on the warrants. Accordingly, you will lose all of your initial investment in the warrants if the final index level,
as measured on the five averaging dates, is greater than or equal to the strike level on the expiration date. If the index does
not depreciate sufficiently over the term of the warrants, you will lose your entire investment.
|
Bearish
index return:
|
(strike level – final index level) / initial index level
|
Maximum
cash settlement amount:
|
$150 per warrant
|
Initial
index level:
|
2,976.61, which is the index closing value on the pricing date
|
Final
index level:
|
The arithmetic average of the index closing values on each of the five averaging dates
|
Strike
level:
|
2,827.780, which is approximately 95% of the initial index level. If the final index level is greater than or equal to the strike level, investors will lose all of their investment in the warrants.
|
Barrier
level:
|
2,381.288, which is 80% of the initial index level. Investors will not benefit from any depreciation in the final index level beyond the barrier level.
|
Warrant
premium percentage:
|
1.99%
|
CUSIP
/ ISIN:
|
61769Q311 / US61769Q3112
|
Listing:
|
The warrants will not be listed on any securities exchange.
|
Agents:
|
J.P. Morgan Securities LLC and JPMorgan Chase Bank, N.A. See “Supplemental information regarding plan of distribution; conflicts of interest.”
|
Estimated
value on the pricing date:
|
$18.10 per $19.90 premium amount of warrants. See “Summary of Pricing Supplement” beginning on PS-3.
|
Commissions
and issue price:
|
|
Price to public
|
Agent’s commissions and fees
(1)
|
Proceeds to us
(2)
|
Per warrant
|
|
$19.90
|
$1.10
|
$18.80
|
Total
|
|
$59,899
|
$3,311
|
$56,588
|
|
(1)
|
J.P. Morgan Securities LLC, which we refer to as JPMS LLC, and JPMorgan Chase Bank, N.A. will act as placement agents for
the warrants. The placement agents will forego fees for sales to fiduciary accounts. The total fees represent the amount that the
placement agents receive from sales to accounts other than such fiduciary accounts. The placement agents will receive a fee from
us that will not exceed $1.10 per warrant. See “Description of the Warrants—Supplemental Information Concerning Plan
of Distribution” in this pricing supplement. For additional information, see “Plan of Distribution (Conflicts of Interest)”
in the accompanying prospectus supplement.
|
|
(2)
|
See “Description of the Warrants—Use of Proceeds and Hedging” beginning on PS-22.
|
You must have an options-approved
brokerage account in order to purchase the warrants and you must be experienced with respect to options and option transactions.
The warrants are highly risky
and involve risks not associated with an investment in conventional securities. If the final index level is greater than or equal
to the strike level, you will lose all of your investment in the warrants. See “Risk Factors” beginning on PS-10.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these warrants, or determined if this pricing supplement is truthful or complete. Any
representation to the contrary is a criminal offense.
The warrants are not deposits or savings accounts and are
not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they obligations
of, or guaranteed by, a bank.
You should read this document together with the related prospectus
supplement, index supplement and prospectus, each of which can be accessed via the hyperlinks below. You should read the more detailed
description of the warrants in this pricing supplement. In particular, you should review and understand the descriptions in “Summary
of Pricing Supplement” and “Description of the Warrants.”
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.
Prospectus Supplement dated November 16, 2017
Index Supplement dated November 16, 2017
Prospectus dated November 16, 2017
JPMorgan
Placement Agent
For
a description of certain restrictions on offers, sales and deliveries of the warrants and on the distribution of this pricing
supplement and the accompanying prospectus supplement, index supplement and prospectus relating to the warrants, see the section
of this pricing supplement called “Description of the Warrants—Supplemental Information Concerning Plan of Distribution;
Conflicts of Interest.”
No
action has been or will be taken by us, the agent or any dealer that would permit a public offering of the warrants or possession
or distribution of this pricing supplement or the accompanying prospectus supplement, index supplement or prospectus in any jurisdiction,
other than the United States, where action for that purpose is required. Neither this pricing supplement nor the accompanying
prospectus supplement, index supplement and prospectus may be used for the purpose of an offer or solicitation by anyone in any
jurisdiction in which such offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer
or solicitation.
In
addition to the selling restrictions set forth in “Plan of Distribution (Conflicts of Interest)” in the accompanying
prospectus supplement, the following selling restrictions also apply to the warrants:
The
warrants have not been and will not be registered with the Comissão de Valores Mobiliários (The Brazilian Securities
Commission). The warrants may not be offered or sold in the Federative Republic of Brazil except in circumstances which do not
constitute a public offering or distribution under Brazilian laws and regulations.
The
warrants have not been registered with the Superintendencia de Valores y Seguros in Chile and may not be offered or sold publicly
in Chile. No offer, sales or deliveries of the warrants or distribution of this pricing supplement or the accompanying prospectus
supplement, index supplement or prospectus, may be made in or from Chile except in circumstances which will result in compliance
with any applicable Chilean laws and regulations.
The
warrants have not been registered with the National Registry of Securities maintained by the Mexican National Banking and Securities
Commission and may not be offered or sold publicly in Mexico. This pricing supplement and the accompanying prospectus supplement,
index supplement and prospectus may not be publicly distributed in Mexico.
SUMMARY
OF PRICING SUPPLEMENT
The
following summary describes the warrants in general terms only. You should read the summary together with the more-detailed information
that is contained in the rest of this pricing supplement and in the accompanying index supplement, prospectus supplement and prospectus.
You should carefully consider, among other things, the matters set forth in “Risk Factors” below.
The
3,010 Put Warrants Due January 23, 2020 Based on the Inverse Performance of the S&P 500
®
Index, which we refer
to as the warrants, are European-style cash-settled put warrants. The warrants provide the opportunity to gain inverse exposure
to the performance of the S&P 500
®
Index, which we refer to as the index, as follows: if the final index level,
as measured on the five averaging dates, is less than 95% of the initial index level, which we refer to as the strike level, the
warrants will be automatically exercised on the expiration date (which will be the last averaging date), and we will pay a cash
settlement amount on the cash settlement date equal to the product of (i) the notional amount and (ii) the bearish index return,
subject to the maximum cash settlement amount. If the final index level, as measured on the five averaging dates, is greater than
or equal to the strike level, the warrants will not be exercised and will expire worthless on the expiration date. The warrants
may not be exercised by either you or us prior to the expiration date.
The warrants are highly risky and involve risks not
associated with an investment in conventional securities. If the level of the index does not decline below the strike level, you
will lose your entire investment in the warrants. In addition, even if the level of the index has decreased to below the strike
level, if the final index level is not sufficiently less than the strike level to offset the premium amount, you will lose a portion
of your initial investment. In order to receive a positive return on your investment, the final index level must be less than
the strike level by a percentage greater than the warrant premium percentage of 1.99%. There is no minimum payment on the warrants.
Accordingly, you may lose some or all of your initial investment in the warrants.
The warrants are for investors who are willing
to risk their invested premium in exchange for the opportunity to gain leveraged returns for any depreciation of the index beyond
the strike level when the warrants are automatically exercised on the expiration date.
You will not be able to purchase the
warrants unless you have an options-approved brokerage account. All payments are subject to our credit risk.
Each warrant costs $19.90
|
We are offering the 3,010 Put
Warrants Due January 23, 2020 Based on the Inverse Performance of the S&P 500
®
Index, which we refer to
as the warrants. The premium amount and original issue price of each warrant is $19.90.
|
|
The
original issue price includes costs associated with issuing, selling, structuring and hedging the warrants, which are
borne by you, and, consequently, the estimated value of the warrants on the pricing date is less than $19.90. We estimate
that the value of each warrant on the pricing date is $18.10.
Our
estimate of the value of the warrants as determined on the pricing date will be set forth in the final pricing supplement.
What
goes into the estimated value on the pricing date?
The
estimated value of the warrants is determined using our own pricing and valuation models, market inputs and assumptions
relating to the index, instruments based on the index, volatility and other factors including current and expected interest
rates as well as our creditworthiness.
What
is the relationship between the estimated value on the pricing date and the secondary market price of the warrants?
The
price at which market participants may purchase the warrants in the secondary market, absent changes in market conditions, including
those related to the index, may vary from, and be lower than, the estimated value on the pricing date, because the secondary market
price takes into account the bid-offer spread that such market participants 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 warrants
are not fully deducted upon issuance, for a period of up to 3 months following the issue date, to the extent that market participants
may buy or sell the warrants in the secondary market, absent changes in market conditions, including those related to the index,
and to our secondary market credit spreads, they would generally 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.
There may not be a secondary market for the warrants, and, if
a secondary market once develops, it may cease to exist at any time.
|
Exercise of the warrants; cash settlement
amount
|
The
warrants are European-style cash-settled put warrants. The warrants will be automatically exercised or will expire worthless
on the expiration date, as follows:
|
|
•
if the final index level, as measured on the five averaging dates, is less than the strike level
, the warrants will
be automatically exercised on the expiration date. On the cash settlement date, we will pay for each warrant a cash
settlement amount equal to:
|
|
notional amount
× bearish index return, subject to the maximum cash settlement amount
|
|
where,
|
|
notional
amount
|
=
|
$1,000
per warrant
|
|
bearish index
return
|
=
|
strike
level – final index level
|
initial index level
|
|
final index level
|
=
|
The arithmetic average
of the index closing values on each of the five averaging dates, subject to postponement for non-index business days or market
disruption events
|
|
initial
index level
|
=
|
2,976.61,
which is the closing value of the index on July 19, 2019, which we refer to as the pricing date.
|
|
|
strike level
|
=
|
2,827.780, which is approximately
95% of the initial index level
|
|
|
maximum cash settlement
amount
|
=
|
$150 per warrant
|
|
|
•
if the final index level, as measured on the five averaging dates, is greater than or equal to the strike level
,
the warrants will expire worthless and the cash settlement amount will be $0.
|
|
The warrants may not be exercised
by either you or us prior to the expiration date.
The warrants are highly risky. If the level of the
index does not decline below the strike level, you will lose your entire investment in the warrants. In addition,
if the final index level is not sufficiently less than the strike level to offset the warrant premium, you will lose a portion
of your initial investment.
In order to receive a positive return on your investment, the final index level
must be less than the strike level by a percentage of the initial index level greater than the warrant premium percentage. The
warrant premium percentage is 1.99%.
There is no minimum payment on the warrants. Accordingly, you could
lose your entire initial investment in the warrants.
|
|
All
payments on the warrants are subject to our credit risk.
|
|
Beginning
on PS-6, in the section titled “Hypothetical Payouts on the Warrants,” we have provided a table and corresponding
examples illustrating the calculation of the cash settlement amount on the warrants at maturity over a range of hypothetical
final index levels and resulting bearish index returns, as determined on the five averaging dates. The examples do not
show every situation that can occur.
|
|
You
can review the historical values of the index in the section of this pricing supplement called “Description of the Warrants—Historical
Information” starting on PS-21.
You cannot predict the future performance of the index based on its
|
|
historical performance.
|
|
Investing in the warrants is not equivalent
to investing in, or taking a direct short position in, the index or its component stocks.
|
Morgan Stanley & Co. LLC will be the calculation agent
|
We have appointed our affiliate, Morgan Stanley & Co. LLC,
to act as calculation agent for The Bank of New York Mellon, a New York banking corporation, the warrant agent for the warrants. As
calculation agent, MS & Co. will determine the initial index level, the index closing value on each averaging date, the
final index level and the bearish index return and will calculate the payment that you will receive on the cash settlement
date, if any.
|
Where you can find more information on the warrants
|
The warrants are unsecured warrants issued as part of our Series
A global warrants program. You can find a general description of our Series A global warrants program in the accompanying
prospectus supplement dated November 16, 2017, the index supplement dated November 16, 2017 and the prospectus dated November
16, 2017.
|
|
Because this is a summary, it does not contain all of the
information that may be important to you. For a detailed description of the terms of the warrants, you should read
the “Description of the Warrants” section in this pricing supplement. You should also read about some
of the risks involved in investing in the warrants in the section called “Risk Factors.” The tax and
accounting treatment of investments in index-linked warrants such as these may differ from that of investments in ordinary
debt securities or common stock. See the section of this pricing supplement called “Description of the Warrants—United
States Federal Taxation.” We urge you to consult with your investment, legal, tax, accounting and other advisers
with regard to any proposed or actual investment in the warrants.
|
HYPOTHETICAL
PAYOUTS ON THE WARRANTS
The
following examples and table illustrate the calculation of the cash settlement amount on the warrants payable at maturity over
a range of hypothetical final index levels and resulting bearish index returns, as determined on the five averaging dates. The
hypothetical cash settlement amounts set forth below are for illustrative purposes only. The actual initial index level, strike
level, barrier level, notional amount and warrant premium percentage are set forth on the cover of this document. The actual cash
settlement amount payable on the cash settlement date will be determined based on the performance of the index, as determined
on the five averaging dates. The numbers appearing in the following tables and examples may have been rounded for ease of analysis.
The
examples and table are based on the following terms:
Term:
|
Approximately 6 months
|
Notional Amount:
|
$1,000 per warrant
|
Premium Amount:
|
$19.90 per warrant
|
Hypothetical Initial Index Level:
|
2,700
|
Hypothetical Strike Level:
|
2,565, which is 95% of the hypothetical
Initial Index Level
|
Hypothetical Barrier Level:
|
2,160, which is 80% of the hypothetical
Initial Index Level
|
Warrant Premium Percentage:
|
1.99% per warrant
|
Exercise of Warrants:
|
If the final index level is greater
than the strike level, the warrants will be automatically exercised on the expiration date and you will receive the cash settlement
amount, subject to the maximum cash settlement amount. If the final index level is equal to or greater than the strike
level, the warrants will expire worthless and the cash settlement amount will be zero.
|
Example
1: The final index level is 2,295, resulting in a bearish index return of 10%.
The
final index level, as measured on the five averaging dates, is 2,295, which represents a 15% decrease from the initial index level
of 2,700. The bearish index return is calculated as follows:
(2,565
– 2,295) / 2,700 = 10%
Since
the final index level is less than the strike level, your warrant will be automatically exercised and your payment upon expiration
will be calculated as follows:
|
cash settlement amount
= notional amount × bearish index return
|
|
|
|
|
|
=
$1,000 × 10%
|
|
|
|
|
|
=
$100
|
Therefore,
on the cash settlement date, you will receive $100 for each $19.90 warrant (an approximately 402.51% total return).
Example
2: The final index level is 1,890, resulting in a bearish index return of 25%.
The
final index level, as measured on the five averaging dates, is 1,890, which represents a 30% decrease from the initial index level
of 2,700. The bearish index return is calculated as follows:
(2,565
– 1,890) / 2,700 = 25%
Since
the final index level is less than the strike level, your warrant will be automatically exercised and your payment upon expiration
will be calculated as follows:
|
cash settlement amount = notional
amount × bearish index return, subject to the maximum cash settlement amount
|
|
|
|
|
|
=
$1,000 × 25%, subject to the maximum cash settlement amount
|
|
|
|
|
|
=
$150
|
Since
the final index level is less than the barrier level, your payment upon expiration will be limited by the maximum cash settlement
amount. Therefore, on the cash settlement date, you will receive $150 for each $19.90 warrant (an approximately 653.77% total
return). This represents the maximum amount payable upon expiration of the warrants. You will not benefit from any depreciation
in the final index level beyond the barrier level.
Example
3: The final index level is 2,511.27, resulting in a bearish index return of 1.99%.
The
final index level, as measured on the five averaging dates, is 2,511.27, which represents a 6.99% decrease from the initial index
level of 2,700.
The
bearish index return is calculated as follows:
(2,565
– 2,511.27) / 2,700 = 1.99%
Since
the final index level is less than the strike level, your warrant will be automatically exercised and your payment upon expiration
will be calculated as follows:
|
cash settlement amount = notional amount × bearish index return
|
|
|
|
|
|
=
$1,000 × 1.99%
|
|
|
|
|
|
=
$19.90
|
However,
because the bearish index return is equal to the warrant premium percentage of 1.99%, which results in a cash settlement amount
equal to the premium amount paid per warrant, you will not receive a positive return on your investment. Therefore, on the cash
settlement date, you will receive $19.90 for each $19.90 warrant (a 0.00% total return).
Example
4: The final index level is 2,538, resulting in a bearish index return of 1%.
The
final index level, as measured on the five averaging dates, is 2,538, which represents a 6% decrease from the initial index level
of 2,700.
The
bearish index return is calculated as follows:
(2,565
– 2,538) / 2,700 = 1%
Since
the final index level is less than the strike level, your warrant will be automatically exercised and your payment upon expiration
will be calculated as follows:
|
cash settlement amount = notional amount × bearish index return
|
|
|
|
|
|
=
$1,000 × 1%
|
|
|
|
|
|
=
$10
|
In
this example, even though the final index level is less than the strike level, because the bearish index return is less than the
warrant premium percentage of 1.99%, the cash settlement amount does not fully offset the premium amount paid on the warrants
and you will lose part of your investment. Therefore, on the cash settlement date, you will receive $10 for each $19.90 warrant
(an approximately 49.75% total loss).
Accordingly,
if the bearish index return is positive but less than the warrant premium percentage (meaning that the final index level is not
sufficiently less than the strike level to offset the warrant premium), you will receive a cash settlement amount that is less
than the premium amount and, therefore, you will lose a portion of your initial investment in the warrants.
Example
5: The final index level is 2,565, resulting in a bearish index return of 0%.
The
final index level, as measured on the five averaging dates, is 2,565, which is equal to 95% of the initial index level of 2,700.
The bearish index return is calculated as follows:
(2,565
– 2,565) / 2,700 = 0%
Since
the final index level is equal to the strike level, the warrants will not be exercised and will expire worthless on the expiration
date. Therefore, the loss on your initial investment in the warrants will be 100% (a total loss of your initial investment), and
you will receive $0 for each $19.90 warrant at maturity (a total loss of your initial investment).
Example
6: The final index level is 3,240, resulting in a bearish index return of -25%.
The
final index level, as measured on the five averaging dates, is 3,240, which represents a 20% increase from the initial index level
of 2,700. The bearish index return is calculated as follows:
(2,565
– 3,240) / 2,700 = -25%
Since
the final index level is greater than the strike level, the warrants will not be exercised and will expire worthless on the expiration
date. Therefore, the loss on your initial investment in the warrants will be 100% (a total loss of your initial investment), and
you will receive $0 for each $19.90 warrant at maturity (a total loss of your initial investment).
Accordingly,
if the bearish index return is zero or negative (meaning that the final index level is greater than or equal to the strike level),
you will lose all of your initial investment in the warrants.
Cash
Settlement Amount at Maturity
Final
Index Level
|
Percentage
Change from Initial Index Level to Final Index Level
|
Bearish
Index Return
|
Cash
Settlement Amount
|
Cash
Settlement Amount
minus
Premium Amount
|
Total
Return on the Put Warrants
|
4,320.00
|
60.00%
|
-65.00%
|
$0.00
|
-$19.90
|
-100.00%
|
3,780.00
|
40.00%
|
-45.00%
|
$0.00
|
-$19.90
|
-100.00%
|
3,240.00
|
20.00%
|
-25.00%
|
$0.00
|
-$19.90
|
-100.00%
|
2,970.00
|
10.00%
|
-15.00%
|
$0.00
|
-$19.90
|
-100.00%
|
2,835.00
|
5.00%
|
-10.00%
|
$0.00
|
-$19.90
|
-100.00%
|
2,700.00
|
0.00%
|
-5.00%
|
$0.00
|
-$19.90
|
-100.00%
|
2,565.00
|
-5.00%
|
0.00%
|
$0.00
|
-$19.90
|
-100.00%
|
2,538.00
|
-6.00%
|
1.00%
|
$10.00
|
-$9.90
|
-49.75%
|
2,511.27
|
-6.99%
|
1.99%
|
$19.90
|
$0.00
|
0.00%
|
2,430.00
|
-10.00%
|
5.00%
|
$50.00
|
$30.10
|
151.26%
|
2,295.00
|
-15.00%
|
10.00%
|
$100.00
|
$80.10
|
402.51%
|
2,160.00
|
-20.00%
|
15.00%
|
$150.00
|
$130.10
|
653.77%
|
1,620.00
|
-40.00%
|
35.00%
|
$150.00
|
$130.10
|
653.77%
|
1,080.00
|
-60.00%
|
55.00%
|
$150.00
|
$130.10
|
653.77%
|
540.00
|
-80.00%
|
75.00%
|
$150.00
|
$130.10
|
653.77%
|
0.00
|
-100.00%
|
95.00%
|
$150.00
|
$130.10
|
653.77%
|
DESCRIPTION
OF THE WARRANTS
Terms
used but not defined herein have the meanings given to such terms in the accompanying prospectus supplement. The term “Warrant”
refers to each $19.90 Premium Amount of our 3,010 Put Warrants Due January 23, 2020 Based on the Inverse Performance of the S&P
500
®
Index.
Aggregate
Premium Amount
|
$59,899
|
Aggregate
Notional Amount
|
$3,010,000
|
Pricing
Date
|
July
19, 2019
|
Original
Issue Date (Settlement Date)
|
July
24, 2019 (3 Business Days after the Pricing Date)
|
Cash
Settlement Date
|
January
23, 2020, subject to extension as described in the following paragraph.
|
|
If
the Expiration Date is postponed in accordance with the definition thereof so that it falls less than two Business Days prior
to the scheduled Cash Settlement Date, the Cash Settlement Date will be postponed to the second Business Day following the
Expiration Date as postponed. See “––Expiration Date” and “––Averaging
Dates” below.
|
Issue
Price
|
100%
($19.90 per Warrant)
|
Premium
Amount
|
$19.90
per Warrant
|
Denominations
|
$19.90
and integral multiples thereof
|
Notional
Amount
|
$1,000
per Warrant
|
Minimum
Initial Investment
|
$10,000,
resulting in a minimum initial purchase of 503 Warrants (after rounding)
|
Specified
Currency
|
U.S.
dollars
|
Exercise
of Warrants;
|
|
Cash
Settlement Amount
|
The
Warrants will either be automatically exercised or will expire worthless on the Expiration Date, as follows:
|
(i)
if the Final Index Level, as measured on the five Averaging Dates, is
less than
the Strike Level, the Warrants will be
automatically exercised on the Expiration Date. On the Cash Settlement Date, upon delivery of the Warrants to the Warrant Agent,
we will pay with respect to the $19.90 Premium Amount of each Warrant an amount in cash, as determined by the Calculation Agent,
equal to the product of (x) the Notional Amount and (y) the Bearish Index Return, subject to the Maximum Cash Settlement Amount,
or
(ii)
if the Final Index Level, as measured on the five Averaging Dates, is
greater than or equal to
the Strike Level, the Warrants
will expire worthless and the Cash Settlement Amount will be $0.
We
shall, or shall cause the Calculation Agent to, (i) provide written notice to the Warrant Agent and to The Depository Trust Company,
which we refer to as DTC, of the amount of cash to be delivered with respect to the $19.90 Premium Amount of each Warrant, on
or prior to 10:30 a.m. (New York City time) on the Business Day preceding the Cash Settlement Date, and (ii) deliver the aggregate
cash amount due, if any, with respect to the Warrants to the Warrant Agent for delivery to DTC, as holder of the Warrants, on
or prior to the Cash Settlement Date. We expect such amount of cash will be distributed to investors on the Cash Settlement Date
in accordance with the standard rules and procedures of DTC and its direct and indirect participants. See “—Book Entry
Security or Certificated Security” below, and see “Forms of Securities—The Depositary” in the accompanying
prospectus.
Bearish
Index Return
|
A
fraction, as determined by the Calculation Agent, the numerator of which is the Strike Level minus the Final Index Level and
the denominator of which is the Initial Index Level, as described by the following formula:
|
Bearish Index
Return
|
=
|
Strike
Level – Final Index Level
|
Initial Index
Level
|
Initial
Index Level
|
2,976.61,
which is the Index Closing Value on the Pricing Date. See “Discontinuance of the Index; Alteration of Method of Calculation”
below.
|
Strike
Level
|
2,827.780,
which is approximately 95% of the Initial Index Level. If the Final Index Level is greater than or equal to the Strike Level,
investors will lose all of their investment in the Warrants. See “Discontinuance of the Index; Alteration of Method
of Calculation” below.
|
Barrier
Level
|
2,381.288,
which is 80% of the Initial Index Level. Investors will not benefit from any depreciation in the Final Index Level beyond
the Barrier Level. See “Discontinuance of the Index; Alteration of Method of Calculation” below.
|
Final
Index Level
|
The
arithmetic average of the Index Closing Values on each of the five Averaging Dates, as determined by the Calculation Agent.
|
Maximum
Cash Settlement Amount
|
$150
per Warrant. Therefore, investors will not benefit from any depreciation in the Final Index Level beyond the Barrier Level.
|
Index
Closing Value
|
The
Index Closing Value on any Index Business Day will be determined by the Calculation Agent and will equal the official closing
value of the Index, or any Successor Index (as defined under “—Discontinuance of the Index; Alteration of Method
of Calculation” below), published at the regular official weekday close of trading on that Index Business Day by the
Index Publisher. In certain circumstances, the Index Closing Value will be based on the alternate calculation of the Index
described under “—Discontinuance of the Index; Alteration of Method of Calculation.”
|
Index
Publisher
|
S&P
Dow Jones Indices LLC or any successor publisher of the Index.
|
Expiration
Date
|
January
17, 2020, subject to postponement for non-Index Business Days or Market Disruption Events as described under “Averaging
Dates” below.
|
Averaging
Dates
|
January
13, 2020, January 14, 2020, January 15, 2020, January 16, 2020 and the Expiration Date.
|
If
a Market Disruption Event occurs on any scheduled Averaging Date or any scheduled Averaging Date is not an Index Business Day,
such scheduled Averaging Date shall be subject to postponement as described below.
If
a Market Disruption Event occurs on any scheduled Averaging Date or if any scheduled Averaging Date is not an Index Business Day
with respect to the Index, the Index Closing Value for such date shall be determined on the immediately succeeding Index Business
Day on which no Market Disruption Event shall have occurred. Each succeeding Averaging Date shall then be the next Index Business
Day following the preceding Averaging Date as postponed. The Final Index Level shall be determined on the date on which the Index
Closing Values for all scheduled Averaging Dates have been determined;
provided
that (i) the Index Closing Value for any
Averaging Date shall not be determined on a date later than the fifth Business Day after the scheduled Expiration Date, (ii) the
Index Closing Value for any remaining Averaging Dates that would otherwise fall after such fifth Business Day shall be the Index
Closing Value on such fifth Business Day and (iii) if such fifth Business Day is not an Index Business Day or if there is a Market
Disruption Event on such date, the Calculation Agent shall determine the Index Closing Value of the Index on such date in accordance
with the formula for and method of calculating the Index last in effect prior to the commencement of the Market Disruption Event
(or prior to the non-Index Business Day), without rebalancing or substitution, using the closing price (or, if trading in the
relevant securities has been materially suspended or materially limited, its good faith estimate of the closing price that would
have prevailed but for such suspension, limitation or non-Index Business Day) on such date of each security most recently constituting
the Index.
Business
Day
|
Any
day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized
or required by law or regulation to close in The City of New York.
|
Index
Business Day
|
A
day, as determined by the Calculation Agent, on which trading is generally conducted on each of the Relevant Exchange(s) for
the Index, other than a day on which trading on such exchange(s) is scheduled to close prior to the time of the posting of
its regular final weekday closing price.
|
Relevant
Exchange
|
The
primary exchange(s) or market(s) of trading for (i) any security then included in the Index, or any Successor Index, and (ii)
any futures or options contracts related to the Index or to any security then included in the Index.
|
Book
Entry Security or
|
|
Certificated
Security
|
Book
Entry. The Warrants will be issued in the form of one or more fully registered global warrants, which will be deposited
with, or on behalf of, DTC and will be registered in the name of a nominee of DTC. DTC’s nominee will be
the only registered holder of the Warrants. Your beneficial interest in the Warrants will be evidenced solely by
entries on the books of the Warrants intermediary acting on your behalf as a direct or indirect participant in DTC. In
this pricing supplement, all references to actions taken by “you” or to be taken by “you” refer to
actions taken or to be taken by DTC and its participants acting on your behalf, and all references to payments or notices
to you will mean payments or notices to DTC, as the registered holder of the Warrants, for distribution to participants in
accordance with DTC’s procedures. For more information regarding DTC and book-entry warrants, please read
“Forms of Securities—The Depositary,” “Securities Offered on a Global Basis Through the Depositary—Book-Entry,
Delivery and Form” and “Securities Offered on a Global Basis Through the Depositary—Global Clearance and
Settlement Procedures” in the accompanying prospectus.
|
Warrant
Agent
|
The
Bank of New York Mellon, a New York banking corporation
|
Agents
|
J.P.
Morgan Securities LLC and JPMorgan Chase Bank, N.A.
|
Calculation
Agent
|
MS
& Co. and its successors
|
All
determinations made by the Calculation Agent will be at the sole discretion of the Calculation Agent and will, in the absence
of manifest error, be conclusive for all purposes and binding on you, the Warrant Agent and us.
All
calculations with respect to the Cash Settlement Amount, if any, will be made by the Calculation Agent and will be rounded to
the nearest one hundred-thousandth, with five one-millionths rounded upward (e.g., .876545 would be rounded to .87655); all dollar
amounts related to determination of the amount of cash payable per Warrant, if any, will be rounded to the nearest ten-thousandth,
with five one hundred-thousandths rounded upward (e.g., .76545 would be rounded up to .7655); and all dollar amounts paid, if
any, on the aggregate number of Warrants will be rounded to the nearest cent, with one-half cent rounded upward.
Because
the Calculation Agent is our affiliate, the economic interests of the Calculation Agent and its affiliates may be adverse to your
interests as an investor in the Warrants, including with respect to certain determinations and judgments that the Calculation
Agent must make in determining the Initial Index Level or the Final Index Level. See “—Discontinuance of the Index;
Alteration of Method of Calculation” below. MS & Co. is obligated to carry out its duties and functions as Calculation
Agent in good faith and using its reasonable judgment.
Market
Disruption Event
|
Market
Disruption Event means, with respect to the Index:
|
(i) the
occurrence or existence of any of:
(a) a
suspension, absence or material limitation of trading of securities then constituting 20 percent or more of the level of the Index
(or the Successor Index (as defined below under “—Discontinuance of the Index; Alteration of Method of Calculation”))
on the Relevant Exchange for such securities for more than two hours of trading or during the one-half hour period preceding the
close of the principal trading session on such Relevant Exchange, or
(b)
a breakdown or failure in the price and trade reporting systems of any Relevant Exchange
as a result of which the reported trading prices for securities then constituting 20 percent or more of the level of the Index
(or the Successor Index) during the last one-half hour preceding the close of the principal trading session on such Relevant Exchange
are materially inaccurate, or
(c)
the suspension, material limitation or absence of trading on any major U.S. securities
market for trading in futures or options contracts or exchange-traded funds related to the Index (or the Successor Index) for
more than two hours of trading or during the one-half hour period preceding the close of the principal trading session on such
market,
in
each case, as determined by the Calculation Agent in its sole discretion; and
(ii) a
determination by the Calculation Agent in its sole discretion that any event described in clause (i) above materially interfered
with our ability or the ability of any of our affiliates to unwind or adjust all or a material portion of the hedge position with
respect to the Warrants.
For
the purpose of determining whether a Market Disruption Event exists at any time, if trading in a security included in the Index
is materially suspended or materially limited at that time, then the relevant percentage contribution of that security to the
level of the Index shall be based on a comparison of (x) the portion of the value of the Index attributable to that security relative
to (y) the overall value of the Index, in each case immediately before that suspension or limitation.
For
the purpose of determining whether a Market Disruption Event has occurred: (1) a limitation on the hours or number of days of
trading will not constitute a Market Disruption Event if it results from an announced change in the regular business hours of
the Relevant Exchange or market, (2) a decision to permanently discontinue trading in the relevant futures or options contract
or exchange-traded fund will not constitute a Market Disruption Event, (3) a suspension of trading in futures or options contracts
or exchange-traded funds on the Index by the primary securities market trading in such contracts or funds by reason of (a) a price
change exceeding limits set by such securities exchange or market, (b) an imbalance of orders relating to such contracts or funds,
or (c) a disparity in bid and ask quotes relating to such contracts or funds will constitute a suspension, absence or material
limitation of trading in futures or options contracts or exchange-traded funds related to the Index and (4) a “suspension,
absence or material limitation of trading” on any Relevant
Exchange
or on the primary market on which futures or options contracts or exchange-traded funds related to the Index are traded will not
include any time when such securities market is itself closed for trading under ordinary circumstances.
Discontinuance
of the Index;
|
|
Alteration
of Method of Calculation
|
If
the Index Publisher discontinues publication of the Index and the Index Publisher or another entity (including MS & Co.)
publishes a successor or substitute index that MS & Co., as the Calculation Agent, determines, in its sole discretion,
to be comparable to the discontinued Index (such index being referred to herein as a “Successor Index”), then
any subsequent Index Closing Value will be determined by reference to the published value of such Successor Index at the regular
weekday close of trading on any Index Business Day that the Index Closing Value is to be determined, and, to the extent the
Index Closing Value of the Successor Index differs from the Index Closing Value of the Index at the time of such substitution,
proportionate adjustments will be made by the Calculation Agent to the Initial Index Level, Strike Level and Barrier Level.
|
Upon
any selection by the Calculation Agent of a Successor Index, the Calculation Agent will cause written notice thereof to be furnished
to the Warrant Agent, to us and to DTC, as holder of the Warrants, within three Business Days of such selection. We expect that
such notice will be made available to you, as a beneficial owner of the Warrants, in accordance with the standard rules and procedures
of DTC and its direct and indirect participants.
If
the Index Publisher discontinues the publication of the Index prior to, and such discontinuance is continuing on, any Averaging
Date and the Calculation Agent determines, in its sole discretion, that no Successor Index is available at such time, then the
Calculation Agent will determine the Index Closing Value for such date. The Index Closing Value will be computed by the Calculation
Agent in accordance with the formula for calculating the Index last in effect prior to such discontinuance, using the closing
price (or, if trading in the relevant securities has been materially suspended or materially limited, its good faith estimate
of the closing price that would have prevailed but for such suspension or limitation) at the close of the principal trading session
of the Relevant Exchange on such date of each security most recently constituting the Index without any rebalancing or substitution
of such securities following such discontinuance. Notwithstanding these alternative arrangements, discontinuance of the publication
of the Index may adversely affect the value of the Warrants.
If
at any time the method of calculating the Index or a Successor Index, or the value thereof, is changed in a material respect,
or if the Index or a Successor Index is in any other way modified so that such index does not, in the sole opinion of MS &
Co., as the Calculation Agent, fairly represent the value of the Index or such Successor Index had such changes or modifications
not been made, then, from and after such time, the Calculation Agent will, at the close of business in New York City on each date
on which the Index Closing Value is to be determined, make such
calculations
and adjustments as, in the good faith judgment of the Calculation Agent, may be necessary in order to arrive at a value of a stock
index comparable to the Index or such Successor Index, as the case may be, as if such changes or modifications had not been made,
and the Calculation Agent will calculate the Index Closing Value with reference to the Index or such Successor Index, as adjusted.
Accordingly, if the method of calculating the Index or such Successor Index is modified so that the value of such index is a fraction
of what it would have been if it had not been modified (
e.g.
, due to a split in the index), then the Calculation Agent
will adjust such index in order to arrive at a value of the Index or such Successor Index as if it had not been modified (
e.g.
,
as if such split had not occurred).
The
Index
|
The
S&P 500
®
Index, which is calculated, maintained and published by S&P Dow Jones Indices LLC (“S&P”),
consists of stocks of 500 component companies selected to provide a performance benchmark for the U.S. equity markets. The
calculation of the S&P 500
®
Index is based on the relative value of the float adjusted aggregate market
capitalization of the 500 component companies as of a particular time as compared to the aggregate average market capitalization
of 500 similar companies during the base period of the years 1941 through 1943. For additional information about
the S&P 500
®
Index, see the information set forth under “S&P 500
®
Index”
in the accompanying index supplement.
|
Historical
Information
|
The
following table sets forth the published high and low Index Closing Values, as well as end-of-quarter Index Closing Values,
of the Index for each quarter in the period from January 1, 2014 through July 19, 2019. The Index Closing Value
on July 19, 2019 was 2,976.61. The graph following the table sets forth the historical performance of the Index for each day
during the same period. We obtained the information in the table below from Bloomberg Financial Markets, without
independent verification.
|
The
historical values of the Index should not be taken as an indication of future performance, and no assurance can be given as to
the Index Closing Value on any Averaging Date. The Final Index Level may be at or above the Strike Level so that the Warrants
expire worthless on the Expiration Date.
We
cannot give you any assurance that the Bearish Index Return will be greater than the Warrant Premium Percentage so that you will
not lose money on your investment, or that it will be positive so that you will not lose your entire investment in the Warrants.
S&P
500
®
Index
|
High
|
Low
|
Period
End
|
2014
|
|
|
|
First
Quarter
|
1,878.04
|
1,741.89
|
1,872.34
|
Second
Quarter
|
1,962.87
|
1,815.69
|
1,960.23
|
Third
Quarter
|
2,011.36
|
1,909.57
|
1,972.29
|
Fourth
Quarter
|
2,090.57
|
1,862.49
|
2,058.90
|
2015
|
|
|
|
First
Quarter
|
2,117.39
|
1,992.67
|
2,067.89
|
Second
Quarter
|
2,130.82
|
2,057.64
|
2,063.11
|
Third
Quarter
|
2,128.28
|
1,867.61
|
1,920.03
|
Fourth
Quarter
|
2,109.79
|
1,923.82
|
2,043.94
|
2016
|
|
|
|
S&P
500
®
Index
|
High
|
Low
|
Period
End
|
First
Quarter
|
2,063.95
|
1,829.08
|
2,059.74
|
Second
Quarter
|
2,119.12
|
2,000.54
|
2,098.86
|
Third
Quarter
|
2,190.15
|
2,088.55
|
2,168.27
|
Fourth
Quarter
|
2,271.72
|
2,085.18
|
2,238.83
|
2017
|
|
|
|
First
Quarter
|
2,395.96
|
2,238.83
|
2,362.72
|
Second
Quarter
|
2,453.46
|
2,328.95
|
2,423.41
|
Third
Quarter
|
2,519.36
|
2,409.75
|
2,519.36
|
Fourth
Quarter
|
2,690.16
|
2,519.36
|
2,673.61
|
2018
|
|
|
|
First
Quarter
|
2,872.87
|
2,581.00
|
2,640.87
|
Second
Quarter
|
2,786.85
|
2,581.88
|
2,718.37
|
Third
Quarter
|
2,930.75
|
2,713.22
|
2,913.98
|
Fourth
Quarter
|
2,925.51
|
2,351.10
|
2,506.85
|
2019
|
|
|
|
First
Quarter
|
2,854.88
|
2,447.89
|
2,834.40
|
Second
Quarter
|
2,954.18
|
2,744.45
|
2,941.76
|
Third
Quarter (through July 19, 2019)
|
3,014.30
|
2,964.33
|
2,976.61
|
Historical
Daily Index Closing Values of the S&P 500
®
Index
January
1, 2014 through July 19, 2019
Use
of Proceeds and Hedging
|
The
proceeds from the sale of the Warrants will be used by us for general corporate purposes. We will receive, in aggregate,
$19.90 per Warrant issued, because, when we enter into hedging transactions in order to meet our obligations under the Warrants,
our hedging counterparty will reimburse the cost of the Agent’s commissions. The costs of the Warrants borne
by you and described beginning on PS-3 above comprise the Agent’s commissions and the cost of issuing, structuring and
hedging the Warrants. See also “Use of Proceeds” in the accompanying prospectus.
|
On
or prior to the Pricing Date, we hedged our anticipated exposure in connection with the Warrants by entering into hedging transactions
with our affiliates and/or third-party dealers. We expect our hedging counterparties to have taken positions in the securities
constituting the Index and in futures and/or options contracts on the Index or its component securities listed on major securities
markets. Such purchase activity could have affected the
Initial
Index Level, and therefore could have affected the value below which the Index must close on the Averaging Dates so that you do
not lose your entire initial investment in the Warrants. In addition, through our affiliates, we are likely to modify our hedge
position throughout the term of the Warrants, including on the Averaging Dates, by purchasing and selling the securities underlying
the Index, futures and/or options contracts on the Index or its component securities listed on major securities markets or positions
in any other available warrants or instruments that we may wish to use in connection with such hedging activities. As a result,
these entities may be unwinding or adjusting hedge positions during the term of the Warrants, and the hedging strategy may involve
greater and more frequent dynamic adjustments to the hedge as the Averaging Dates approach. We cannot give any assurance that
our hedging activities will not affect the value of the Index, and, therefore, adversely affect the value of the Warrants or the
payment you will receive on the Cash Settlement Date, if any.
Governing
Law
|
The
Warrants are governed by, and construed in accordance with, the laws of the State of New York.
|
In
the event MSFL or Morgan Stanley becomes subject to a proceeding under the Federal Deposit Insurance Act or Title II of the Dodd-Frank
Wall Street Reform and Consumer Protection Act (together, the “
U.S. Special Resolution Regimes
”), the transfer
of the Warrants, the Warrant Agreement and the related Morgan Stanley guarantee (together, the “
Relevant Agreements
”),
and any interest and obligation in or under the Relevant Agreements, from MSFL or Morgan Stanley, respectively, will be effective
to the same extent as the transfer would be effective under such U.S. Special Resolution Regime if the Relevant Agreements, and
any interest and obligation in or under the Relevant Agreements, were governed by the laws of the United States or a state of
the United States. In the event MSFL or Morgan Stanley, or any of their affiliates, becomes subject to a U.S. Special Resolution
Regime, default rights against MSFL or Morgan Stanley with respect to the Relevant Agreements are permitted to be exercised to
no greater extent than such default rights could be exercised under such U.S. Special Resolution Regime if the Relevant Agreements
were governed by the laws of the United States or a state of the United States.
Supplemental
Information Concerning
|
|
Plan
of Distribution
|
Under the terms
and subject to the conditions contained in the U.S. distribution agreement referred to in the prospectus supplement under “Plan
of Distribution (Conflicts of Interest),” the Agent, acting as principal for its own account, has agreed to purchase, and
we have agreed to sell, the aggregate premium amount of Warrants set forth on the cover of this pricing supplement. J.P.
Morgan Securities LLC and JPMorgan Chase Bank, N.A. will act as placement agents for the Warrants and will receive a fee from
us that will not exceed $1.10 per $19.90 Premium Amount of each Warrant, but will forgo any fees for sales to certain fiduciary
accounts.
|
General
No
action has been or will be taken by us, the Agent or any dealer that would permit a public offering of the Warrants or possession
or distribution of this pricing supplement or the accompanying index supplement, prospectus supplement or prospectus in any jurisdiction,
other than the United States, where action for that purpose is required. No offers, sales or deliveries of the Warrants, or distribution
of this pricing supplement or the accompanying index supplement, prospectus supplement or prospectus or any other offering material
relating to the Warrants, may be made in or from any jurisdiction except in circumstances which will result in compliance with
any applicable laws and regulations and will not impose any obligations on us, the Agent or any dealer.
The
Agent has represented and agreed, and each dealer through which we may offer the Warrants has represented and agreed, that it
(i) will comply with all applicable laws and regulations in force in each non-U.S. jurisdiction in which it purchases, offers,
sells or delivers the Warrants or possesses or distributes this pricing supplement and the accompanying index supplement, prospectus
supplement and prospectus and (ii) will obtain any consent, approval or permission required by it for the purchase, offer or sale
by it of the Warrants under the laws and regulations in force in each non-U.S. jurisdiction to which it is subject or in which
it makes purchases, offers or sales of the Warrants. We shall not have responsibility for the Agent’s or any dealer’s
compliance with the applicable laws and regulations or obtaining any required consent, approval or permission.
In
addition to the selling restrictions set forth in “Plan of Distribution (Conflicts of Interest)” in the accompanying
prospectus supplement, the following selling restrictions also apply to the Warrants:
Brazil
The
Warrants have not been and will not be registered with the Comissão de Valores Mobiliários (The Brazilian Securities
Commission). The Warrants may not be offered or sold in the Federative Republic of Brazil except in circumstances which do not
constitute a public offering or distribution under Brazilian laws and regulations.
Chile
The
Warrants have not been registered with the Superintendencia de Valores y Seguros in Chile and may not be offered or sold publicly
in Chile. No offer, sales or deliveries of the Warrants or distribution of this pricing supplement or the accompanying prospectus
supplement, index supplement or prospectus, may be made in or from Chile except in circumstances which will result in compliance
with any applicable Chilean laws and regulations.
Mexico
The
Warrants have not been registered with the National Registry of Securities maintained by the Mexican National Banking and
Securities
Commission and may not be offered or sold publicly in Mexico. This pricing supplement, the accompanying prospectus supplement,
the accompanying index supplement and the accompanying prospectus may not be publicly distributed in Mexico.
Validity
of the Warrants
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In
the opinion of Davis Polk & Wardwell LLP, as special counsel to MSFL and Morgan Stanley, when the Warrants offered by
this pricing supplement have been executed and issued by MSFL, countersigned by the Warrant Agent pursuant to the Warrant
Agreement (as defined in the accompanying prospectus) and delivered against payment as contemplated herein, such Warrants
will be valid and binding obligations of MSFL and the related guarantee will be a valid and binding obligation of Morgan Stanley,
enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’
rights generally, concepts of reasonableness and equitable principles of general applicability (including, without limitation,
concepts of good faith, fair dealing and the lack of bad faith),
provided
that such counsel expresses no opinion as
to the (i) effect of fraudulent conveyance, fraudulent transfer or similar provision of applicable law on the conclusions
expressed above and (ii) any provision of the MSFL Warrant Agreement that purports to avoid the effect of fraudulent conveyance,
fraudulent transfer or similar provision of applicable law by limiting the amount of Morgan Stanley’s obligation under
the related guarantee. This opinion is given as of the date hereof and is limited to the laws of the State of New York, the
General Corporation Law of the State of Delaware and the Delaware Limited Liability Company Act. In addition, this opinion
is subject to customary assumptions about the Warrant Agent’s authorization, execution and delivery of the MSFL Warrant
Agreement and its countersignature to the Warrants and the validity, binding nature and enforceability of the MSFL Warrant
Agreement with respect to the Warrant Agent, all as stated in the letter of such counsel dated November 16, 2017, which is
Exhibit 5-a to the Registration Statement on Form S-3 filed by Morgan Stanley on November 16, 2017.
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Benefit
Plan Investor Considerations
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Each
fiduciary of a pension, profit-sharing or other employee benefit plan subject to Title I of the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”), which we refer to as a “plan,” should consider the fiduciary
standards of ERISA in the context of the plan’s particular circumstances before authorizing an investment in these Warrants.
Accordingly, among other factors, the fiduciary should consider whether the investment would satisfy the prudence and diversification
requirements of ERISA and would be consistent with the documents and instruments governing the plan.
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In
addition, we and certain of our affiliates, including MS & Co., may each be considered “parties in interest” within
the meaning of ERISA or “disqualified persons” within the meaning of the Code with respect to many plans, as well
as many individual retirement accounts and Keogh plans (such accounts and plans, together with other plans, accounts and arrangements
subject to Section 4975 of the Code, also “plans”). ERISA Section 406 and Code Section 4975 generally prohibit transactions
between plans
and
parties in interest or disqualified persons. Prohibited transactions within the meaning of ERISA or the Code would likely arise,
for example, if these Warrants are acquired by or with the assets of a plan with respect to which MS & Co. or any of its affiliates
is a service provider or other party in interest, unless the Warrants are acquired pursuant to an exemption from the “prohibited
transaction” rules. A violation of these “prohibited transaction” rules could result in an excise tax or other
liabilities under ERISA and/or Section 4975 of the Code for those persons, unless exemptive relief is available under an applicable
statutory or administrative exemption.
The
U.S. Department of Labor has issued five prohibited transaction class exemptions (“PTCEs”) that may provide exemptive
relief for direct or indirect prohibited transactions resulting from the purchase or holding of these Warrants. Those class exemptions
are PTCE 96-23 (for certain transactions determined by in-house asset managers), PTCE 95-60 (for certain transactions involving
insurance company general accounts), PTCE 91-38 (for certain transactions involving bank collective investment funds), PTCE 90-1
(for certain transactions involving insurance company separate accounts) and PTCE 84-14 (for certain transactions determined by
independent qualified asset managers). In addition, ERISA Section 408(b)(17) and Section 4975(d)(20) of the Code provide an exemption
for the purchase and sale of Warrants and the related lending transactions, provided that neither the issuer of the Warrants nor
any of its affiliates has or exercises any discretionary authority or control or renders any investment advice with respect to
the assets of any plan involved in the transaction and provided further that the plan pays no more than adequate consideration
in connection with the transaction (the so-called “service provider” exemption). There can be no assurance that any
of these class or statutory exemptions will be available with respect to transactions involving these Warrants.
Because
we may be considered a party in interest with respect to many plans, unless otherwise specified in the applicable prospectus supplement,
these Warrants may not be purchased, held or disposed of by any plan, any entity whose underlying assets include “plan assets”
by reason of any plan’s investment in the entity (a “plan asset entity”) or any person investing “plan
assets” of any plan, unless such purchase, holding or disposition is eligible for exemptive relief, including relief available
under PTCEs 96-23, 95-60, 91-38, 90-1, 84-14 or the service provider exemption or such purchase, holding or disposition is otherwise
not prohibited. Unless otherwise specified in the applicable prospectus supplement, any purchaser, including any fiduciary purchasing
on behalf of a plan, transferee or holder of these Warrants will be deemed to have represented, in its corporate and its fiduciary
capacity, by its purchase and holding thereof that either (a) it is not a plan or a plan asset entity, is not purchasing such
Warrants on behalf of or with “plan assets” of any plan, or with any assets of a governmental or church plan that
is subject to any federal, state, local or non-U.S. law that is substantially similar to the provisions of Section 406 of ERISA
or Section 4975 of the Code (“Similar Law”) or (b) its purchase, holding and disposition of these Warrants will not
constitute or result in a non-
exempt
prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or violate any Similar Law.
Due
to the complexity of these rules and the penalties that may be imposed upon persons involved in nonexempt prohibited transactions,
it is particularly important that fiduciaries or other persons considering purchasing these Warrants on behalf of or with “plan
assets” of any plan consult with their counsel regarding the availability of exemptive relief.
The
Warrants are contractual financial instruments. The financial exposure provided by the Warrants is not a substitute or proxy for,
and is not intended as a substitute or proxy for, individualized investment management or advice for the benefit of any purchaser
or holder of the Warrants. The Warrants have not been designed and will not be administered in a manner intended to reflect the
individualized needs and objectives of any purchaser or holder of the Warrants.
Each
purchaser or holder of any Warrants acknowledges and agrees that:
(i) the
purchaser or holder or its fiduciary has made and shall make all investment decisions for the purchaser or holder and the purchaser
or holder has not relied and shall not rely in any way upon us or our affiliates to act as a fiduciary or adviser of the purchaser
or holder with respect to (A) the design and terms of the Warrants, (B) the purchaser or holder’s investment in the Warrants,
or (C) the exercise of or failure to exercise any rights we have under or with respect to the Warrants;
(ii) we
and our affiliates have acted and will act solely for our own account in connection with (A) all transactions relating to the
Warrants and (B) all hedging transactions in connection with our obligations under the Warrants;
(iii) any
and all assets and positions relating to hedging transactions by us or our affiliates are assets and positions of those entities
and are not assets and positions held for the benefit of the purchaser or holder;
(iv) our
interests are adverse to the interests of the purchaser or holder; and
(v) neither
we nor any of our affiliates is a fiduciary or adviser of the purchaser or holder in connection with any such assets, positions
or transactions, and any information that we or any of our affiliates may provide is not intended to be impartial investment advice.
Each
purchaser and holder of these Warrants has exclusive responsibility for ensuring that its purchase, holding and disposition of
the Warrants do not violate the prohibited transaction rules of ERISA or the Code or any Similar Law. The sale of any of these
Warrants to any plan or plan subject to Similar Law is in no respect a representation by us or any of our affiliates or representatives
that such an investment meets all relevant legal requirements with respect to investments by plans
generally
or any particular plan, or that such an investment is appropriate for plans generally or any particular plan. In this regard,
neither this discussion nor anything provided in this document is or is intended to be investment advice directed at any potential
Plan purchaser or at Plan purchasers generally and such purchasers of these Warrants should consult and rely on their own counsel
and advisers as to whether an investment in these Warrants is suitable.
However,
individual retirement accounts, individual retirement annuities and Keogh plans, as well as employee benefit plans that permit
participants to direct the investment of their accounts, will not be permitted to purchase or hold the Warrants if the account,
plan or annuity is for the benefit of an employee of Morgan Stanley or a family member and the employee receives any compensation
(such as, for example, an addition to bonus) based on the purchase of the Warrants by the account, plan or annuity.
Client
accounts over which Morgan Stanley or any of its subsidiaries have investment discretion are not permitted to purchase the Warrants,
either directly or indirectly.
United
States Federal Taxation
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In
the opinion of Davis Polk & Wardwell LLP, under current law, each Warrant should be treated as a single financial contract
that is an “open transaction” for U.S. federal income tax purposes.
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Assuming
this treatment of the Warrants is respected, a U.S. Holder should not be required to recognize taxable income over the term of
the Warrants prior to settlement, other than pursuant to a sale or exchange. Any gain or loss recognized upon sale, exchange,
lapse or settlement of the Warrants should generally be short-term capital gain or loss. For a detailed discussion of the U.S.
federal income tax consequences to U.S. Holders of the ownership and disposition of the Warrants, U.S. Holders should read the
sections of the accompanying prospectus supplement entitled “United States Federal Taxation—Tax Consequences to U.S.
Holders—Warrants” and “United States Federal Taxation—Tax Consequences to U.S. Holders—Backup Withholding
and Information Reporting.”
Section
871(m) Withholding Tax on Dividend Equivalents
Section
871(m) of the Internal Revenue Code of 1986, as amended, and Treasury regulations promulgated thereunder (“Section 871(m)”)
generally impose a 30% (or a lower applicable treaty rate) withholding tax on dividend equivalents paid or deemed paid to Non-U.S.
Holders with respect to certain financial instruments linked to U.S. equities or indices that include U.S. equities (each, an
“Underlying Security”). Subject to certain exceptions, Section 871(m) generally applies to securities that substantially
replicate the economic performance of one or more Underlying Securities, as determined based on tests set forth in the applicable
Treasury regulations.
In
light of the economic terms of the Warrants, payment on the Warrants to Non-U.S. Holders should not be subject to Section 871(m).
Both
U.S. and non-U.S. investors considering an investment in the Warrants should read the section of the accompanying prospectus supplement
entitled “United States Federal Taxation” and consult their tax advisers regarding all aspects of the U.S. federal
income tax consequences of an investment in the Warrants, and any tax consequences arising under the laws of any state, local,
or non-U.S. taxing jurisdiction. A holder who has made a separate investment the return of which is based on or linked to the
performance of the underlying (including any component thereof) should discuss with its tax adviser the U.S. federal income tax
consequences of an investment in the Warrants (including the potential application of the “straddle” rules).
The
discussion in the preceding paragraphs under “United States Federal Taxation” and the discussion contained in the
section entitled “United States Federal Taxation” in the accompanying prospectus supplement, insofar as they purport
to describe provisions of U.S. federal income tax laws or legal conclusions with respect thereto, constitute the full opinion
of Davis Polk & Wardwell LLP regarding the material U.S. federal income tax consequences of an investment in the Warrants.