CALCULATION OF REGISTRATION FEE
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Maximum Aggregate
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Amount of Registration
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Title of Each Class of Securities Offered
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Offering Price
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Fee
|
|
|
|
|
|
Contingent Income Auto-Callable Securities due 2022
|
|
$4,455,000
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$539.95
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|
|
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July
2019
Pricing Supplement No. 2,260
Registration Statement Nos.
333-221595; 333-221595-01
Dated July 25, 2019
Filed pursuant to Rule 424(b)(2)
M
organ
S
tanley
F
inance
LLC
Structured
Investments
Opportunities in U.S. Equities
Contingent Income Auto-Callable Securities due
July 28, 2022, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst
Performing of the Common Stock of CVS Health Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of
Johnson & Johnson and the Common Stock of The Walt Disney Company
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 and prospectus, as supplemented or modified by this document. The securities
do not guarantee the repayment of principal and do not provide for the regular payment of interest. Instead, the securities
will pay a contingent monthly coupon
but only if
the determination closing price of
each
of the common stock of CVS
Health Corporation, the common stock of McDonald’s Corporation, the common stock of Johnson & Johnson and the common
stock of The Walt Disney Company, which we refer to collectively as the underlying stocks, is
at or above
57.75% of its
respective initial share price, which we refer to as the respective downside threshold level, on the related observation date.
If the determination closing price of
any underlying stock
is less than its respective downside threshold level on any observation
date, we will pay no interest for the related monthly period. However, if the determination closing price of each of
the underlying stocks is at or above its respective downside threshold level on any subsequent observation date, investors will
receive, in addition to the contingent monthly coupon for the related monthly period, any previously unpaid contingent monthly
coupons from prior observation dates. In addition, the securities will be automatically redeemed if the determination
closing price of
each underlying stock
is
greater than or equal to
its respective redemption threshold level on any
monthly redemption determination date (beginning approximately six months after the original issue date) for the early redemption
payment equal to the sum of the stated principal amount plus the related contingent monthly coupon and any previously unpaid contingent
monthly coupons from prior observation dates. At maturity, if the securities have not previously been redeemed and the
final share price of
each underlying stock
is
greater than or equal to
its respective downside threshold level, the
payment at maturity will also be the sum of the stated principal amount plus the related contingent monthly coupon and any previously
unpaid contingent monthly coupons from prior observation dates. However, if the final share price of
any underlying
stock
is
less than
its respective downside threshold level, investors will be exposed to the decline in the worst performing
underlying stock on a 1-to-1 basis and will receive a payment at maturity that is less than 57.75% 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 monthly coupons throughout the
3-year term of the securities.
The securities are for investors who are willing to risk their principal and seek
an opportunity to earn interest at a potentially above-market rate in exchange for the risk of receiving no monthly interest over
the entire 3-year term and in exchange for the possibility of an automatic early redemption prior to maturity. Because
the payment of contingent monthly coupons is based on the worst performing of the underlying stocks, the fact that the securities
are linked to three underlying stocks does not provide any asset diversification benefits and instead means that a decline of
any
underlying stock below the relevant downside threshold level will result in no contingent monthly coupons, even if one or more
of the other underlying stocks close at or above the respective downside threshold levels. Because all payments on the
securities are based on the worst performing of the underlying stocks, a decline beyond the respective downside threshold level
of any underlying stock will result in no contingent monthly coupon payments and a significant loss of your investment, even if
one or more of the other underlying stocks have appreciated or have not declined as much. Investors will not participate
in any appreciation of any underlying stock. The securities are notes issued as part of MSFL’s Series A Global
Medium-Term Notes program.
All payments are subject to our credit risk. If
we default on our obligations, you could lose some or all of your investment. These securities are not secured obligations
and you will not have any security interest in, or otherwise have any access to, any underlying reference asset or assets.
FINAL TERMS
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Issuer:
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Morgan Stanley Finance LLC
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Guarantor:
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Morgan Stanley
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Underlying stocks:
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CVS Health Corporation common stock (the “CVS Stock”), McDonald’s Corporation common stock (the “MCD Stock”), Johnson & Johnson common stock (the “JNJ Stock”) and The Walt Disney Company common stock (the “DIS Stock”)
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Aggregate principal amount:
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$4,455,000
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Stated principal amount:
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$1,000 per security
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Issue price:
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$1,000 per security
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Pricing date:
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July 25, 2019
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Original issue date:
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July 30, 2019 (3 business days after the pricing date)
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Maturity date:
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July 28, 2022
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Early redemption:
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The securities are not subject to early redemption until six
months after the original issue date. Following this six-month non-call period, if, on any redemption determination
date, beginning on January 27, 2020, the determination closing price of
each underlying stock
is greater than or equal to
its respective redemption threshold level, the securities will be automatically redeemed for an early redemption payment on the
related early redemption date. No further payments will be made on the securities once they have been redeemed.
The securities will not be redeemed early on any early redemption
date if the determination closing price of any underlying stock is below its respective redemption threshold level on the related
redemption determination date.
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Early redemption payment:
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The early redemption payment will be an amount equal to (i) the stated principal amount for each security you hold
plus
(ii) the contingent monthly coupon with respect to the related observation date and any previously unpaid contingent monthly coupons from the prior observation dates.
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Determination closing price:
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With respect to each underlying stock, the closing price of such underlying stock on any redemption determination date or observation date (other than the final observation date),
times
the adjustment factor on such determination date or observation date, as applicable
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Early redemption dates:
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Starting on January 30, 2020, monthly. 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.
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Contingent monthly coupon:
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A
contingent monthly coupon
at an annual rate of 9.00%
(corresponding to approximately $7.50 per month per security)
plus
any previously unpaid contingent monthly coupons from
any prior observation dates will be paid on the securities on each coupon payment date
but only if
the determination
closing price of
each underlying stock
is at or above its respective downside threshold level on the related observation
date;
provided, however,
in the case of any such payment of a previously unpaid contingent monthly coupon, no additional
interest shall accrue or be payable in respect of such unpaid contingent monthly coupon from and after the end of the original
interest period for such unpaid contingent monthly coupon. You will not receive such unpaid contingent monthly coupons
if the determination closing price of any underlying stock is less than its respective redemption threshold level on each subsequent
observation date.
If, on any observation date, the determination closing price
of any underlying stock is less than its respective downside threshold level, no contingent monthly coupon will be paid with respect
to that observation date.
It is possible that one or more underlying stocks will remain below their respective
downside threshold levels for extended periods of time or even throughout the entire 3-year term of the securities so that you
will receive few or no contingent monthly coupons.
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Downside threshold level:
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With respect to the CVS Stock, $32.017, which is equal to approximately
57.75% of its initial share price
With respect to the MCD Stock, $123.839, which is equal
to approximately 57.75% of its initial share price
With respect to the JNJ Stock, $75.722, which is equal to approximately
57.75% of its initial share price
With respect to the DIS Stock, $82.704, which is equal
to approximately 57.75% of its initial share price
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Payment at maturity:
|
If the securities are not redeemed prior to maturity, investors
will receive a payment at maturity determined as follows:
·
If the final share price of
each underlying
stock
is
greater than or equal to
its respective downside threshold level: (i) the stated principal amount
plus
(ii) the contingent monthly coupon with respect to the final observation date and any previously unpaid contingent monthly
coupons from the prior observation dates
·
If the final share price of
any underlying
stock
is
less than
its respective downside threshold level: (i) the stated principal amount
multiplied by
(ii)
the share performance factor of the worst performing underlying stock
Under these circumstances, the payment at maturity
will be significantly less than the stated principal amount of $1,000, and will represent a loss of more than 42.25%, and possibly
all, of your investment.
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Terms continued on the following page
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Agent:
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Morgan Stanley & Co. LLC (“MS & Co.”), an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley. See “Supplemental information regarding plan of distribution; conflicts of interest.”
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Estimated value on the pricing date:
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$960.20 per security. See “Investment Summary” beginning on page 3.
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Commissions and issue price:
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Price to public
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Agent’s commissions
(1)
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Proceeds to us
(2)
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Per security
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$1,000
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$35
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$965
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Total
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$4,455,000
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$155,925
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$4,299,075
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(1)
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Selected dealers and their financial advisors will
collectively receive from the agent, Morgan Stanley & Co. LLC, a fixed sales commission of $35 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.
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|
(2)
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See “Use of proceeds and hedging” on page
35.
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The
securities involve risks not associated with an investment in ordinary debt securities. See “Risk Factors”
beginning on page 13.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these securities, or determined if this document or the accompanying product supplement
and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The securities are not deposits or saving accounts and are
not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they obligations
of, or guaranteed by, a bank.
You should read this document together with the related product
supplement and prospectus, each of which can be accessed via the hyperlinks below. Please also see “Additional
Terms of the Securities” and “Additional Information About the Securities” at the end of this document.
As used in this document, “we,” “us”
and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due July 28, 2022, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of CVS Health Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of Johnson & Johnson and the Common Stock of The Walt Disney Company
Principal at Risk Securities
|
Terms continued from previous page:
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Redemption determination dates:
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Beginning after six months, monthly, as set forth under “Observation Dates, Redemption Determination Dates, Coupon Payment Dates and Early Redemption Dates” below, subject to postponement for non-trading days and certain market disruption events.
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Redemption threshold level:
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With respect to the CVS Stock, $55.44, which is equal to 100%
of its initial share price
With respect to the MCD Stock, $214.44, which is equal
to 100% of its initial share price
With respect to the JNJ Stock, $131.12, which is equal to 100%
of its initial share price
With respect to the DIS Stock, $143.21, which is equal
to 100% of its initial share price
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Initial share price:
|
With respect to the CVS Stock, $55.44, which is its closing price
on the pricing date
With respect to the MCD Stock, $214.44, which is its
closing price on the pricing date
With respect to the JNJ Stock, $131.12, which is its closing
price on the pricing date
With respect to the DIS Stock, $143.21, which is its
closing price on the pricing date
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Coupon payment dates:
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Monthly, as set forth under “Observation Dates, Redemption Determination Dates, Coupon Payment Dates and Early Redemption Dates” below;
provided
that the contingent monthly coupon, if any, with respect to the final observation date shall be paid on the maturity date.
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Observation dates:
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Monthly, as set forth under “Observation Dates, Redemption Determination Dates, Coupon Payment Dates and Early Redemption Dates” below, subject, independently in the case of each underlying stock, to postponement for non-trading days and certain market disruption events. We also refer to July 25, 2022 as the final observation date.
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Final share price:
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With respect to each underlying stock, the closing price of such underlying stock on the final observation date
times
the adjustment factor on such date
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Adjustment factor:
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With respect to each underlying stock, 1.0, subject to adjustment in the event of certain corporate events affecting such underlying stock
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Worst performing underlying stock:
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The underlying stock with the largest percentage decrease from the respective initial share price to the respective final share price
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Share performance factor:
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Final share price
divided by
the initial share price
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CUSIP / ISIN:
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61769HLQ6 / US61769HLQ64
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Listing:
|
The securities will not be listed on any securities exchange.
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|
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Observation Dates, Redemption
Determination Dates, Coupon Payment Dates and Early Redemption Dates
Observation Dates / Redemption Determination Dates
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Coupon Payment Dates / Early Redemption Dates
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8/26/2019*
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8/29/2019*
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9/25/2019*
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9/30/2019*
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10/25/2019*
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10/30/2019*
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11/25/2019*
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11/29/2019*
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12/26/2019*
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12/31/2019*
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1/27/2020
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1/30/2020
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2/25/2020
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2/28/2020
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3/25/2020
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3/30/2020
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4/27/2020
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4/30/2020
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5/26/2020
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5/29/2020
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6/25/2020
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6/30/2020
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7/27/2020
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7/30/2020
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8/25/2020
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8/28/2020
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9/25/2020
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9/30/2020
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10/26/2020
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10/29/2020
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11/25/2020
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12/1/2020
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12/28/2020
|
12/31/2020
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1/25/2021
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1/28/2021
|
2/25/2021
|
3/2/2021
|
3/25/2021
|
3/30/2021
|
4/26/2021
|
4/29/2021
|
5/25/2021
|
5/28/2021
|
6/25/2021
|
6/30/2021
|
7/26/2021
|
7/29/2021
|
8/25/2021
|
8/30/2021
|
9/27/2021
|
9/30/2021
|
10/25/2021
|
10/28/2021
|
11/26/2021
|
12/1/2021
|
12/27/2021
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12/30/2021
|
1/25/2022
|
1/28/2022
|
2/25/2022
|
3/2/2022
|
3/25/2022
|
3/30/2022
|
4/25/2022
|
4/28/2022
|
5/25/2022
|
5/31/2022
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6/27/2022
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6/30/2022
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7/25/2022 (final observation date)
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7/28/2022 (maturity date)
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* The securities are not
subject to automatic early redemption until the sixth coupon payment date, which is January 30, 2020.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due July 28, 2022, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of CVS Health Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of Johnson & Johnson and the Common Stock of The Walt Disney Company
Principal at Risk Securities
|
Investment Summary
Contingent Income Auto-Callable Securities
Principal at Risk Securities
Contingent Income Auto-Callable Securities due July 28, 2022,
with 6-month Initial Non-Call Period All Payments on the Securities Based on the Worst Performing of the Common Stock of CVS Health
Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of Johnson & Johnson and the Common Stock of
The Walt Disney Company (the “securities”) do not provide for the regular payment of interest. Instead,
the securities will pay a contingent monthly coupon at an annual rate of 9.00%
but only if
the determination closing price
of
each underlying stock
is
at or above
57.75% of its respective initial share price, which we refer to as the respective
downside threshold level, on the related observation date. If the determination closing price of
any underlying
stock
is less than its downside threshold level on any observation date, we will pay no coupon for the related monthly period. However,
if the determination closing price of each of the underlying stocks is at or above its respective downside threshold level on any
subsequent observation date, investors will receive, in addition to the contingent monthly coupon for the related monthly period,
any previously unpaid contingent monthly coupons from prior observation dates. It is possible that the determination
closing price of
one or more underlying stocks will remain below their respective downside threshold levels
for extended
periods of time or even throughout the entire 3-year term of the securities so that you will receive few or no contingent monthly
coupons during the entire term of the securities.
We refer to these coupons as contingent, because there is no
guarantee that you will receive a coupon payment on any coupon payment date. Even if all of the underlying stocks were
to be at or above their respective downside threshold levels on some monthly observation dates, one or more underlying stocks may
fluctuate below the respective downside threshold level(s) on others, and the underlying stocks may not close at or above their
respective downside threshold level on any subsequent observation date, in which case you will not receive payment of any unpaid
previously contingent monthly coupons. In addition, if the securities have not been automatically called prior to maturity
and the final share price of
any underlying stock
is less than its respective downside threshold level, investors will be
exposed to the decline in the worst performing underlying stock on a 1-to-1 basis, and will receive a payment at maturity that
is less than 57.75% 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 monthly payments throughout the entire 3-year term of the securities.
Maturity:
|
Approximately 3 years
|
Contingent monthly coupon:
|
A
contingent monthly coupon
at an annual rate of 9.00%
(corresponding to approximately $7.50 per month per security) will be paid on the securities on each coupon payment date
but
only if
the determination closing price of
each underlying stock
is at or above its respective downside threshold level
on the related observation date.
If the contingent monthly coupon is not paid on any coupon
payment date (because the determination closing price of an underlying stock on the related observation date is less than the downside
threshold level), such unpaid contingent monthly coupon will be paid on a later coupon payment date but only if the determination
closing price of each underlying stock on such later observation date is greater than or equal to the respective downside threshold
level. You will not receive such unpaid contingent monthly coupon if the determination closing price of any underlying
stock on each subsequent observation date is less than its respective downside threshold level. If the determination
closing price of any underlying stock on each observation date is less than its respective downside threshold level, you will not
receive any contingent monthly coupon for the entire term of the securities.
|
Automatic early redemption monthly beginning in January
|
Starting in January 2020, if the determination closing price of
each underlying stock
is greater than or equal to its respective redemption threshold level (equal to 100% of the respective initial share price) on any monthly determination date, beginning on January 27, 2020 (approximately six months after the original issue date), the
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due July 28, 2022, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of CVS Health Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of Johnson & Johnson and the Common Stock of The Walt Disney Company
Principal at Risk Securities
|
2020:
|
securities will be automatically redeemed for an early redemption payment equal to the stated principal amount
plus
the contingent monthly coupon with respect to the related observation date and any previously unpaid contingent monthly coupons from prior observation dates.
|
Payment at maturity:
|
If the securities have not previously been redeemed and the final
share price of
each underlying stock
is
greater than or equal to
its respective downside threshold level, the payment
at maturity will be the sum of the stated principal amount
plus
the related contingent monthly coupon and any previously
unpaid contingent monthly coupons from prior observation dates.
If the final share price of
any underlying stock
is less
than its downside threshold level, investors will receive a payment at maturity based on the decline in the worst performing underlying
stock over the term of the securities. Under these circumstances, the payment at maturity will be less than 57.75% of the stated
principal amount of the securities and could be zero.
Accordingly,
i
nvestors in the securities must be willing
to accept the risk of losing their entire initial investment.
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due July 28, 2022, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of CVS Health Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of Johnson & Johnson and the Common Stock of The Walt Disney Company
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 $960.20.
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 underlying stocks. The
estimated value of the securities is determined using our own pricing and valuation models, market inputs and assumptions relating
to the underlying stocks, instruments based on the underlying stocks, volatility and other factors including current and expected
interest rates, as well as an interest rate related to our secondary market credit spread, which is the implied interest rate at
which our conventional fixed rate debt trades in the secondary market.
What determines the economic terms of the securities?
In determining the economic terms of the securities, including
the contingent monthly coupon rate, the redemption threshold levels and the downside threshold levels, we use an internal funding
rate, which is likely to be lower than our secondary market credit spreads and therefore advantageous to us. If the
issuing, selling, structuring and hedging costs borne by you were lower or if the internal funding rate were higher, one or more
terms of the securities would be more favorable to you.
What is the relationship between the estimated value on the
pricing date and the secondary market price of the securities?
The price at which MS & Co. purchases the securities in the
secondary market, absent changes in market conditions, including those related to the underlying stocks, may vary from, and be
lower than, the estimated value on the pricing date, because the secondary market price takes into account our secondary market
credit spread as well as the bid-offer spread that MS & Co. would charge in a secondary market transaction of this type and
other factors. However, because the costs associated with issuing, selling, structuring and hedging the securities are
not fully deducted upon issuance, for a period of up to 6 months following the issue date, to the extent that MS & Co. may
buy or sell the securities in the secondary market, absent changes in market conditions, including those related to the underlying
stocks, 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 28, 2022, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of CVS Health Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of Johnson & Johnson and the Common Stock of The Walt Disney Company
Principal at Risk Securities
|
Key Investment Rationale
The securities do not provide for the regular payment of interest. Instead,
the securities will pay a contingent monthly coupon
but only if
the determination closing price of
each underlying stock
is
at or above
its respective downside threshold level on the related observation date. The securities have been
designed for investors who are willing to forgo market floating interest rates and risk the loss of principal and accept the risk
of receiving few or no coupon payments for the entire 3-year term of the securities in exchange for an opportunity to earn interest
at a potentially above-market rate if all of the underlying stocks close at or above their respective downside threshold levels,
unless the securities are redeemed early. The following scenarios are for illustration purposes only to demonstrate
how the coupon and the payment at maturity (if the securities have not previously been redeemed) are calculated, and do not attempt
to demonstrate every situation that may occur. Accordingly, the securities may or may not be redeemed, the contingent
coupon may be payable in none of, or some but not all of, the monthly periods during the 3-year term of the securities, and the
payment at maturity may be less than 57.75% of the stated principal amount of the securities and may be zero.
Scenario 1: The securities are redeemed prior to maturity
|
This scenario assumes that, prior to early redemption, all of
the underlying stocks close at or above their respective downside threshold levels on some monthly observation dates, but one or
more underlying stocks close below the respective downside threshold level(s) on the others. Investors receive the contingent
monthly coupon, as well as any previously unpaid contingent monthly coupons form prior observation dates, for the monthly periods
for which the determination closing price of each underlying stock is greater than or equal to the respective downside threshold
level on the related observation date.
Starting on January 27, 2020, when all of the underlying stocks
close at or above their respective redemption threshold levels on a monthly redemption determination date, the securities will
be automatically redeemed for the stated principal amount
plus
the contingent monthly coupon with respect to the related
observation date and any previously unpaid contingent monthly coupons from prior observation dates.
|
Scenario 2: The securities are not redeemed prior to maturity, and investors receive principal back at maturity
|
This scenario assumes that all of the underlying stocks close at or above their respective downside threshold levels on some monthly observation dates, but one or more underlying stocks close below the respective downside threshold level(s) on the others, and at least one of the underlying stocks closes below its redemption threshold level on every monthly redemption determination date. Consequently, the securities are not redeemed early, and investors receive the contingent monthly coupon, as well as any previously unpaid contingent monthly coupons form prior observation dates, for the monthly periods for which the determination closing price of each underlying stock is greater than or equal to the respective downside threshold level on the related observation date. On the final observation date, all of the underlying stocks close at or above their respective downside threshold levels. At maturity, in addition to the contingent monthly coupon with respect to the final observation date and any previously unpaid contingent monthly coupons form prior observation dates, investors will receive the stated principal amount.
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due July 28, 2022, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of CVS Health Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of Johnson & Johnson and the Common Stock of The Walt Disney Company
Principal at Risk Securities
|
Scenario 3: The securities are not redeemed prior to maturity, and investors suffer a substantial loss of principal at maturity
|
This scenario assumes that all of the underlying stocks close at or above their respective downside threshold levels on some monthly observation dates, but one or more underlying stocks close below the respective downside threshold level(s) on the others, and at least one of the underlying stocks closes below its redemption threshold level on every monthly redemption determination date. Consequently, the securities are not redeemed early, and investors receive the contingent monthly coupon, as well as any previously unpaid contingent monthly coupons form prior observation dates, for the monthly periods for which the determination closing price of each underlying stock is greater than or equal to the respective downside threshold level on the related observation date. On the final observation date, one or more underlying stocks close below the respective downside threshold level(s). At maturity, investors will receive an amount equal to the stated principal amount multiplied by the share performance factor of the worst performing underlying stock. Under these circumstances, the payment at maturity will be less than 57.75% of the stated principal amount and could be zero. No coupon will be paid at maturity in this scenario, and investors will not receive payment of any previously unpaid contingent monthly coupons at maturity.
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due July 28, 2022, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of CVS Health Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of Johnson & Johnson and the Common Stock of The Walt Disney Company
Principal at Risk Securities
|
How the Securities Work
The following diagrams illustrate the potential outcomes for
the securities depending on (1) the determination closing prices on each monthly observation date, (2) the determination closing
prices on each monthly redemption determination date and (3) the final share prices. Please see “Hypothetical
Examples” below for an illustration of hypothetical payouts on the securities.
Diagram #1: Contingent Monthly Coupons (Beginning
on the First Coupon Payment Date until Early Redemption or Maturity)
Diagram #2: Automatic Early Redemption (Starting
in January 2020)
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due July 28, 2022, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of CVS Health Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of Johnson & Johnson and the Common Stock of The Walt Disney Company
Principal at Risk Securities
|
Diagram #3: Payment at Maturity if No Automatic
Early Redemption Occurs
For more information about the payout at maturity in different
hypothetical scenarios, see “Hypothetical Examples” below.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due July 28, 2022, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of CVS Health Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of Johnson & Johnson and the Common Stock of The Walt Disney Company
Principal at Risk Securities
|
Hypothetical Examples
The following hypothetical examples illustrate how to determine
whether a contingent monthly coupon is paid with respect to an observation date and how to calculate the payment at maturity, if
any, assuming the securities are not redeemed prior to maturity. The following examples are for illustrative purposes
only. Whether you receive a contingent monthly coupon will be determined by reference to the determination closing price
of each underlying stock on each monthly observation date. Whether the securities are redeemed early will be determined
by reference to the determination closing price of each underlying stock on each monthly determination date (beginning approximately
six months after the original issue date) and the payment at maturity, if any, will be determined by reference to the final share
price of each underlying stock on the final determination date. The actual initial share price and downside threshold
level for each underlying stock are set forth on the cover of this document. All payments on the securities, if any,
are subject to our credit risk. The below examples are based on the following terms:
Contingent Monthly Coupon:
|
9.00% per annum, (corresponding to approximately $7.50 per month
per security)
1
With respect to each coupon payment date, a contingent monthly
coupon
plus
any previously unpaid monthly coupons from any prior observation dates is paid but only if the determination
closing price of each underlying stock is at or above its respective downside threshold level on the related observation date.
|
Payment at Maturity (if the securities are not redeemed prior to maturity):
|
If the final share price of
each
underlying stock is
greater
than or equal to
its respective downside threshold level: the stated principal amount
plus
the contingent monthly coupon
with respect to the final observation date and any previously unpaid contingent monthly coupons from the prior observation dates
If the final share price of
any
underlying stock is
less
than
its respective downside threshold level: (i) the stated principal amount
multiplied by
(ii) the share performance
factor of the worst performing underlying stock
|
Stated Principal Amount:
|
$1,000
|
Hypothetical Initial Share Price:
|
With respect to the CVS Stock: $60.00
With respect to the MCD Stock: $215.00
With respect to the JNJ Stock: $140.00
With respect to the DIS Stock: $145.00
|
Hypothetical Downside Threshold Level:
|
With respect to the CVS Stock: $34.65, which is 57.75% of its
hypothetical initial share price
With respect to the MCD Stock: $124.16, which is 57.75% of its
hypothetical initial share price
With respect to the JNJ Stock: $80.85, which is 57.75% of its
hypothetical initial share price
With respect to the DIS Stock: $83.74, which is 57.75% of its
hypothetical initial share price
|
1
The actual contingent monthly coupon will be an
amount determined by the calculation agent based on the number of days in the applicable payment period, calculated on a 30/360
day count basis. The hypothetical contingent monthly coupon of $7.50 is used in these examples for ease of analysis.
How to determine whether a contingent monthly
coupon is payable with respect to an observation date:
|
Determination Closing Price
|
Hypothetical Contingent Monthly Coupon
|
|
CVS Stock
|
MCD Stock
|
JNJ Stock
|
DIS Stock
|
|
1
st
Monthly Observation Date
|
$45.00 (
at or above
its downside threshold level)
|
$175.00 (
at or above
its downside threshold level)
|
$115.00 (
at or above
its downside threshold level)
|
$96.00 (
at or above
its downside threshold level)
|
$7.50
|
2
nd
Monthly Observation Date
|
$48.00 (
at or above
its downside threshold level)
|
$110.00 (
below
its downside threshold level)
|
$104.00 (
at or above
its downside threshold level)
|
$115.00 (
at or above
its downside threshold level)
|
$0
|
3
rd
Monthly Observation Date
|
$52.00 (
at or above
its
|
$187.00 (
at or above
its
|
$124.00 (
at or above
its
|
$130.00 (
at or above
its
|
$7.50 + $7.50 = $15.00
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due July 28, 2022, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of CVS Health Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of Johnson & Johnson and the Common Stock of The Walt Disney Company
Principal at Risk Securities
|
|
downside threshold level)
|
downside threshold level)
|
downside threshold level)
|
downside threshold level)
|
|
4
th
Monthly Observation Date
|
$28.00 (
below
its downside threshold level)
|
$105.00 (
below
its downside threshold level)
|
$65.00 (
below
its downside threshold level)
|
$77.00 (
below
its downside threshold level)
|
$0
|
On hypothetical observation date 1, each of the underlying stocks
closes at or above its respective downside threshold level. Therefore, a contingent monthly coupon of $7.50 is paid
on the relevant coupon payment date.
On hypothetical observation date 2, three underlying stocks close
at or above their respective downside threshold levels, but the other underlying stock closes below its respective downside threshold
level. Therefore, no contingent monthly coupon is paid on the relevant coupon payment date.
On hypothetical observation date 3, each of the underlying stocks
closes at or above its respective downside threshold level. Therefore, investors receive the contingent monthly coupon
with respect to the third observation date as well as the previously unpaid contingent monthly coupon with respect to the second
observation date.
On hypothetical observation date 4, each of the underlying stocks
closes below its respective downside threshold level, and accordingly no contingent monthly coupon is paid on the relevant coupon
payment date.
You will not receive a contingent monthly coupon on any coupon
payment date if the determination closing price of any underlying stock is below its respective downside threshold level on the
related observation date.
How to calculate the payment at maturity:
In the following examples, one or more underlying stocks close
below the respective redemption threshold levels on each redemption determination date, and, consequently, the securities are not
automatically redeemed prior to, and remain outstanding until, maturity.
|
Final Share Price
|
Payment at Maturity
|
|
CVS Stock
|
MCD Stock
|
JNJ Stock
|
DIS Stock
|
|
Example 1:
|
$80.00 (
at or above
its downside threshold level)
|
$240.00 (
at or above
its downside threshold level)
|
$175.00 (
at or above
its downside threshold level)
|
$190.00 (
at or above
its downside threshold level)
|
$1,000
plus
the contingent monthly coupon with respect to the final observation date and any previously unpaid contingent monthly coupons from the prior observation dates
|
Example 2:
|
$12.00 (
below
its downside threshold level)
|
$190.00 (
at or above
its downside threshold level)
|
$100.00 (
at or above
its downside threshold level)
|
$105.00 (
at or above
its downside threshold level)
|
$1,000 x share performance factor of the worst performing underlying stock = $1,000 x ($12.00 / $60.00) = $200.00
|
Example 3:
|
$42.00 (
at or above
its downside threshold level)
|
$175.00 (
at or above
its downside threshold level)
|
$63.00 (
below
its downside threshold level)
|
$113.00 (
at or above
its downside threshold level)
|
$1,000 x ($63.00 / $140.00) = $450.00
|
Example 4:
|
$24.00 (
below
its downside threshold level)
|
$96.75 (
below
its downside threshold level)
|
$61.60 (
below
its downside threshold level)
|
$79.75 (
below
its downside threshold level)
|
$1,000 x ($24.00 / $60.00) = $400.00
|
Example 5:
|
$27.00 (
below
its downside threshold level)
|
$64.50 (
below
its downside threshold level)
|
$63.00 (
below
its downside threshold level)
|
$63.80 (
below
its downside threshold level)
|
$1,000 x ($64.50 / $215.00) = $300.00
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due July 28, 2022, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of CVS Health Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of Johnson & Johnson and the Common Stock of The Walt Disney Company
Principal at Risk Securities
|
In example 1, the final share prices of each of the CVS Stock,
MCD Stock, JNJ Stock and DIS Stock are at or above their respective downside threshold levels. Therefore, investors
receive at maturity the stated principal amount of the securities
plus
the contingent monthly coupon with respect to the
final observation date and any previously unpaid contingent monthly coupons from the prior observation dates. Investors do not
participate in the appreciation of any of the underlying stocks.
In example 2, the final share prices of three underlying stocks
are above their respective downside threshold levels, but the final share price of the other underlying stock is below its downside
threshold level. Therefore, investors are exposed to the downside performance of the worst performing underlying stock
at maturity and receive an amount equal to the stated principal amount
times
the share performance factor of the worst performing
underlying stock.
In example 3, the final share prices of three underlying stocks
are at or above their respective downside threshold levels, but the final share price of the other underlying stock is below its
downside threshold level. Therefore, investors are exposed to the downside performance of the worst performing underlying
stock at maturity and receive at maturity an amount equal to the stated principal amount times the share performance factor of
the worst performing underlying stock.
In examples 4 and 5, the final share prices of all of the underlying
stocks are below their respective downside threshold levels, and investors receive at maturity an amount equal to the stated principal
amount
times
the share performance factor of the worst performing underlying stock. In example 4, the CVS Stock
has declined 60% from its initial share price to its final share price, the MCD Stock has declined 55% from its initial share price
to its final share price, the JNJ Stock has declined 56% from its initial share price to its final share price and the DIS Stock
has declined 45% from its initial share price to its final share price. Therefore, the payment at maturity equals the
stated principal amount
times
the share performance factor of the CVS Stock, which represents the worst performing underlying
stock in this example. In example 5, the CVS Stock has declined 55% from its initial share price to its final share
price, the MCD Stock has declined 70% from its initial share price to its final share price, the JNJ Stock has declined 55% from
its initial share price to its final share price and the DIS Stock has declined 56% from its initial share price to its final share
price. Therefore the payment at maturity equals the stated principal amount
times
the share performance factor
of the MCD Stock, which represents the worst performing underlying stock in this example.
If the final share price of ANY underlying stock is below
its respective downside threshold level, you will be exposed to the downside performance of the worst performing underlying stock
at maturity, and your payment at maturity will be less than 57.75% of the stated principal amount per security and could be zero.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due July 28, 2022, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of CVS Health Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of Johnson & Johnson and the Common Stock of The Walt Disney Company
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 and prospectus. You should also consult with your investment,
legal, tax, accounting and other advisers in connection with your investment in the securities.
|
§
|
The securities do not guarantee the return of any
principal.
The terms of the securities differ from those of ordinary debt securities in that they do not guarantee
the return of any of the principal amount at maturity. If the securities have not been automatically redeemed prior
to maturity and if the final share price of
any
underlying stock is less than its downside threshold level of 57.75% of
its initial share price, you will be exposed to the decline in the closing price of the worst performing underlying stock, as compared
to its initial share price, on a 1-to-1 basis, and you will receive for each security that you hold at maturity an amount equal
to the stated principal amount
times
the share performance factor of the worst performing underlying stock. In
this case, the payment at maturity will be less than 57.75% of the stated principal amount and could be zero.
You could lose
up to your entire investment in the securities.
|
|
§
|
The securities do not provide for the regular payment
of interest and may pay no interest over the entire term of the securities.
The terms of the securities differ from
those of ordinary debt securities in that they do not provide for the regular payment of interest. Instead, the securities
will pay a contingent monthly coupon but only if the determination closing price of each underlying stock is at or above 57.75%
of its respective initial share price, which we refer to as the respective downside threshold level, on the related observation
date. If the determination closing price of any underlying stock is lower than its downside threshold level on the relevant
observation date for any interest period, we will pay no coupon on the applicable coupon payment date. However, if the
determination closing price of each of the underlying stocks is at or above its respective downside threshold level on any subsequent
observation date, investors will receive, in addition to the contingent monthly coupon for the related monthly period, any previously
unpaid contingent monthly coupons from prior observation dates. Nevertheless, it is possible that the determination
closing price(s) of one or more underlying stocks could remain below the respective downside threshold level(s) for extended periods
of time or even throughout the entire 3-year term of the securities so that you will receive few or no contingent monthly coupons. If
you do not earn sufficient contingent coupons over the term of the securities, the overall return on the securities may be less
than the amount that would be paid on a conventional debt security of ours of comparable maturity.
|
|
§
|
You are exposed to the price risk of all of the
underlying stocks, with respect to both the contingent monthly coupons, if any, and the payment at maturity, if any.
Your
return on the securities is not linked to a basket consisting of the underlying stocks. Rather, it will be contingent
upon the independent performance of each underlying stock. Unlike an instrument with a return linked to a basket of
underlying assets, in which risk is mitigated and diversified among all the components of the basket, you will be exposed to the
risks related to each of the underlying stocks. Poor performance by
any
underlying stock over the term of the
securities may negatively affect your return and will not be offset or mitigated by any positive performance by the other underlying
stocks. To receive
any
contingent monthly coupons,
all
of the underlying stocks must close at or above
their respective downside threshold levels on the applicable observation date. In addition, if
any
underlying
stock 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 stock over the term of the securities on a 1-to-1 basis, even if the other underlying
stocks have appreciated or have not declined as much. Under this scenario, the value of any such payment will be less
than 57.75% of the stated principal amount and could be zero. Accordingly, your investment is subject to the price risk
of all of the underlying stocks.
|
|
§
|
The contingent coupon, if any, is based only on
the determination closing prices of the underlying stocks on the related monthly observation date at the end of the related interest
period
.
Whether the contingent coupon will be paid on any coupon payment date will be determined at the end
of the relevant interest period based on the determination closing price of each underlying stock on the relevant monthly observation
date. As a result, you will not know whether you will receive the contingent coupon on any coupon payment date until
near the end of the relevant interest period. Moreover, because the contingent coupon is based solely on the price of
each underlying stock on
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due July 28, 2022, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of CVS Health Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of Johnson & Johnson and the Common Stock of The Walt Disney Company
Principal at Risk Securities
|
monthly observation dates, if the determination closing
price of any underlying stock on any observation date is below the respective downside threshold level, you will receive no coupon
for the related interest period, or any previously unpaid coupons, even if the price(s) of one or more of the underlying stocks
were higher on other days during that interest period.
|
§
|
Investors will not participate in any appreciation
in the price of any underlying stock.
Investors will not participate in any appreciation in the price of any underlying
stock from its initial share price, and the return on the securities will be limited to the contingent monthly coupon, if any,
that is paid with respect to each observation date on which all determination closing prices are greater than or equal to their
respective downside threshold levels, if any.
|
|
§
|
The market price will be influenced by many unpredictable
factors.
Several factors, many of which are beyond our control, will influence the value of the securities in the
secondary market and the price at which MS & Co. may be willing to purchase or sell the securities in the secondary market. We
expect that generally the level of interest rates available in the market and the prices of the underlying stocks on any day, including
in relation to the respective downside threshold levels, will affect the value of the securities more than any other factors. Other
factors that may influence the value of the securities include:
|
|
o
|
the trading price and volatility (frequency and magnitude of changes in value) of the underlying stocks,
|
|
o
|
whether the determination closing price of any underlying stock has been below its respective downside threshold level on any
observation date,
|
|
o
|
dividend rates on the underlying stocks,
|
|
o
|
geopolitical conditions and economic, financial, political, regulatory or judicial events that affect the underlying stocks
and which may affect the prices of the underlying stocks,
|
|
o
|
the time remaining until the securities mature,
|
|
o
|
interest and yield rates in the market,
|
|
o
|
the availability of comparable instruments,
|
|
o
|
the occurrence of certain events affecting the underlying stock that may or may not require an adjustment to the adjustment
factor, and
|
|
o
|
any actual or anticipated changes in our credit ratings or credit spreads.
|
Some or all of these factors will influence the price
that you will receive if you sell your securities prior to maturity. For example, you may have to sell your securities
at a substantial discount from the stated principal amount of $1,000 per security if the price of any underlying stock at the time
of sale is near or below its downside threshold level or if market interest rates rise.
The prices of the underlying stocks may be, and have
recently been, volatile, and we can give you no assurance that the volatility will lessen. The prices of the underlying
stocks may decrease and be below the respective downside threshold level(s) on each observation date so that you will receive no
return on your investment and receive a payment at maturity that is less than 57.75% of the stated principal amount and could be
zero. There can be no assurance that the determination closing prices of all of the underlying stocks will be at or
above their respective downside threshold levels on any observation date so that you will receive a coupon payment on the securities
for the applicable interest period, or, with respect to the final observation date, so that you do no suffer a significant loss
on your initial investment in the securities. See “CVS Health Corporation Overview,” “McDonald’s
Corporation Overview,” “Johnson & Johnson Overview” and “The Walt Disney Company Overview” below.
|
§
|
The securities are subject to our credit risk,
and any actual or anticipated changes to our credit ratings or credit spreads may adversely affect the market value of the securities.
You
are dependent on our ability to pay all amounts due on the securities on each coupon payment date, upon automatic redemption and
at maturity and therefore you are subject to our credit risk. The securities are not guaranteed by any other entity. If
we default on our obligations under the securities, your investment would be at risk and you could lose some or all of your investment. As
a result,
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due July 28, 2022, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of CVS Health Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of Johnson & Johnson and the Common Stock of The Walt Disney Company
Principal at Risk Securities
|
the market value of the securities prior to maturity
will be affected by changes in the market’s view of our creditworthiness. Any actual or anticipated decline in
our credit ratings or increase in the credit spreads charged by the market for taking our credit risk is likely to adversely affect
the market value of the securities.
|
§
|
As a finance subsidiary, MSFL has no independent
operations and will have no independent assets.
As a finance subsidiary, MSFL has no independent operations beyond the issuance
and administration of its securities and will have no independent assets available for distributions to holders of MSFL securities
if they make claims in respect of such securities in a bankruptcy, resolution or similar proceeding. Accordingly, any
recoveries by such holders will be limited to those available under the related guarantee by Morgan Stanley and that guarantee
will rank
pari passu
with all other unsecured, unsubordinated obligations of Morgan Stanley. Holders will have recourse
only to a single claim against Morgan Stanley and its assets under the guarantee. Holders of securities issued by MSFL should accordingly
assume that in any such proceedings they would not have any priority over and should be treated
pari passu
with the claims
of other unsecured, unsubordinated creditors of Morgan Stanley, including holders of Morgan Stanley-issued securities.
|
|
§
|
Reinvestment risk.
The term of your
investment in the securities may be shortened due to the automatic early redemption feature of the securities. If the
securities are redeemed prior to maturity, you will receive no more contingent monthly coupons and may be forced to invest in a
lower interest rate environment and may not be able to reinvest at comparable terms or returns. However, under no circumstances
will the securities be redeemed in the first six months of the term of the securities.
|
|
§
|
Investing in the securities is not equivalent to
investing in the common stock of CVS Health Corporation, the common stock of McDonald’s Corporation, the common stock of
Johnson & Johnson or the common stock of The Walt Disney Company.
Investors in the securities will not participate
in any appreciation in the underlying stocks, and will not have voting rights or rights to receive dividends or other distributions
or any other rights with respect to the underlying stocks. As a result, any return on the securities will not reflect the return
you would realize if you actually owned shares of the underlying stocks and received the dividends paid or distributions made on
them.
|
|
§
|
No affiliation with CVS Health Corporation, McDonald’s
Corporation, Johnson & Johnson or The Walt Disney Company.
CVS Health Corporation, McDonald’s Corporation,
Johnson & Johnson and The Walt Disney Company are not affiliates of ours, are not involved with this offering in any way, and
have no obligation to consider your interests in taking any corporate actions that might affect the value of the securities. We
have not made any due diligence inquiry with respect to CVS Health Corporation, McDonald’s Corporation, Johnson & Johnson
or The Walt Disney Company in connection with this offering.
|
|
§
|
We may engage in business with or involving CVS
Health Corporation, McDonald’s Corporation, Johnson & Johnson or The Walt Disney Company without regard to your interests.
We
or our affiliates may presently or from time to time engage in business with CVS Health Corporation, McDonald’s Corporation,
Johnson & Johnson or The Walt Disney Company without regard to your interests and thus may acquire non-public information about
CVS Health Corporation, McDonald’s Corporation, Johnson & Johnson or The Walt Disney Company. Neither we nor
any of our affiliates undertakes to disclose any such information to you. In addition, we or our affiliates from time
to time have published and in the future may publish research reports with respect to CVS Health Corporation, McDonald’s
Corporation, Johnson & Johnson or The Walt Disney Company, which may or may not recommend that investors buy or hold the underlying
stock(s).
|
|
§
|
The antidilution adjustments the calculation agent
is required to make do not cover every corporate event that could affect the underlying stocks.
MS & Co., as
calculation agent, will adjust the adjustment factors for certain corporate events affecting the underlying stocks, such as stock
splits, stock dividends and extraordinary dividends, and certain other corporate actions involving the issuers of the underlying
stocks, such as mergers. However, the calculation agent will not make an adjustment for every corporate event that can
affect the underlying stocks. For example, the calculation agent is not required to make any adjustments if the issuers
of the underlying stocks or anyone else makes a partial tender or partial exchange offer for the underlying stocks, nor will adjustments
be made following the final observation date. In addition, no adjustments will be made for regular cash dividends, which
are expected to reduce the price of the underlying stocks by the amount of such dividends
.
If
an event occurs that does not require the
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due July 28, 2022, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of CVS Health Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of Johnson & Johnson and the Common Stock of The Walt Disney Company
Principal at Risk Securities
|
calculation agent to adjust an adjustment factor,
such as a regular cash dividend, the market price of the securities and your return on the securities may be materially and adversely
affected. For example, if the record date for a regular cash dividend were to occur on or shortly before an observation date, this
may decrease the determination closing price of an underlying stock to be less than the downside threshold level (resulting in
no contingent monthly coupon being paid with respect to such date) or the final share price of an underlying stock to be less than
the downside threshold level (resulting in a loss of a significant portion of all of your investment in the securities), materially
and adversely affecting your return.
|
§
|
The securities will not be listed on any securities
exchange and secondary trading may be limited
, and
accordingly, you should be willing to hold your securities for the entire
3-year term of the securities.
The securities will not be listed on any securities exchange. Therefore,
there may be little or no secondary market for the securities. MS & Co. may, but is not obligated to, make a market
in the securities and, if it once chooses to make a market, may cease doing so at any time. When it does make a market,
it will generally do so for transactions of routine secondary market size at prices based on its estimate of the current value
of the securities, taking into account its bid/offer spread, our credit spreads, market volatility, the notional size of the proposed
sale, the cost of unwinding any related hedging positions, the time remaining to maturity and the likelihood that it will be able
to resell the securities. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade
or sell the securities easily. Since other broker-dealers may not participate significantly in the secondary market
for the securities, the price at which you may be able to trade your securities is likely to depend on the price, if any, at which
MS & Co. is willing to transact. If, at any time, MS & Co. were to cease making a market in the securities,
it is likely that there would be no secondary market for the securities. Accordingly, you should be willing to hold
your securities to maturity.
|
|
§
|
The rate we are willing to pay for securities of
this type, maturity and issuance size is likely to be lower than the rate implied by our secondary market credit spreads and advantageous
to us. Both the lower rate and the inclusion of costs associated with issuing, selling, structuring and hedging the
securities in the original issue price reduce the economic terms of the securities, cause the estimated value of the securities
to be less than the original issue price and will adversely affect secondary market prices.
Assuming no change in
market conditions or any other relevant factors, the prices, if any, at which dealers, including MS & Co., may be willing to
purchase the securities in secondary market transactions will likely be significantly lower than the original issue price, because
secondary market prices will exclude the issuing, selling, structuring and hedging-related costs that are included in the original
issue price and borne by you and because the secondary market prices will reflect our secondary market credit spreads and the bid-offer
spread that any dealer would charge in a secondary market transaction of this type as well as other factors.
|
The inclusion of the costs of issuing, selling, structuring
and hedging the securities in the original issue price and the lower rate we are willing to pay as issuer make the economic terms
of the securities less favorable to you than they otherwise would be.
However, because the costs associated with issuing,
selling, structuring and hedging the securities are not fully deducted upon issuance, for a period of up to 6 months following
the issue date, to the extent that MS & Co. may buy or sell the securities in the secondary market, absent changes in market
conditions, including those related to the underlying stocks, and to our secondary market credit spreads, it would do so based
on values higher than the estimated value, and we expect that those higher values will also be reflected in your brokerage account
statements.
|
§
|
The estimated value of the securities is determined
by reference to our pricing and valuation models, which may differ from those of other dealers and is not a maximum or minimum
secondary market price.
These pricing and valuation models are proprietary and rely in part on subjective views
of certain market inputs and certain assumptions about future events, which may prove to be incorrect. As a result,
because there is no market-standard way to value these types of securities, our models may yield a higher estimated value of the
securities than those generated by others, including other dealers in the market, if they attempted to value the securities. In
addition, the estimated value on the pricing date does not represent a minimum or maximum price at which dealers, including MS
& Co., would be willing to purchase your securities in the secondary market (if any exists) at any time. The value of your
securities at any time after the date of this document will vary based on many factors that cannot be predicted with
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due July 28, 2022, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of CVS Health Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of Johnson & Johnson and the Common Stock of The Walt Disney Company
Principal at Risk Securities
|
accuracy, including our creditworthiness and changes
in market conditions. See also “The market price will be influenced by many unpredictable factors” above.
|
§
|
Hedging and trading activity by our affiliates
could potentially affect the value of the securities.
One or more of our affiliates and/or third-party dealers have
carried out, and will continue to carry out, hedging activities related to the securities (and to other instruments linked to the
underlying stocks), including trading in the underlying stocks. Some of our affiliates also trade the underlying stocks
and other financial instruments related to the underlying stocks on a regular basis as part of their general broker-dealer and
other businesses. As a result, these entities may be unwinding or adjusting hedge positions during the term of the securities,
and the hedging strategy may involve greater and more frequent dynamic adjustments to the hedge as the final observation date approaches. Any
of these hedging or trading activities on or prior to the pricing date could have increased the initial share price of an underlying
stock, and, therefore, could have increased (i) the value at or above which such underlying stock must close on the redemption
determination dates so that the securities are redeemed prior to maturity for the early redemption payment (depending also on the
performance of the other underlying stocks) and (ii) the downside threshold level for such underlying stock, which is the value
at or above which the underlying stock must close on the observation dates so that you receive a contingent monthly coupon on the
securities (depending also on the performance of the other underlying stocks), and, with respect to the final observation date,
so that you are not exposed to the negative performance of the worst performing underlying stock at maturity (depending also on
the performance of the other underlying stocks). Additionally, such hedging or trading activities during the term of
the securities could potentially affect the value of any underlying stock on the redemption determination dates and the observation
dates, and, accordingly, whether we redeem the securities prior to maturity, whether we pay a contingent monthly coupon on the
securities and the amount of cash you will receive at maturity, if any (depending also on the performance of the other underlying
stocks).
|
|
§
|
The calculation agent, which is a subsidiary of
Morgan Stanley and an affiliate of MSFL, will make determinations with respect to the securities.
As calculation
agent, MS & Co. has determined the initial share prices, the redemption threshold levels and the downside threshold levels
and will determine the final share prices, the payment at maturity, if any, whether you receive a contingent monthly coupon on
each coupon payment date and/or at maturity, whether the securities will be redeemed on any early redemption date, whether a market
disruption event has occurred and whether to make any adjustments to the adjustment factors. Moreover, certain determinations
made by MS & Co., in its capacity as calculation agent, may require it to exercise discretion and make subjective judgments,
such as with respect to the occurrence or non-occurrence of market disruption events and certain adjustments to the adjustment
factors. These potentially subjective determinations may affect the payout to you upon an automatic early redemption
or at maturity, if any. For further information regarding these types of determinations, see “Description of Auto-Callable
Securities—Auto-Callable Securities Linked to Underlying Shares” and “—Calculation Agent and Calculations”
and related definitions in the accompanying product supplement. In addition, MS & Co. has determined the estimated
value of the securities on the pricing date.
|
|
§
|
The U.S. federal income tax consequences of an
investment in the securities are uncertain.
There is no direct legal authority as to the proper treatment of the securities
for U.S. federal income tax purposes, and, therefore, significant aspects of the tax treatment of the securities are uncertain.
|
Please read the discussion under “Additional
Information—Tax considerations” in this document concerning the U.S. federal income tax consequences of an investment
in the securities. We intend to treat a security for U.S. federal income tax purposes as a single financial contract
that provides for a coupon that will be treated as gross income to you at the time received or accrued, in accordance with your
regular method of tax accounting. Under this treatment, the ordinary income treatment of the coupon payments, in conjunction
with the capital loss treatment of any loss recognized upon the sale, exchange or settlement of the securities, could result in
adverse tax consequences to holders of the securities because the deductibility of capital losses is subject to limitations. We
do not plan to request a ruling from the Internal Revenue Service (the “IRS”) regarding the tax treatment of the securities,
and the IRS or a court may not agree with the tax treatment described herein. If the IRS were successful in asserting
an alternative treatment for the securities, the timing and character of income or loss on the securities might differ significantly
from the tax treatment described herein. For example, under one possible treatment, the IRS could seek to recharacterize
the securities as debt instruments. In that event, U.S. Holders (as defined below) would be required to accrue into
income original issue
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due July 28, 2022, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of CVS Health Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of Johnson & Johnson and the Common Stock of The Walt Disney Company
Principal at Risk Securities
|
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 28, 2022, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of CVS Health Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of Johnson & Johnson and the Common Stock of The Walt Disney Company
Principal at Risk Securities
|
CVS Health Corporation
Overview
CVS Health Corporation is an integrated pharmacy health care
provider. The CVS Stock is registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Information provided to or filed with the Securities and Exchange Commission by CVS Health Corporation pursuant to the Exchange
Act can be located by reference to the Securities and Exchange Commission file number 001-01011 through the Securities and Exchange
Commission’s website at www.sec.gov. In addition, information regarding CVS Health Corporation may be obtained from other
sources including, but not limited to, press releases, newspaper articles and other publicly disseminated documents.
Neither
the issuer nor the agent makes any representation that such publicly available documents or any other publicly available information
regarding the issuer of the CVS Stock is accurate or complete.
Information as of market close on July 25, 2019:
Bloomberg Ticker Symbol:
|
CVS
|
Exchange:
|
NYSE
|
Current Stock Price:
|
$55.44
|
52 Weeks Ago:
|
$65.99
|
52 Week High (on 11/13/2018):
|
$80.80
|
52 Week Low (on 4/2/2019):
|
$52.13
|
Current Dividend Yield:
|
3.61%
|
|
|
The following table sets forth the published high and low closing
prices of, as well as dividends on, the CVS Stock for each quarter from January 1, 2016 through July 25, 2019. The closing
price of the CVS Stock on July 25, 2019 was $55.44. The associated graph shows the closing prices of the CVS Stock for
each day from January 1, 2014 through July 25, 2019. We obtained the information in the table and graph below from Bloomberg Financial
Markets, without independent verification. The historical performance of the CVS Stock should not be taken as an indication
of its future performance, and no assurance can be given as to the price of the CVS Stock at any time, including on the redemption
determination dates or the observation dates.
Common Stock of CVS Health Corporation (CUSIP 126650100)
|
High ($)
|
Low ($)
|
Dividends ($)
|
2016
|
|
|
|
First Quarter
|
104.05
|
89.65
|
0.425
|
Second Quarter
|
106.10
|
93.21
|
0.425
|
Third Quarter
|
98.06
|
88.99
|
0.425
|
Fourth Quarter
|
88.80
|
73.53
|
0.50
|
2017
|
|
|
|
First Quarter
|
83.92
|
74.80
|
0.50
|
Second Quarter
|
82.79
|
75.95
|
0.50
|
Third Quarter
|
83.31
|
75.35
|
0.50
|
Fourth Quarter
|
80.91
|
66.80
|
0.50
|
2018
|
|
|
|
First Quarter
|
83.63
|
60.60
|
0.50
|
Second Quarter
|
72.18
|
60.71
|
0.50
|
Third Quarter
|
79.59
|
63.78
|
0.50
|
Fourth Quarter
|
80.80
|
62.92
|
0.50
|
2019
|
|
|
|
First Quarter
|
69.88
|
52.36
|
0.50
|
Second Quarter
|
57.33
|
52.13
|
0.50
|
Third Quarter (through July 25, 2019)
|
57.97
|
54.80
|
0.50
|
|
|
|
|
We make no representation as to the amount of dividends, if any,
that CVS Health Corporation may pay in the future. In any event, as an investor in the Contingent Income Auto-Callable
Securities, you will not be entitled to receive dividends, if any, that may be payable on the common stock of CVS Health Corporation.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due July 28, 2022, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of CVS Health Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of Johnson & Johnson and the Common Stock of The Walt Disney Company
Principal at Risk Securities
|
Common Stock of CVS Health Corporation – Daily Closing Prices
January 1, 2014 to July 25, 2019
|
|
* The red solid line indicates the downside threshold level of
$32.017, which is approximately 57.75% of the initial share price.
This document relates only to the securities referenced hereby
and does not relate to the CVS Stock or other securities of CVS Health Corporation. We have derived all disclosures
contained in this document regarding CVS Health Corporation stock from the publicly available documents described above. In
connection with the offering of the securities, neither we nor the agent has participated in the preparation of such documents
or made any due diligence inquiry with respect to CVS Health Corporation. Neither we nor the agent makes any representation that
such publicly available documents or any other publicly available information regarding CVS Health Corporation is accurate or complete. Furthermore,
we cannot give any assurance that all events occurring prior to the date hereof (including events that would affect the accuracy
or completeness of the publicly available documents described above) that would affect the trading price of the CVS Stock (and
therefore the price of the CVS Stock at the time we priced the securities) have been publicly disclosed. Subsequent
disclosure of any such events or the disclosure of or failure to disclose material future events concerning CVS Health Corporation
could affect the value received with respect to the securities and therefore the value of the securities.
Neither the issuer nor any of its affiliates makes any representation
to you as to the performance of the CVS Stock.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due July 28, 2022, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of CVS Health Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of Johnson & Johnson and the Common Stock of The Walt Disney Company
Principal at Risk Securities
|
McDonald’s Corporation Overview
McDonald’s Corporation operates and franchises McDonald’s
restaurants, which serve a locally relevant menu of food and beverages in more than 100 countries. The MCD Stock is registered
under the Exchange Act. Information provided to or filed with the Securities and Exchange Commission by McDonald’s Corporation
pursuant to the Exchange Act can be located by reference to the Securities and Exchange Commission file number 001-05231 through
the Securities and Exchange Commission’s website at .www.sec.gov. In addition, information regarding McDonald’s Corporation
may be obtained from other sources including, but not limited to, press releases, newspaper articles and other publicly disseminated
documents.
Neither the issuer nor the agent makes any representation that such publicly available documents or any
other publicly available information regarding the issuer of the MCD Stock is accurate or complete.
Information as of market close on July 25, 2019:
Bloomberg Ticker Symbol:
|
MCD
|
Exchange:
|
NYSE
|
Current Stock Price:
|
$214.44
|
52 Weeks Ago:
|
$158.89
|
52 Week High (on 7/18/2019):
|
$215.91
|
52 Week Low (on 8/2/2018):
|
$155.41
|
Current Dividend Yield:
|
2.16%
|
|
|
The following table sets forth the published high and low closing
prices of, as well as dividends on, the MCD Stock for each quarter from January 1, 2016 through July 25, 2019. The closing
price of the MCD Stock on July 25, 2019 was $214.44. The associated graph shows the closing prices of the MCD Stock
for each day from January 1, 2014 through July 25, 2019. We obtained the information in the table and graph below from Bloomberg
Financial Markets, without independent verification. The historical performance of the MCD Stock should not be taken
as an indication of its future performance, and no assurance can be given as to the price of the MCD Stock at any time, including
on the redemption determination dates or the observation dates.
Common Stock of McDonald’s Corporation (CUSIP 580135101)
|
High ($)
|
Low ($)
|
Dividends ($)
|
2016
|
|
|
|
First Quarter
|
125.83
|
115.12
|
0.89
|
Second Quarter
|
131.60
|
116.30
|
0.94
|
Third Quarter
|
128.26
|
114.44
|
0.94
|
Fourth Quarter
|
123.72
|
110.57
|
0.94
|
2017
|
|
|
|
First Quarter
|
129.61
|
119.48
|
0.94
|
Second Quarter
|
154.80
|
129.29
|
0.94
|
Third Quarter
|
161.53
|
151.85
|
0.94
|
Fourth Quarter
|
174.20
|
156.86
|
1.01
|
2018
|
|
|
|
First Quarter
|
178.36
|
148.27
|
1.01
|
Second Quarter
|
169.48
|
155.94
|
1.01
|
Third Quarter
|
167.29
|
155.41
|
1.01
|
Fourth Quarter
|
189.26
|
162.97
|
1.16
|
2019
|
|
|
|
First Quarter
|
189.90
|
173.97
|
1.16
|
Second Quarter
|
207.66
|
188.35
|
1.16
|
Third Quarter (through July 25, 2019)
|
215.91
|
206.30
|
1.16
|
|
|
|
|
We make no representation as to the amount of dividends, if any,
that McDonald’s Corporation may pay in the future. In any event, as an investor in the Contingent Income Auto-Callable
Securities, you will not be entitled to receive dividends, if any, that may be payable on the common stock of McDonald’s
Corporation.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due July 28, 2022, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of CVS Health Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of Johnson & Johnson and the Common Stock of The Walt Disney Company
Principal at Risk Securities
|
Common Stock of McDonald’s Corporation – Daily Closing Prices
January 1, 2014 to July 25, 2019
|
|
* The red solid line indicates the downside threshold level of
$123.839, which is approximately 57.75% of the initial share price.
This document relates only to the securities referenced hereby
and does not relate to the MCD Stock or other securities of McDonald’s Corporation. We have derived all disclosures
contained in this document regarding McDonald’s Corporation stock from the publicly available documents described above. In
connection with the offering of the securities, neither we nor the agent has participated in the preparation of such documents
or made any due diligence inquiry with respect to McDonald’s Corporation. Neither we nor the agent makes any representation
that such publicly available documents or any other publicly available information regarding McDonald’s Corporation is accurate
or complete. Furthermore, we cannot give any assurance that all events occurring prior to the date hereof (including
events that would affect the accuracy or completeness of the publicly available documents described above) that would affect the
trading price of the MCD Stock (and therefore the price of the MCD Stock at the time we priced the securities) have been publicly
disclosed. Subsequent disclosure of any such events or the disclosure of or failure to disclose material future events
concerning McDonald’s Corporation could affect the value received with respect to the securities and therefore the value
of the securities.
Neither the issuer nor any of its affiliates makes any representation
to you as to the performance of the MCD Stock.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due July 28, 2022, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of CVS Health Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of Johnson & Johnson and the Common Stock of The Walt Disney Company
Principal at Risk Securities
|
Johnson & Johnson Overview
Johnson & Johnson is engaged in the research and development,
manufacture and sale of a range of products in the health-care field. The JNJ Stock is registered under the Exchange Act. Information
provided to or filed with the Securities and Exchange Commission by Johnson & Johnson pursuant to the Exchange Act can be located
by reference to the Securities and Exchange Commission file number 001-03215 through the Securities and Exchange Commission’s
website at .www.sec.gov. In addition, information regarding Johnson & Johnson may be obtained from other sources including,
but not limited to, press releases, newspaper articles and other publicly disseminated documents.
Neither the issuer
nor the agent makes any representation that such publicly available documents or any other publicly available information regarding
the issuer of the JNJ Stock is accurate or complete.
Information as of market close on July 25, 2019:
Bloomberg Ticker Symbol:
|
JNJ
|
Exchange:
|
NYSE
|
Current Stock Price:
|
$131.12
|
52 Weeks Ago:
|
$128.62
|
52 Week High (on 12/13/2018):
|
$147.84
|
52 Week Low (on 12/24/2018):
|
$122.84
|
Current Dividend Yield:
|
2.90%
|
|
|
The following table sets forth the published high and low closing
prices of, as well as dividends on, the JNJ Stock for each quarter from January 1, 2016 through July 25, 2019. The closing
price of the JNJ Stock on July 25, 2019 was $131.12. The associated graph shows the closing prices of the JNJ Stock
for each day from January 1, 2014 through July 25, 2019. We obtained the information in the table and graph below from Bloomberg
Financial Markets, without independent verification. The historical performance of the JNJ Stock should not be taken
as an indication of its future performance, and no assurance can be given as to the price of the JNJ Stock at any time, including
on the redemption determination dates or the observation dates.
Common Stock of Johnson & Johnson (CUSIP 478160104)
|
High ($)
|
Low($)
|
Dividends ($)
|
2016
|
|
|
|
First Quarter
|
109.14
|
95.75
|
0.75
|
Second Quarter
|
121.30
|
108.59
|
0.80
|
Third Quarter
|
125.40
|
117.27
|
0.80
|
Fourth Quarter
|
120.31
|
110.99
|
0.80
|
2017
|
|
|
|
First Quarter
|
128.96
|
111.76
|
0.80
|
Second Quarter
|
136.43
|
121.37
|
0.84
|
Third Quarter
|
136.57
|
129.47
|
0.84
|
Fourth Quarter
|
143.62
|
131.22
|
0.84
|
2018
|
|
|
|
First Quarter
|
148.14
|
125.10
|
0.84
|
Second Quarter
|
131.76
|
119.40
|
0.90
|
Third Quarter
|
142.88
|
121.58
|
0.90
|
Fourth Quarter
|
147.84
|
122.84
|
0.90
|
2019
|
|
|
|
First Quarter
|
139.79
|
125.72
|
0.90
|
Second Quarter
|
144.24
|
131.15
|
0.95
|
Third Quarter (through July 25, 2019)
|
142.14
|
128.64
|
0.95
|
|
|
|
|
We make no representation as to the amount of dividends, if any,
that Johnson & Johnson may pay in the future. In any event, as an investor in the Contingent Income Auto-Callable
Securities, you will not be entitled to receive dividends, if any, that may be payable on the common stock of Johnson & Johnson.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due July 28, 2022, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of CVS Health Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of Johnson & Johnson and the Common Stock of The Walt Disney Company
Principal at Risk Securities
|
Common Stock of Johnson & Johnson – Daily Closing Prices
January 1, 2014 to July 25, 2019
|
|
* The red solid line indicates the downside threshold level of
$75.722, which is approximately 57.75% of the initial share price.
This document relates only to the securities referenced hereby
and does not relate to the JNJ Stock or other securities of Johnson & Johnson. We have derived all disclosures contained
in this document regarding Johnson & Johnson stock from the publicly available documents described above. In connection
with the offering of the securities, neither we nor the agent has participated in the preparation of such documents or made any
due diligence inquiry with respect to Johnson & Johnson. Neither we nor the agent makes any representation that
such publicly available documents or any other publicly available information regarding Johnson & Johnson 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 JNJ Stock (and
therefore the price of the JNJ Stock at the time we priced the securities) have been publicly disclosed. Subsequent
disclosure of any such events or the disclosure of or failure to disclose material future events concerning Johnson & Johnson
could affect the value received with respect to the securities and therefore the value of the securities.
Neither the issuer nor any of its affiliates makes any representation
to you as to the performance of the JNJ Stock.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due July 28, 2022, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of CVS Health Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of Johnson & Johnson and the Common Stock of The Walt Disney Company
Principal at Risk Securities
|
The Walt Disney Company Overview
The Walt Disney Company is a diversified worldwide entertainment
company. The DIS Stock is registered under the Exchange Act. Information provided to or filed with the Securities and Exchange
Commission by The Walt Disney Company. pursuant to the Exchange Act can be located by reference to the Securities and Exchange
Commission file number 001-11605 through the Securities and Exchange Commission’s website at .www.sec.gov. In addition, information
regarding The Walt Disney Company may be obtained from other sources including, but not limited to, press releases, newspaper articles
and other publicly disseminated documents.
Neither the issuer nor the agent makes any representation that such publicly
available documents or any other publicly available information regarding the issuer of the DIS Stock is accurate or complete.
Information as of market close on July 25, 2019:
Bloomberg Ticker Symbol:
|
DIS
|
Exchange:
|
NYSE
|
Current Stock Price:
|
$143.21
|
52 Weeks Ago:
|
$111.18
|
52 Week High (on 7/15/2019):
|
$145.06
|
52 Week Low (on 12/24/2018):
|
$100.35
|
Current Dividend Yield:
|
1.23%
|
|
|
The following table sets forth the published high and low closing
prices of, as well as dividends on, the DIS Stock for each quarter from January 1, 2016 through July 25, 2019. The closing
price of the DIS Stock on July 25, 2019 was $143.21. The associated graph shows the closing prices of the DIS Stock
for each day from January 1, 2014 through July 25, 2019. We obtained the information in the table and graph below from Bloomberg
Financial Markets, without independent verification. The historical performance of the DIS Stock should not be taken
as an indication of its future performance, and no assurance can be given as to the price of the DIS Stock at any time, including
on the redemption determination dates or the observation dates.
Common Stock of The Walt Disney Company (CUSIP 254687106)
|
High ($)
|
Low($)
|
Dividends ($)
|
2016
|
|
|
|
First Quarter
|
102.98
|
88.85
|
-
|
Second Quarter
|
106.60
|
94.38
|
0.71
|
Third Quarter
|
100.20
|
91.72
|
-
|
Fourth Quarter
|
105.56
|
90.83
|
0.78
|
2017
|
|
|
|
First Quarter
|
113.39
|
106.08
|
-
|
Second Quarter
|
115.84
|
103.94
|
0.78
|
Third Quarter
|
110.61
|
97.06
|
-
|
Fourth Quarter
|
111.81
|
96.93
|
0.84
|
2018
|
|
|
|
First Quarter
|
112.47
|
98.54
|
-
|
Second Quarter
|
108.85
|
98.66
|
0.84
|
Third Quarter
|
116.94
|
104.04
|
-
|
Fourth Quarter
|
118.90
|
100.35
|
0.88
|
2019
|
|
|
|
First Quarter
|
115.25
|
106.33
|
-
|
Second Quarter
|
142.02
|
111.96
|
0.88
|
Third Quarter (through July 25, 2019)
|
145.06
|
139.85
|
-
|
|
|
|
|
We make no representation as to the amount of dividends, if any,
that The Walt Disney Company may pay in the future. In any event, as an investor in the Contingent Income Auto-Callable
Securities, you will not be entitled to receive dividends, if any, that may be payable on the common stock of The Walt Disney Company.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due July 28, 2022, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of CVS Health Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of Johnson & Johnson and the Common Stock of The Walt Disney Company
Principal at Risk Securities
|
Common Stock of The Walt Disney Company – Daily Closing Prices
January 1, 2014 to July 25, 2019
|
|
* The red solid line indicates the downside threshold level of
$82.704, which is approximately 57.75% of the initial share price.
This document relates only to the securities referenced hereby
and does not relate to the DIS Stock or other securities of The Walt Disney Company. We have derived all disclosures
contained in this document regarding The Walt Disney Company stock from the publicly available documents described above. In
connection with the offering of the securities, neither we nor the agent has participated in the preparation of such documents
or made any due diligence inquiry with respect to The Walt Disney Company. Neither we nor the agent makes any representation
that such publicly available documents or any other publicly available information regarding The Walt Disney Company 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 DIS Stock (and therefore the price of the DIS Stock at the time we priced the securities) have been publicly
disclosed. Subsequent disclosure of any such events or the disclosure of or failure to disclose material future events
concerning The Walt Disney Company could affect the value received with respect to the securities and therefore the value of the
securities.
Neither the issuer nor any of its affiliates makes any representation
to you as to the performance of the DIS Stock.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due July 28, 2022, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of CVS Health Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of Johnson & Johnson and the Common Stock of The Walt Disney Company
Principal at Risk Securities
|
Additional Terms of the Securities
Please read this information in conjunction with the summary
terms on the front cover of this document.
If the terms described herein are inconsistent with those described in the accompanying product supplement or prospectus, the terms described herein shall control.
|
Interest period:
|
The monthly period from and including the original issue date (in the case of the first interest period) or the previous scheduled coupon payment date, as applicable, to but excluding the following scheduled coupon payment date, with no adjustment for any postponement thereof.
|
Record date:
|
The record date for each coupon payment date shall be the date one business day prior to such scheduled coupon payment date;
provided
, however, that any coupon payable at maturity (or upon early redemption) shall be payable to the person to whom the payment at maturity or early redemption payment, as the case may be, shall be payable.
|
Underlying stock:
|
The accompanying product supplement refers to the underlying stock as the “underlying shares.”
|
Underlying stock issuer:
|
With respect to the CVS Stock, CVS Health Corporation
With respect to the MCD Stock, McDonald’s Corporation
With respect to the JNJ Stock, Johnson & Johnson
With respect to the DIS Stock, The Walt Disney Company
The accompanying product supplement refers to each underlying
stock issuer as an “underlying company.”
|
Downside threshold level:
|
The accompanying product supplement refers to the downside threshold level as the “trigger level.”
|
Day count convention:
|
Interest will be computed on the basis of a 360-day year of twelve 30-day months.
|
Postponement of maturity date:
|
If the final observation date is postponed due to a non-trading day or certain market disruption events with respect to any underlying stock so that it falls less than two business days prior to the scheduled maturity date, the maturity date will be postponed to the second business day following that final observation date as postponed with respect to any underlying stock, and no adjustment will be made to the payment at maturity made on that postponed date.
|
Antidilution adjustments:
|
The following replaces in its entirety the portion of the
section entitled “Antidilution Adjustments” in the accompanying product supplement for auto-callable securities from
the start of paragraph 5 to the end of such section.
5. If, with respect to one or more of the underlying stocks,
(i) there occurs any reclassification or change of such underlying stock, including, without limitation, as a result of the issuance
of any tracking stock by the underlying stock issuer for such underlying stock, (ii) such underlying stock issuer or any surviving
entity or subsequent surviving entity of such underlying stock issuer (the “successor corporation”) has been subject
to a merger, combination or consolidation and is not the surviving entity, (iii) any statutory exchange of securities of such underlying
stock issuer or any successor corporation with another corporation occurs (other than pursuant to clause (ii) above), (iv) such
underlying stock issuer is liquidated, (v) such underlying stock issuer issues to all of its shareholders equity securities of
an issuer other than such underlying stock issuer (other than in a transaction described in clause (ii), (iii) or (iv) above) (a
“spin-off event”) or (vi) a tender or exchange offer or going-private transaction is consummated for all the outstanding
shares of such underlying stock (any such event in clauses (i) through (vi), a “reorganization event”), the method
of determining whether an early redemption has occurred and the amount payable upon an early redemption date or at maturity for
each security will be as follows:
·
Upon
any redemption determination date following the effective date of a reorganization event and prior to the final observation date: If
the exchange property value (as defined below) is greater than or equal to the respective redemption threshold level, and the determination
closing price (or exchange property value, if applicable) of each other underlying stock is also greater than or equal to its redemption
threshold level, the securities will be automatically redeemed for an early redemption payment.
·
Upon
the final observation date, if the securities have not previously been automatically redeemed: You will receive for
each security that you hold a payment at maturity equal
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due July 28, 2022, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of CVS Health Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of Johnson & Johnson and the Common Stock of The Walt Disney Company
Principal at Risk Securities
|
|
to:
Ø
If the exchange property value on the final observation
date is greater than or equal to the respective downside threshold level, and the final share price of each other underlying stock
(or exchange property value, as applicable) is also greater than its respective downside threshold level:
(i) the stated principal
amount plus (ii) the contingent monthly coupon with respect to the final observation date and any previously unpaid contingent
monthly coupons from the prior observation dates.
Ø
If
the exchange property value on the final observation date is less than the respective downside threshold level, or if the final
share price (or exchange property value, if applicable) of any other underlying stock is less than its respective downside threshold
level:
Ø
If
the worst performing underlying stock has not undergone a reorganization event as described in paragraph 5 above:
(i) the stated
principal amount multiplied by (ii) the share performance factor of the worst performing underlying stock.
Ø
If
the worst performing underlying stock has undergone a reorganization event as described in paragraph 5 above:
(i) the stated
principal amount multiplied by (ii) the share performance factor of the worst performing underlying stock. For purposes
of determining the share performance factor of the worst performing underlying stock, the final share price of such worst performing
underlying stock will be deemed to equal the per-share cash value, determined as of the final observation date, of the securities,
cash or any other assets distributed to holders of the worst performing underlying stock in or as a result of any such reorganization
event, including (A) in the case of the issuance of tracking stock, the reclassified share of such worst performing underlying
stock, (B) in the case of a spin-off event, the share of such worst performing underlying stock with respect to which the spun-off
security was issued, and (C) in the case of any other reorganization event where such worst performing underlying stock continues
to be held by the holders receiving such distribution, such worst performing underlying stock (collectively, the “exchange
property”).
Following the effective date of a reorganization event, the contingent
monthly coupon, as well as any previously unpaid contingent monthly coupons, will be payable for each observation date on which
the exchange property value is greater than or equal to the downside threshold level and the determination closing price (or exchange
property value, as applicable) of each other underlying stock is also greater than or equal to its downside threshold level.
If exchange property includes a cash component, investors will
not receive any interest accrued on such cash component. In the event exchange property consists of securities, those
securities will, in turn, be subject to the antidilution adjustments set forth in paragraphs 1 through 5.
For purposes of determining whether or not the exchange property
value is less than the initial share price, or less than the downside threshold level, or for determining the worst performing
underlying stock, “exchange property value” means (x) for any cash received in any reorganization event, the value,
as determined by the calculation agent, as of the date of receipt, of such cash received for one share of such underlying stock,
as adjusted by the adjustment factor at the time of such reorganization event, (y) for any property other than cash or securities
received in any such reorganization event, the market value, as determined by the calculation agent in its sole discretion, as
of the date of receipt, of such exchange property received for one share of such underlying stock, as adjusted by the adjustment
factor at the time of such reorganization event and (z) for any security received in any such reorganization event, an amount equal
to the determination closing price, as of the day on which the exchange property value is determined, per share of such security
multiplied by the quantity of such security received for each share of such underlying stock, as adjusted by the adjustment factor
at the time of such reorganization event.
For purposes of paragraph 5 above, in the case of a consummated
tender or exchange offer or going-private transaction involving consideration of particular types, exchange property shall be deemed
to include the amount of cash or other property delivered by the offeror in the tender or exchange offer (in an amount determined
on the basis of the rate of exchange in such tender or exchange offer or going-private transaction). In the event of
a tender or exchange offer or a going-private transaction with respect to exchange property in which an
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due July 28, 2022, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of CVS Health Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of Johnson & Johnson and the Common Stock of The Walt Disney Company
Principal at Risk Securities
|
|
offeree may elect to receive cash or other property, exchange
property shall be deemed to include the kind and amount of cash and other property received by offerees who elect to receive cash.
Following the occurrence of any reorganization event referred
to in paragraph 5 above, all references in this offering document and in the related product supplement with respect to the securities
to such “underlying stock” shall be deemed to refer to the exchange property and references to a “share”
or “shares” of such underlying stock shall be deemed to refer to the applicable unit or units of such exchange property,
unless the context otherwise requires.
No adjustment to the adjustment factor will be required unless
such adjustment would require a change of at least 0.1% in the adjustment factor then in effect. The adjustment factor
resulting from any of the adjustments specified above will be rounded to the nearest one hundred-thousandth, with five one-millionths
rounded upward. Adjustments to the adjustment factor will be made up to the close of business on the final observation
date.
No adjustments to the adjustment factor or method of calculating
the adjustment factor will be required other than those specified above. The adjustments specified above do not cover
all events that could affect the determination closing price or the final share price of such underlying stock, including, without
limitation, a partial tender or exchange offer for such underlying stock.
The calculation agent shall be solely responsible for the determination
and calculation of any adjustments to the adjustment factor or method of calculating the adjustment factor and of any related determinations
and calculations with respect to any distributions of stock, other securities or other property or assets (including cash) in connection
with any corporate event described in paragraphs 1 through 5 above, and its determinations and calculations with respect thereto
shall be conclusive in the absence of manifest error.
The calculation agent will provide information as to any adjustments
to the adjustment factor or to the method of calculating the amount payable at maturity of the securities made pursuant to paragraph
5 above upon written request by any investor in the securities.
|
Trustee:
|
The Bank of New York Mellon
|
Calculation agent:
|
MS & Co.
|
Issuer notices to registered security holders, the trustee and the depositary:
|
In the event that the maturity date is postponed due to postponement
of the final observation date, the issuer shall give notice of such postponement and, once it has been determined, of the date
to which the maturity date has been rescheduled (i) to each registered holder of the securities by mailing notice of such postponement
by first class mail, postage prepaid, to such registered holder’s last address as it shall appear upon the registry books,
(ii) to the trustee by facsimile, confirmed by mailing such notice to the trustee by first class mail, postage prepaid, at its
New York office and (iii) to The Depository Trust Company (the “depositary”) by telephone or facsimile confirmed by
mailing such notice to the depositary by first class mail, postage prepaid. Any notice that is mailed to a registered holder of
the securities in the manner herein provided shall be conclusively presumed to have been duly given to such registered holder,
whether or not such registered holder receives the notice. The issuer shall give such notice as promptly as possible, and in no
case later than (i) with respect to notice of 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
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due July 28, 2022, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of CVS Health Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of Johnson & Johnson and the Common Stock of The Walt Disney Company
Principal at Risk Securities
|
|
holder receives the notice. This notice shall be given by the
issuer or, at the issuer’s request, by the trustee in the name and at the expense of the issuer, with any such request to
be accompanied by a copy of the notice to be given.
The issuer shall, or shall cause the calculation agent to, (i)
provide written notice to the trustee, on which notice the trustee may conclusively rely, and to the depositary of the amount of
cash to be delivered as contingent monthly coupon, if any, with respect to each security on or prior to 10:30 a.m. (New York City
time) on the business day preceding each coupon payment date, and (ii) deliver the aggregate cash amount due, if any, with respect
to the contingent monthly coupon to the trustee for delivery to the depositary, as holder of the securities, on the applicable
coupon payment date.
The issuer shall, or shall cause the calculation agent to, (i)
provide written notice to the trustee, on which notice the trustee may conclusively rely, and to the depositary of the amount of
cash, if any, to be delivered with respect to the securities, on or prior to 10:30 a.m. (New York City time) on the business day
preceding the maturity date, and (ii) deliver the aggregate cash amount due with respect to the securities, if any, to the trustee
for delivery to the depositary, as holder of the securities, on the maturity date.
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due July 28, 2022, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of CVS Health Corporation, the Common Stock of McDonald’s Corporation, the Common Stock of Johnson & Johnson and the Common Stock of The Walt Disney Company
Principal at Risk Securities
|