CALCULATION
OF REGISTRATION FEE
Title of Each Class of Securities
Offered
|
|
Maximum Aggregate
Offering Price
|
|
Amount of Registration
Fee
|
Callable Contingent Income Buffered Securities due 2022
|
|
$2,200,000
|
|
$266.64
|
August
2019
Pricing
Supplement No. 2,400
Registration Statement Nos. 333-221595; 333-221595-01
Dated August 14, 2019
Filed pursuant to Rule 424(b)(2)
Morgan Stanley Finance LLC
Structured Investments
Opportunities in U.S. Equities
Callable Contingent Income Buffered Securities
due August 18, 2022
Payments on the Securities Based on the Worst
Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Fully and Unconditionally Guaranteed by Morgan
Stanley
Principal at Risk
Securities
The securities are unsecured obligations
of Morgan Stanley Finance LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley. The securities
have the terms described in the accompanying prospectus supplement, index supplement and prospectus, as supplemented or modified
by this document. The securities do not guarantee the repayment of principal and do not provide for the regular payment of interest.
The securities will pay a contingent monthly coupon
but only if
the index closing value of
each of the Russell 2000
®
Index and the S&P 500
®
Index
on the related observation date is
at or above 79% of its respective
initial index value
, which we refer to as the respective coupon barrier level. If the index closing value
of either underlying
index
is less than the coupon barrier level for such index on any observation date, we will pay no interest for the related
monthly period. In addition, beginning on August 19, 2020,
we will have the right to redeem the securities at our discretion
on any quarterly redemption date
for a redemption payment equal to the sum of the stated principal amount plus any contingent
monthly coupon otherwise due with respect to the related observation date. An early redemption of the securities will be at our
discretion and will not automatically occur based on the performance of any underlying index. At maturity, if the securities have
not previously been redeemed and the final index value of
each
underlying index has appreciated, has remained unchanged
or has declined by an amount less than or equal to the buffer amount of 21%, the payment at maturity will be the stated principal
amount and the related contingent monthly coupon. If, however, the final index value of
either
underlying index has declined
from its initial index value by an amount greater than the buffer amount of 21%, investors will lose 1.2658% for every 1% decline
of the worst performing underlying index beyond the specified buffer amount.
Accordingly,
i
nvestors in the securities
must be willing to accept the risk of losing their entire principal amount if either underlying index declines by an amount greater
than the buffer amount, and also the risk of not receiving any monthly coupons during the entire 3-year term of the securities.
Because payments on the securities are based on the worst performing of the underlying indices, a decline of more than 21%
by
either
underlying index will result in few or no contingent monthly coupons and/or a loss of your investment, even if
the other underlying index has appreciated or has not declined as much. Investors will not participate in any appreciation in
either underlying index. 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 and the limited protection provided by the buffer feature in exchange for the risk
of receiving no monthly interest if
either underlying index
closes below the coupon barrier level for such index on the
observation dates, and the risk of an early redemption of the securities at our discretion. The securities are notes issued as
part of MSFL’s Series A Global Medium-Term Notes program.
All payments are subject to
our credit risk. If we default on our obligations, you could lose some or all of your investment. These securities are not secured
obligations and you will not have any security interest in, or otherwise have any access to, any underlying reference asset or
assets.
FINAL
TERMS
|
Issuer:
|
Morgan Stanley Finance LLC
|
Guarantor:
|
Morgan Stanley
|
Underlying indices:
|
Russell 2000
®
Index (the “RTY Index”) and S&P
500
®
Index (the “SPX Index”)
|
Aggregate principal amount:
|
$2,200,000
|
Stated
principal amount:
|
$1,000 per security
|
Issue
price:
|
$1,000 per security (see “Commissions and issue price” below)
|
Pricing
date:
|
August 14, 2019
|
Original
issue date:
|
August 19, 2019 (3 business days after the pricing date)
|
Maturity date:
|
August 18, 2022
|
Optional
early redemption:
|
Beginning on August 19, 2020, we will have the right
to redeem the securities,
at our discretion
, in whole but not in part, on any quarterly redemption date for the redemption
payment. If we decide to redeem the securities, we will give you notice at least 3 business days before the redemption date
specified in the notice. No further payments will be made on the securities once they have been redeemed.
|
Contingent
monthly coupon:
|
If, on any observation
date, the index closing value of
each underlying index
is
greater than or equal to
its respective coupon
barrier level, we will pay a contingent monthly coupon at an annual rate of 7.00% (corresponding to approximately $5.833
per month per security) on the related contingent coupon payment date.
If, on any observation
date, the closing value
of either underlying index
is
less than
the coupon barrier level for such index,
no contingent monthly coupon will be paid with respect to that observation date.
It is possible that one or both underlying
indices will remain below the respective coupon barrier level(s) for extended periods of time or even throughout the entire
term of the securities so that you will receive few or no contingent monthly coupons.
|
Payment
at maturity:
|
If the securities have
not previously been redeemed, investors will receive on the maturity date a payment at maturity determined as follows:
If the final index value
of
each
underlying index is
greater than or equal to
79% of its respective initial index value, meaning that
neither
underlying index has decreased by an amount greater than the buffer amount of 21% from its respective initial index value:
the
stated principal amount and the contingent monthly coupon with respect to the final observation date
If the final index value
of
either
underlying index is
less than
79% of its respective initial index value, meaning that
either
underlying index has decreased by an amount greater than the buffer amount of 21% from its respective initial index
value:
$1,000
+ [$1,000
×
(index percent change of the worst performing
underlying index + 21%)
×
downside factor]
Under these circumstances,
the payment at maturity will be less than the stated principal amount of $1,000 and could be zero.
|
|
Terms continued on the following
page
|
Agent:
|
Morgan Stanley & Co. LLC (“MS & Co.”), an affiliate of MSFL
and a wholly owned subsidiary of Morgan Stanley. See “Supplemental information regarding plan of distribution;
conflicts of interest.”
|
Estimated value on the pricing date:
|
$982.00 per security. See “Investment Overview” beginning
on page 3.
|
Commissions and
issue price:
|
Price
to public
|
Agent’s commissions
(1)
|
Proceeds to us
(2)
|
Per security
|
$1,000
|
$1
|
$999
|
Total
|
$2,200,000
|
$2,200
|
$2,197,800
|
|
(1)
|
Selected dealers and their
financial advisors will collectively receive from the agent, Morgan Stanley & Co.
LLC, a fixed sales commission of $1 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
prospectus supplement.
|
|
(2)
|
See “Use of proceeds
and hedging” on page 31.
|
The securities involve risks
not associated with an investment in ordinary debt securities. See “Risk Factors” beginning on page 12.
The Securities and Exchange
Commission and state securities regulators have not approved or disapproved these securities, or determined if this document or
the accompanying prospectus supplement, index supplement and prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.
The securities are not deposits
or savings accounts and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality,
nor are they obligations of, or guaranteed by, a bank.
You should read this document
together with the related prospectus supplement, index supplement and prospectus, each of which can be accessed via the hyperlinks
below. Please also see “Additional Terms of the Securities” and “Additional Information About the Securities”
at the end of this document.
References to “we,”
“us” and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context
requires.
Prospectus Supplement dated November 16, 2017
Index Supplement dated November 16, 2017
Prospectus dated November 16, 2017
Morgan Stanley Finance LLC
Callable Contingent Income Buffered Securities due August 18, 2022
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Terms continued from previous page:
|
Redemption
payment:
|
The redemption payment will be an amount equal to (i)
the stated principal amount
plus
(ii) any contingent monthly coupon otherwise due with respect to the related observation
date.
|
Redemption
dates:
|
Beginning after one year, quarterly, on August 19, 2020, November
19, 2020, February 19, 2021, May 19, 2021, August 19, 2021, November 18, 2021, February 17, 2022 and May 19, 2022. If any
such day is not a business day, the redemption payment will be made on the next succeeding business day and no adjustment
will be made to any redemption payment made on that succeeding business day.
|
Initial index value:
|
With respect to the RTY
Index: 1,467.522, which is the index closing value of such index on the pricing date
With respect to the SPX
Index: 2,840.60, which is the index closing value of such index on the pricing date
|
Final
index value:
|
With respect to each underlying index, the respective index closing
value on the final observation date
|
Worst
performing underlying index:
|
The underlying index with the larger percentage decrease from the
respective initial index value to the respective final index value
|
Index
percent change:
|
With respect to each underlying index,
(final
index value
-
initial index value) / initial index value
|
Coupon
barrier level:
|
With respect to the RTY
Index: 1,159.342, which is approximately 79% of the initial index value for such index
With respect to the SPX
Index: 2,244.074, which is 79% of the initial index value for such index
|
Buffer
amount:
|
21%. As a result of the
buffer amount of 21%, the value at or above which each underlying index must close on the final observation date so that
investors do not lose some of their investment at maturity is:
With respect to the RTY
Index: 1,159.342, which is approximately 79% of its initial index value
With respect to the SPX
Index: 2,244.074, which is 79% of its initial index value
|
Downside factor:
|
1.2658
|
Coupon payment dates:
|
Monthly, as set forth under “Observation Dates and Coupon Payment
Dates ” below. If any such day is not a business day, that contingent monthly coupon, if any, will be paid on the next
succeeding business day and no adjustment will be made to any coupon payment made on that succeeding business day;
provided
further
that the contingent monthly coupon, if any, with respect to the final observation date shall be paid on the maturity
date.
|
Observation
dates:
|
Monthly, as set forth under “Observation Dates and Coupon Payment
Dates” below, subject to postponement for non-index business days and certain market disruption events. We
also refer to August 15, 2022 as the final observation date.
|
CUSIP / ISIN:
|
61769HQT5 /
US61769HQT58
|
Listing:
|
The securities will not be listed on any securities exchange.
|
Observation Dates and Coupon
Payment Dates
Observation Dates
|
Coupon Payment Dates
|
September 16, 2019
|
September 19, 2019
|
October 14, 2019
|
October 18, 2019
|
November 14, 2019
|
November 19, 2019
|
December 16, 2019
|
December 19, 2019
|
January 14, 2020
|
January 17, 2020
|
February 14, 2020
|
February 20, 2020
|
March 16, 2020
|
March 19, 2020
|
April 14, 2020
|
April 17, 2020
|
May 14, 2020
|
May 19, 2020
|
June 15, 2020
|
June 18, 2020
|
July 14, 2020
|
July 17, 2020
|
August 14, 2020
|
August 19, 2020
|
September 14, 2020
|
September 17, 2020
|
October 14, 2020
|
October 19, 2020
|
November 16, 2020
|
November 19, 2020
|
December 14, 2020
|
December 17, 2020
|
January 14, 2021
|
January 20, 2021
|
February 16, 2021
|
February 19, 2021
|
March 15, 2021
|
March 18, 2021
|
April 14, 2021
|
April 19, 2021
|
May 14, 2021
|
May 19, 2021
|
June 14, 2021
|
June 17, 2021
|
July 14, 2021
|
July 19, 2021
|
August 16, 2021
|
August 19, 2021
|
September 14, 2021
|
September 17, 2021
|
October 14, 2021
|
October 19, 2021
|
November 15, 2021
|
November 18, 2021
|
December 14, 2021
|
December 17, 2021
|
January 14, 2022
|
January 20, 2022
|
Morgan Stanley Finance LLC
Callable Contingent Income Buffered Securities due August 18, 2022
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
February 14, 2022
|
February 17, 2022
|
March 14, 2022
|
March 17, 2022
|
April 14, 2022
|
April 20, 2022
|
May 16, 2022
|
May 19, 2022
|
June 14, 2022
|
June 17, 2022
|
July 14, 2022
|
July 19, 2022
|
August 15, 2022 (final observation date)
|
August 18, 2022 (maturity date)
|
Morgan Stanley Finance LLC
Callable Contingent Income Buffered Securities due August 18, 2022
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Investment Overview
Callable Contingent Income Buffered Securities
Principal
at Risk Securities
Callable Contingent Income Buffered Securities due August 18,
2022 Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index (the “securities”) do not guarantee the repayment of principal and do not provide for the regular payment of
interest. The securities will pay a contingent monthly coupon
but only if
the index closing value of
each of the Russell
2000
®
Index and the S&P 500
®
Index
(which we refer to together as the “underlying indices”)
is
at or above
79% of its respective initial index value, which we refer to as the respective coupon barrier level, on the
related observation date. If the index closing value
of either underlying index
is less than the coupon barrier level for
such index on any observation date, we will pay no coupon for the related monthly period. It is possible that the index closing
value of one or both underlying indices will remain below the respective coupon barrier level(s) for extended periods of time or
even throughout the entire term of the securities so that you will receive few or no contingent monthly coupons during the entire
3-year term of the securities. Even if an underlying index were to be at or above the coupon barrier level for such index on some
monthly observation dates, it may fluctuate below the coupon barrier level on others. In addition, even if one underlying index
were to be at or above the coupon barrier level for such index on all monthly observation dates, you will receive a contingent
monthly coupon only with respect to the observation dates on which the other underlying index is also at or above the coupon barrier
level for such index, if any. In addition, beginning on August 19, 2020,
we will have the right to redeem the securities at
our discretion
on any quarterly redemption date for the redemption payment equal to the sum of the stated principal amount
plus any contingent monthly coupon otherwise due with respect to the related observation date. At maturity, if the securities have
not been previously redeemed and if the final index value of
each
underlying index has appreciated, remained unchanged or
declined by an amount less than or equal to the buffer amount of 21%, the payment at maturity will be the stated principal amount
and the related contingent monthly coupon. If, however, the final index value of
either
underlying index has declined from
its initial index value by an amount greater than the buffer amount of 21%, investors will lose 1.2658% for every 1% decline of
the worst performing underlying index beyond the specified buffer amount, subject to the minimum payment at maturity of 21% of
the stated principal amount.
Accordingly,
i
nvestors in the securities must be willing to accept the risk of losing their
entire principal amount if either underlying index declines by an amount greater than the buffer amount and also the risk of not
receiving any monthly coupons during the entire 3-year term of the securities.
Maturity:
|
Approximately 3 years, unless redeemed earlier at our discretion
|
Contingent
monthly coupon:
|
If, on any observation date, the index closing value of
each
underlying index
is
greater than or equal to
its respective coupon barrier level, we will pay a contingent monthly coupon
at an annual rate of 7.00% (corresponding to approximately $5.833 per month per security) on the related contingent coupon payment
date.
If, on any observation date, the closing value
of either underlying
index
is
less than
the coupon barrier level for such index, no contingent monthly coupon will be paid with respect to
that observation date.
It is possible that one or both underlying indices will remain below the respective coupon barrier level(s)
for extended periods of time or even throughout the entire term of the securities so that you will receive few or no contingent
monthly coupons.
|
Early
redemption at the option of the issuer:
|
Beginning on August 19, 2020, we have the right to redeem the
securities on any quarterly redemption date for an early redemption payment equal to the stated principal amount plus any contingent
monthly coupon otherwise due with respect to the related observation date. Any early redemption of the securities will be at our
discretion and will not automatically occur based on the performance of the underlying indices. It is more likely that we will
redeem the securities when it would otherwise be advantageous for you to continue to hold the securities. As such, we will be more
likely to redeem the securities when the index closing value of each underlying index on the observation dates is at or above its
respective coupon barrier level, which would otherwise result in an amount of interest payable on the securities that is greater
than instruments of a comparable maturity and credit rating trading in the market. In other words, we will be more likely to redeem
the securities at a time when the securities are paying an above-market coupon. If the securities are redeemed prior to maturity,
you will receive no more contingent monthly coupon payments, may be forced to invest in a lower interest rate environment and may
not be able to reinvest at comparable terms or returns.
|
Morgan Stanley Finance LLC
Callable Contingent Income Buffered Securities due August 18, 2022
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
On the other hand, we will be less likely to exercise our redemption right when the index closing value of either underlying index is below its respective coupon barrier level and/or when the final index value of either underlying index is expected to have declined from its respective initial index value by an amount greater than the buffer amount, such that you will receive no contingent monthly coupons and/or that you will suffer a loss on your initial investment in the securities at maturity. Therefore, if we do not exercise our redemption right, it is more likely that you will receive few or no contingent monthly coupons and suffer a loss at maturity.
|
Payment
at maturity:
|
If the securities have not previously been redeemed, investors
will receive on the maturity date a payment at maturity determined as follows:
If the final index value of
each
underlying index is
greater
than or equal to
79% of its respective initial index value, meaning that
neither
underlying index has decreased by an
amount greater than the buffer amount of 21% from its respective initial index value:
the stated principal amount and the contingent
monthly coupon with respect to the final observation date
If the final index value of
either
underlying index is
less than
79% of its respective initial index value, meaning that
either
underlying index has decreased by an amount
greater than the buffer amount of 21% from its respective initial index value:
$1,000 + [$1,000 × (index percent change
of the worst performing underlying index + 21%) × downside factor]
Under these circumstances, the payment at maturity will be less
than the stated principal amount of $1,000 and could be zero.
|
Morgan Stanley Finance LLC
Callable Contingent Income Buffered Securities due August 18, 2022
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
The original issue price of each security is $1,000. This price
includes costs associated with issuing, selling, structuring and hedging the securities, which are borne by you, and, consequently,
the estimated value of the securities on the pricing date is less than $1,000. We estimate that the value of each security on the
pricing date is $982.00.
What goes into the estimated value on the pricing date?
In valuing the securities on the pricing date, we take into account
that the securities comprise both a debt component and a performance-based component linked to the underlying indices. The estimated
value of the securities is determined using our own pricing and valuation models, market inputs and assumptions relating to the
underlying indices, instruments based on the underlying indices, volatility and other factors including current and expected interest
rates, as well as an interest rate related to our secondary market credit spread, which is the implied interest rate at which our
conventional fixed rate debt trades in the secondary market.
What determines the economic terms of the securities?
In determining the economic terms of the securities, including
the contingent monthly coupon rate, the coupon barrier levels, the buffer amount and the downside factor, we use an internal funding
rate, which is likely to be lower than our secondary market credit spreads and therefore advantageous to us. If the issuing, selling,
structuring and hedging costs borne by you were lower or if the internal funding rate were higher, one or more of the economic
terms of the securities would be more favorable to you.
What is the relationship between the estimated value on the
pricing date and the secondary market price of the securities?
The price at which MS & Co. purchases the securities in the
secondary market, absent changes in market conditions, including those related to the underlying indices, may vary from, and be
lower than, the estimated value on the pricing date, because the secondary market price takes into account our secondary market
credit spread as well as the bid-offer spread that MS & Co. would charge in a secondary market transaction of this type and
other factors. However, because the costs associated with issuing, selling, structuring and hedging the securities are not fully
deducted upon issuance, for a period of up to 6 months following the issue date, to the extent that MS & Co. may buy or sell
the securities in the secondary market, absent changes in market conditions, including those related to the underlying indices,
and to our secondary market credit spreads, it would do so based on values higher than the estimated value. We expect that those
higher values will also be reflected in your brokerage account statements.
MS & Co. may, but is not obligated to, make a market in the
securities, and, if it once chooses to make a market, may cease doing so at any time.
Morgan Stanley Finance LLC
Callable Contingent Income Buffered Securities due August 18, 2022
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Key Investment Rationale
The securities do not provide for the regular payment of interest
and instead will pay a contingent monthly coupon
but only if
the index closing value of
each underlying index
is
at or above
79% of its initial index value, which we refer to as the respective coupon barrier level, on the related observation
date. These securities are for investors who are willing to risk their principal and seek an opportunity to earn interest at a
potentially above-market rate in exchange for the risk of receiving no monthly interest if either underlying index closes below
the coupon barrier level for such index on the observation dates, and the risk of an early redemption of the securities at our
discretion. The following scenarios are for illustration purposes only to demonstrate how the payment at maturity and contingent
monthly coupon (if the securities have not previously been redeemed) are determined, and do not attempt to demonstrate every situation
that may occur. Accordingly, the securities may or may not be redeemed by us at our discretion, the contingent monthly coupon may
be payable with respect to none of, or some but not all of, the monthly periods, and investors may lose some or all of the stated
principal amount of the securities. Investors will not participate in any appreciation in either underlying index.
Scenario 1:
The securities are redeemed prior to maturity.
|
This scenario assumes that we redeem the securities at our discretion prior to the maturity date on one of the quarterly redemption dates, starting on August 19, 2020, one year after the original issue date, for the redemption payment equal to the stated principal amount
plus
any contingent monthly coupon with respect to the relevant observation date, as applicable. Prior to the optional early redemption, each underlying index closes at or above its respective coupon barrier level on some or all of the monthly observation dates. In this scenario, investors receive the contingent monthly coupon with respect to each such observation date, but not for the monthly periods for which one or both underlying indices close below the respective coupon barrier level on the related observation date. No further payments will be made on the securities once they have been redeemed.
|
Scenario 2:
The securities are not redeemed prior to maturity, and investors receive principal back at maturity.
|
This scenario assumes that we do not exercise our redemption right on any of the quarterly redemption dates, and, as a result, investors hold the securities to maturity. During the term of the securities, each underlying index closes at or above its respective coupon barrier level on some monthly observation dates, but one or both underlying indices close below the respective coupon barrier level(s) for such index on the others. Investors will receive the contingent monthly coupon for the monthly periods for which the index closing value of each underlying index is at or above its respective coupon barrier level on the related observation date, but not for the monthly periods for which one or both underlying indices close below the respective coupon barrier level(s) on the related observation date. On the final observation date, neither underlying index has declined from its initial index value by an amount greater than the buffer amount. At maturity, investors receive the stated principal amount and the contingent monthly coupon with respect to the final observation date.
|
Scenario 3:
The securities are not redeemed prior to maturity, and investors suffer a loss of principal at maturity.
|
This scenario assumes that we do not exercise our redemption right on any of the quarterly redemption dates, and, as a result, investors hold the securities to maturity. During the term of the securities, one or both underlying indices close below the respective coupon barrier level(s) on every monthly observation date. Since one or both underlying indices close below the respective coupon barrier level(s) on every monthly observation date, investors do not receive any contingent monthly coupon. On the final observation date, one or both underlying indices have declined from the respective initial index value(s) by an amount greater than the buffer amount. At maturity, investors will lose 1.2658% for every 1% decline of the worst performing underlying index beyond the specified buffer amount. Investors will lose some, and may lose all, of the stated principal amount of the securities in this scenario.
|
Morgan Stanley Finance LLC
Callable Contingent Income Buffered Securities due August 18, 2022
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Underlying Indices Summary
Russell 2000
®
Index
The Russell 2000
®
Index is an index calculated, published and disseminated by FTSE Russell, and measures the composite price performance of stocks
of 2,000 companies incorporated in the U.S. and its territories. All 2,000 stocks are traded on a major U.S. exchange and are the
2,000 smallest securities that form the Russell 3000
®
Index. The Russell 3000
®
Index is composed
of the 3,000 largest U.S. companies as determined by market capitalization and represents approximately 98% of the U.S. equity
market. The Russell 2000
®
Index consists of the smallest 2,000 companies included in the Russell 3000
®
Index and represents a small portion of the total market capitalization of the Russell 3000
®
Index. The Russell
2000
®
Index is designed to track the performance of the small capitalization segment of the U.S. equity market.
Information as of market close on August 14, 2019:
Bloomberg Ticker Symbol:
|
RTY
|
Current Index Value:
|
1,467.522
|
52 Weeks Ago:
|
1,692.578
|
52 Week High (on 8/31/2018):
|
1,740.753
|
52 Week Low (on 12/24/2018):
|
1,266.925
|
For additional information about the Russell 2000
®
Index, see the information set forth under “Russell 2000
®
Index” in the accompanying index supplement.
Furthermore, for additional historical information, see “Russell 2000
®
Index Historical Performance”
below.
S&P 500
®
Index
The S&P 500
®
Index, which is calculated, maintained and published by S&P Dow Jones Indices LLC (“S&P”), consists of stocks
of 500 component companies selected to provide a performance benchmark for the U.S. equity markets. The calculation of the S&P
500
®
Index is based on the relative value of the float adjusted aggregate market capitalization of the 500 component
companies as of a particular time as compared to the aggregate average market capitalization of 500 similar companies during the
base period of the years 1941 through 1943.
Information as of market close on August 14, 2019:
Bloomberg Ticker Symbol:
|
SPX
|
Current Index Value:
|
2,840.60
|
52 Weeks Ago:
|
2,839.96
|
52 Week High (on 7/26/2019):
|
3,025.86
|
52 Week Low (on 12/24/2018):
|
2,351.10
|
For additional information about the S&P 500
®
Index, see the information set forth under “S&P 500
®
Index” in the accompanying index supplement.
Furthermore, for additional historical information, see “S&P 500
®
Index Historical Performance”
below.
Morgan Stanley Finance LLC
Callable Contingent Income Buffered Securities due August 18, 2022
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Hypothetical Examples
The following hypothetical examples illustrate how to determine
whether a contingent monthly coupon is paid with respect to an observation date and how to calculate the payment at maturity, if
any. The following examples are for illustrative purposes only. Whether you receive a contingent monthly coupon will be determined
by reference to the index closing value of each underlying index on each monthly observation date, and the amount you will receive
at maturity, if any, will be determined by reference to the final index value of each underlying index on the final observation
date. Any early redemption of the securities will be at our discretion. The actual initial index value and coupon barrier level
for each underlying index are set forth on the cover of this document. All payments on the securities, if any, are subject to our
credit risk. The below examples are based on the following terms:
Contingent Monthly Coupon:
|
If, on any observation date, the index closing value of
each
underlying index
is
greater than or equal to
its respective coupon barrier level, we will pay a contingent monthly coupon
at an annual rate of 7.00% (corresponding to approximately $5.833 per month per security) on the related contingent coupon payment
date.
If, on any observation date, the closing value
of either underlying
index
is
less than
the coupon barrier level for such index, no contingent monthly coupon will be paid with respect to
that observation date.
It is possible that one or both underlying indices will remain below the respective coupon barrier level(s)
for extended periods of time or even throughout the entire term of the securities so that you will receive few or no contingent
monthly coupons.
|
Optional Early Redemption:
|
Beginning on August 19, 2020, we will have the right to redeem the securities at our discretion on any quarterly redemption date for a redemption payment equal to the stated principal amount plus any contingent monthly coupon otherwise due with respect to the related observation date.
If the securities are redeemed prior to maturity, you will receive no more contingent monthly coupon payments, may be forced to invest in a lower interest rate environment and may not be able to reinvest at comparable terms or returns.
|
Payment at Maturity (if the securities have not been redeemed early at our option):
|
If the final index value of
each
underlying index is
greater
than or equal to
79% of its respective initial index value, meaning that
neither
underlying index has decreased by an
amount greater than the buffer amount of 21% from its respective initial index value:
the stated principal amount and the contingent
monthly coupon with respect to the final observation date
If the final index value of
either
underlying index is
less than
79% of its respective initial index value, meaning that
either
underlying index has decreased by an amount
greater than the buffer amount of 21% from its respective initial index value:
$1,000 + [$1,000 × (index percent change
of the worst performing underlying index + 21%)
×
downside factor]
Under these circumstances, the payment at maturity will be less
than the stated principal amount of $1,000 and could be zero.
|
Stated Principal Amount:
|
$1,000
|
Hypothetical Initial Index Value:
|
With respect to the RTY Index: 1,500
With respect to the SPX Index: 2,500
|
Hypothetical Coupon Barrier Level:
|
With respect to the RTY Index: 1,185, which is 79% of the hypothetical
initial index value for such index
With respect to the SPX Index: 1,975, which is 79% of the hypothetical
initial index value for such index
|
Buffer Amount:
|
21%
|
Downside Factor:
|
1.2658
|
* The actual monthly coupon will be an amount determined by the
calculation agent based on the number of days in the applicable payment period, calculated on a 30/360 basis. The hypothetical
monthly coupon of $5.833 is used in these examples for ease of analysis.
Morgan Stanley Finance LLC
Callable Contingent Income Buffered Securities due August 18, 2022
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
How to determine whether a contingent monthly
coupon is payable with respect to an observation date (if the securities have not been previously redeemed):
|
Index Closing Value
|
Contingent Monthly Coupon
|
|
RTY Index
|
SPX Index
|
|
Hypothetical Observation Date 1
|
1,300 (
at or above
coupon barrier level)
|
2,500 (
at or above
coupon barrier level)
|
$5.833
|
Hypothetical Observation Date 2
|
1,500 (
at or above
coupon barrier level)
|
1,000 (
below
coupon barrier level)
|
$0
|
Hypothetical Observation Date 3
|
900 (
below
coupon barrier level)
|
2,400 (
at or above
coupon barrier level)
|
$0
|
Hypothetical Observation Date 4
|
850 (
below
coupon barrier level)
|
1,500 (
below
coupon barrier level)
|
$0
|
On hypothetical observation date 1, both the RTY Index and SPX
Index close at or above their respective coupon barrier levels. Therefore a contingent monthly coupon of $5.833 is paid on the
relevant coupon payment date.
On each of the hypothetical observation dates 2 and 3, one underlying
index closes at or above its coupon barrier level but the other underlying index closes below its coupon barrier level. Therefore,
no contingent monthly coupon is paid on the relevant coupon payment date.
On hypothetical observation date 4, each underlying index closes
below its respective coupon barrier level and accordingly no contingent monthly coupon is paid on the relevant coupon payment date.
How to calculate the payment
at maturity (if the securities have not been redeemed early at our option):
|
Final Index Value
|
Payment at Maturity
|
|
RTY Index
|
SPX Index
|
|
Example 1:
|
1,600 (
at or above
the coupon barrier level, has not decreased by an amount greater than the buffer amount)
|
2,800 (
at or above
the coupon barrier level, has not decreased by an amount greater than the buffer amount)
|
$1,005.833 (the stated principal amount
plus
the contingent monthly coupon with respect to the final observation date)
|
Example 2:
|
1,300 (
at or above
the coupon barrier level, has not decreased by an amount greater than the buffer amount)
|
975 (
below
the coupon barrier level, has decreased by an amount greater than the buffer amount)
|
$1,000 + [$1,000 × (index percent change of the worst performing underlying index + 21%) × downside factor] =
$1,000 + [$1,000 × (-61% + 21%) × 1.2658] = $493.68
|
Example 3:
|
435 (
below
the coupon barrier level, has decreased by an amount greater than the buffer amount)
|
2,500 (
at or above
the coupon barrier level, has not decreased by an amount greater than the buffer amount)
|
$1,000 + [$1,000 × (-71% + 21%) × 1.2658] = $367.10
|
Example 4:
|
450 (
below
the coupon barrier level, has decreased by an amount greater than the buffer amount)
|
1,000 (
below
the coupon barrier level, has decreased by an amount greater than the buffer amount)
|
$1,000 + [$1,000 × (-70% + 21%) × 1.2658] = $379.76
|
Example 5:
|
450 (
below
the coupon barrier level, has decreased by an amount greater than the buffer amount)
|
500 (
below
the coupon barrier level, has decreased by an amount greater than the buffer amount)
|
$1,000 + [$1,000 × (-80% + 21%) × 1.2658] = $253.18
|
Morgan Stanley Finance LLC
Callable Contingent Income Buffered Securities due August 18, 2022
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
In example 1, the final index values of both the RTY Index and
SPX Index are at or above their coupon barrier levels and neither underlying index has declined from its initial index values by
an amount greater than the buffer amount Therefore, investors receive at maturity the stated principal amount of the securities
and the contingent monthly coupon with respect to the final observation date. However, investors do not participate in the appreciation
of either underlying index.
In examples 2 and 3, the final index value of one underlying
index is at or above its coupon barrier level and has not declined from the initial index value by an amount greater than the buffer
amount, but the final index value of the other underlying index has declined from the initial index value by an amount greater
than the buffer amount. Therefore, investors lose 1.2658% for every 1% decline in the worst performing underlying index beyond
the buffer amount of 21%.
Similarly, in examples 4 and 5, the final index value of each
underlying index has declined from its initial index value by an amount greater than the buffer amount, and each underlying index
closes below its respective coupon barrier level. As a result, investors lose 1.2658% for every 1% decline in the worst performing
underlying index beyond the buffer amount of 21%. In example 4, the RTY Index has declined 70% from its initial index value to
its final index value, while the SPX Index has declined 60% from its initial index value to its final index value. Therefore, investors
lose 1.2658% for every 1% decline in the final index value of the RTY Index from its initial index value beyond the buffer amount
of 21%. In example 5, the RTY Index has declined 70% from its initial index value, while the SPX Index has declined 80% from its
initial index value to its final index value. Therefore, investors lose 1.2658% for every 1% decline in the final index value of
the SPX Index from its initial index value beyond the buffer amount of 21%.
If the securities have not been redeemed prior to maturity
and the final index value of EITHER underlying index has declined from its initial index value by an amount greater than the buffer
amount, you will be exposed to the leveraged downside performance of the worst performing underlying index at maturity, and you
will lose some or all of your initial investment in the securities.
Morgan Stanley Finance LLC
Callable Contingent Income Buffered Securities due August 18, 2022
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Risk Factors
The following is a non-exhaustive list of certain key risk
factors for investors in the securities. For further discussion of these and other risks, you should read the section entitled
“Risk Factors” in the accompanying prospectus supplement, index supplement and prospectus. We also urge you to consult
with your investment, legal, tax, accounting and other advisers in connection with your investment in the securities.
|
§
|
The securities do not guarantee the return of any principal.
The terms of the securities differ from those of ordinary
debt securities in that they do not guarantee the repayment of principal. If the securities have not been redeemed prior to maturity
and the final index value of
either
underlying index has declined from its initial index value by an amount greater than
the buffer amount
of 21%, you will lose 1.2658% for every 1% decline in the value of the
worst performing underlying index from its initial index value beyond the buffer amount of 21%. In this case, the payment at maturity
will be less than the stated principal amount and could be zero.
You could lose your entire investment in the securities.
|
|
§
|
The securities do not provide for regular interest payments.
The terms of the securities differ from those of ordinary
debt securities in that they do not provide for the regular payment of interest. The securities will pay a contingent monthly coupon
only if the index closing value of each underlying index is at or above 79% of its respective initial index value, which we refer
to as the respective coupon barrier level, on the related observation date. If, on the other hand, the index closing value of either
underlying index is lower than the coupon barrier level for such index on the relevant observation date for any interest period,
we will pay no coupon on the applicable coupon payment date. It is possible that the index closing value of one or both underlying
indices will remain below the respective coupon barrier level(s) for extended periods of time or even throughout the entire term
of the securities. If you do not earn sufficient contingent monthly coupons over the term of the securities, the overall return
on the securities may be less than the amount that would be paid on a conventional debt security of ours of comparable maturity.
|
|
§
|
The securities are subject to our redemption right.
The
term of the securities, and thus your opportunity to earn a potentially above-market coupon if the index closing value of each
underlying index is greater than or equal to the coupon barrier level for such index on monthly observation dates, may be limited
by our right to redeem the
securities
at
our option on any quarterly redemption date, beginning August 19, 2020. The term of your investment in the
securities
may
be limited to as short as one year. It is more likely that we will redeem the
securities
when
it would be advantageous for you to continue to hold the securities.
As such, we will be more likely to redeem the securities
when the index closing value of each underlying index on the observation dates is at or above the coupon barrier level for such
index, which would otherwise result in an amount of interest payable on the securities that is greater than instruments of a comparable
maturity and credit rating trading in the market. In other words, we will be more likely to redeem the securities at a time when
the securities are paying an above-market coupon. If the securities are redeemed prior to maturity, you will receive no more contingent
monthly coupon payments, may be forced to invest in a lower interest rate environment and may not be able to reinvest at comparable
terms or returns.
|
On the other hand, we will be less
likely to exercise our redemption right when the index closing value of either underlying index is below the respective coupon
barrier level and/or when the final index value for either underlying index is expected to have declined from its respective initial
index value by an amount greater than the buffer amount, such that you will receive no contingent monthly coupons and/or that you
will suffer a loss on your initial investment in the securities at maturity. Therefore, if we do not exercise our redemption right,
it is more likely that you will receive few or no contingent monthly coupons and suffer a loss at maturity.
|
§
|
You are exposed to the price risk of both underlying indices, with respect to both the contingent monthly coupons, if any,
and the payment at maturity, if any.
Your return
on the securities is not linked to a basket consisting of both underlying indices. Rather, it will be contingent upon the independent
performance of each underlying index. Unlike an instrument with a return linked to a basket of underlying assets, in which risk
is mitigated and diversified among all the components of the basket, you will be exposed to the risks related to both underlying
indices. Poor performance by
either
underlying
index over the term of the securities may negatively affect your return and will not be offset or mitigated by any positive performance
by the other underlying index. To receive any contingent monthly coupons,
each
underlying
index must close at or above its respective coupon barrier level on the applicable observation date.
In
addition, if
either
underlying index has declined from its initial index value by an amount greater than the buffer
amount as of the final
|
Morgan Stanley Finance LLC
Callable Contingent Income Buffered Securities due August 18, 2022
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
observation
date, you will lose 1.2658% for every 1% decline in the value of the worst performing underlying index from its initial index
value beyond the buffer amount of 21%. In this case, the payment at maturity will be less than the stated principal amount and
could be zero. Accordingly, your investment is subject to the price risk of both underlying indices.
|
§
|
Because the securities are linked to the performance of the worst performing underlying index, you are exposed to greater
risks of no contingent monthly coupons and sustaining a loss on your investment than if the securities were linked to just one
index.
The risk that you will not receive any contingent monthly coupons, or that you will suffer a loss on your investment,
is greater if you invest in the securities as opposed to substantially similar securities that are linked to the performance of
just one underlying index. With two underlying indices, it is more likely that either underlying index will close below its coupon
barrier level on any observation date, or will decline from its initial index value by an amount greater than the buffer amount
as of the final observation date, than if the securities were linked to only one underlying index. Therefore, it is more likely
that you will not receive any contingent monthly coupons and that you will suffer a loss on your investment.
|
|
§
|
The contingent monthly coupon, if any, is based only on the value of each underlying index on the related monthly observation
date.
Whether the contingent monthly coupon will be paid on any coupon payment date will be determined at the end of the relevant
interest period, based on the closing value of each underlying index on the relevant monthly observation date. As a result, you
will not know whether you will receive the contingent monthly coupon on any coupon payment date until near the end of the relevant
monthly period. Moreover, because the contingent monthly coupon is based solely on the value of each underlying index on monthly
observation dates, if the closing value of either underlying index on any observation date is below the coupon barrier level for
such index, you will receive no coupon for the related interest period, even if the level of such underlying index was at or above
its respective coupon barrier level on other days during that interest period and even if the closing value of the other underlying
index is at or above the coupon barrier level for such index.
|
|
§
|
Investors will not participate in any appreciation in either underlying index.
Investors will not participate in any appreciation in either underlying index from the initial index value for such index, and
the return on the securities will be limited to the contingent monthly coupons, if any, that are paid with respect to each observation
date on which the index closing value of each underlying index is greater than or equal to its respective coupon barrier level
until the securities are redeemed or reach maturity.
|
|
§
|
The market price will be influenced by many unpredictable factors.
Several factors, many of which are beyond our control, will influence the value of the securities
in the secondary market and the price at which MS & Co. may be willing to purchase or sell the securities in the secondary
market. We expect that generally the level of interest rates available in the market and the value of each
underlying
index
on any day, including in relation to its respective
coupon barrier level, will affect the value of the securities more than any other factors. Other factors that may influence the
value of the securities include:
|
|
o
|
the volatility (frequency and magnitude of changes in value) of the underlying indices,
|
|
o
|
whether the index closing value of either underlying index has been below its respective coupon barrier level on any observation
date,
|
|
o
|
geopolitical conditions and economic, financial, political, regulatory or judicial events that affect the component stocks
of the underlying indices or securities markets generally and which may affect the value of each underlying index,
|
|
o
|
dividend rates on the securities underlying the underlying indices,
|
|
o
|
the time remaining until the securities mature,
|
|
o
|
interest and yield rates in the market,
|
|
o
|
the availability of comparable instruments,
|
|
o
|
the composition of the underlying indices and changes in the constituent stocks of such indices, and
|
|
o
|
any actual or anticipated changes in our credit ratings or credit spreads.
|
Morgan Stanley Finance LLC
Callable Contingent Income Buffered Securities due August 18, 2022
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Some
or all of these factors will influence the price that you will receive if you sell your securities prior to maturity. In particular,
if either underlying index has closed near or below its coupon barrier level, the market value of the securities is expected to
decrease substantially and you may have to sell your securities at a substantial discount from the stated principal amount of $1,000
per security.
You cannot predict the future performance
of either underlying index based on its historical performance. The value of either underlying index may decrease and be below
the coupon barrier level for such index on each observation date so that you will receive no return on your investment, and one
or both underlying indices may decline from the respective initial index value(s) by an amount greater than the buffer amount on
the final observation date so that you lose some or all of your initial investment in the securities. There can be no assurance
that the closing value of each underlying index will be at or above the respective coupon barrier level on any observation date
so that you will receive a coupon payment on the securities for the applicable interest period or that they will not have declined
from their respective initial index values by an amount greater than the buffer amount as of the final observation date so that
you do not suffer a loss on your initial investment in the securities. See “Russell 2000
®
Index Historical
Performance” and “S&P 500
®
Index Historical Performance” below.
|
§
|
The securities are subject to our credit risk, and any actual or anticipated changes to our credit ratings or credit spreads
may adversely affect the market value of the securities.
You are dependent on our ability to pay all amounts due on the securities
at maturity or on any coupon payment date, and therefore you are subject to our credit risk. The securities are not guaranteed
by any other entity. If we default on our obligations under the securities, your investment would be at risk and you could lose
some or all of your investment. As a result, the market value of the securities prior to maturity will be affected by changes in
the market’s view of our creditworthiness. Any actual or anticipated decline in our credit ratings or increase in the credit
spreads charged by the market for taking our credit risk is likely to adversely affect the market value of the securities.
|
|
§
|
As a finance subsidiary, MSFL has no independent operations and will have no independent
assets.
As a finance subsidiary, MSFL has no independent operations beyond the issuance and administration of its securities
and will have no independent assets available for distributions to holders of MSFL securities if they make claims in respect of
such securities in a bankruptcy, resolution or similar proceeding. Accordingly, any recoveries by such holders will be limited
to those available under the related guarantee by Morgan Stanley and that guarantee will rank
pari passu
with all other
unsecured, unsubordinated obligations of Morgan Stanley. Holders will have recourse only to a single claim against Morgan Stanley
and its assets under the guarantee. Holders of securities issued by MSFL should accordingly assume that in any such proceedings
they would not have any priority over and should be treated
pari passu
with the claims of other unsecured, unsubordinated
creditors of Morgan Stanley, including holders of Morgan Stanley-issued securities.
|
|
§
|
The securities are linked to the Russell 2000
®
Index and are subject to risks associated with small-capitalization
companies.
As the Russell 2000
®
Index is one of the underlying indices, and the Russell 2000
®
Index consists of stocks issued by companies with relatively small market capitalization, the securities are linked to the value
of small-capitalization companies. These companies often have greater stock price volatility, lower trading volume and less liquidity
than large-capitalization companies and therefore the Russell 2000
®
Index may be more volatile than indices that
consist of stocks issued by large-capitalization companies. Stock prices of small-capitalization companies are also more vulnerable
than those of large-capitalization companies to adverse business and economic developments, and the stocks of small-capitalization
companies may be thinly traded. In addition, small capitalization companies are typically less well-established and less stable
financially than large-capitalization companies and may depend on a small number of key personnel, making them more vulnerable
to loss of personnel. Such companies tend to have smaller revenues, less diverse product lines, smaller shares of their product
or service markets, fewer financial resources and less competitive strengths than large-capitalization companies and are more susceptible
to adverse developments related to their products.
|
|
§
|
Not equivalent to investing in the underlying indices.
Investing in the securities
is not equivalent to investing in either underlying index or the component stocks of either underlying index. Investors in the
securities will not participate in any positive performance of either underlying index, and will not have voting rights or rights
to receive dividends or other distributions or any other rights with respect to stocks that constitute either underlying index.
|
|
§
|
The securities will not be listed on any securities exchange and secondary trading may be limited. Accordingly, you should
be willing to hold your securities for the entire 3-year term of the securities
.
The securities will not be listed on any securities exchange. Therefore, there may be little or no secondary market for the securities.
MS & Co. may,
|
Morgan Stanley Finance LLC
Callable Contingent Income Buffered Securities due August 18, 2022
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
but is not obligated to, make a
market in the securities and, if it once chooses to make a market, may cease doing so at any time. When it does make a market,
it will generally do so for transactions of routine secondary market size at prices based on its estimate of the current value
of the securities, taking into account its bid/offer spread, our credit spreads, market volatility, the notional size of the proposed
sale, the cost of unwinding any related hedging positions, the time remaining to maturity and the likelihood that it will be able
to resell the securities. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell
the securities easily. Since other broker-dealers may not participate significantly in the secondary market for the securities,
the price at which you may be able to trade your securities is likely to depend on the price, if any, at which MS & Co. is
willing to transact. If, at any time, MS & Co. were to cease making a market in the securities, it is likely that there would
be no secondary market for the securities. Accordingly, you should be willing to hold your securities to maturity.
|
§
|
The rate we are willing to pay for securities of this type, maturity and issuance size is likely to be lower than the rate
implied by our secondary market credit spreads and advantageous to us. Both the lower rate and the inclusion of costs associated
with issuing, selling, structuring and hedging the securities in the original issue price reduce the economic terms of the securities,
cause the estimated value of the securities to be less than the original issue price and will adversely affect secondary market
prices.
Assuming no change in market conditions or any other relevant factors, the prices, if any, at which dealers, including
MS & Co., may be willing to purchase the securities in secondary market transactions will likely be significantly lower than
the original issue price, because secondary market prices will exclude the issuing, selling, structuring and hedging-related costs
that are included in the original issue price and borne by you and because the secondary market prices will reflect our secondary
market credit spreads and the bid-offer spread that any dealer would charge in a secondary market transaction of this type as well
as other factors.
|
The inclusion of the costs of issuing,
selling, structuring and hedging the securities in the original issue price and the lower rate we are willing to pay as issuer
make the economic terms of the securities less favorable to you than they otherwise would be.
However, because the costs associated
with issuing, selling, structuring and hedging the securities are not fully deducted upon issuance, for a period of up to 6 months
following the issue date, to the extent that MS & Co. may buy or sell the securities in the secondary market, absent changes
in market conditions, including those related to the underlying indices, and to our secondary market credit spreads, it would do
so based on values higher than the estimated value, and we expect that those higher values will also be reflected in your brokerage
account statements.
|
§
|
The estimated value of the securities is determined by reference to our pricing and valuation models, which may differ from
those of other dealers and is not a maximum or minimum secondary market price.
These pricing and valuation models are proprietary
and rely in part on subjective views of certain market inputs and certain assumptions about future events, which may prove to be
incorrect. As a result, because there is no market-standard way to value these types of securities, our models may yield a higher
estimated value of the securities than those generated by others, including other dealers in the market, if they attempted to value
the securities. In addition, the estimated value on the pricing date does not represent a minimum or maximum price at which dealers,
including MS & Co., would be willing to purchase your securities in the secondary market (if any exists) at any time. The value
of your securities at any time after the date of this document will vary based on many factors that cannot be predicted with accuracy,
including our creditworthiness and changes in market conditions. See also “The market price will be influenced by many unpredictable
factors” above.
|
|
§
|
Hedging and trading activity by our affiliates could potentially affect the value of the securities.
One or more of
our affiliates and/or third-party dealers have carried out, and will continue to carry out, hedging activities related to the securities
(and to other instruments linked to the underlying indices or their component stocks), including trading in the stocks that constitute
the underlying indices as well as in other instruments related to the underlying indices. As a result, these entities may be unwinding
or adjusting hedge positions during the term of the securities, and the hedging strategy may involve greater and more frequent
dynamic adjustments to the hedge as the final observation date approaches. Some of our affiliates also trade the stocks that constitute
the underlying indices and other financial instruments related to the underlying indices on a regular basis as part of their general
broker-dealer and other businesses. Any of these hedging or trading activities on or prior to the pricing date could have increased
the initial index value of an underlying index, and, therefore, could have increased (i) the coupon barrier level for such underlying
index, which, if the securities have not been redeemed, is the value at or above which such underlying index must close on the
observation dates in order for you to earn a contingent monthly coupon (depending also on the performance of the other underlying
index), and (ii) the level at or above
|
Morgan Stanley Finance LLC
Callable Contingent Income Buffered Securities due August 18, 2022
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
which such underlying index must
close on the final observation date so that you are not exposed to the negative performance of the worst performing underlying
index at maturity (depending also on the performance of the other underlying index). Additionally, such hedging or trading activities
during the term of the securities could affect the value of an underlying index on the observation dates, and, accordingly, whether
we pay a contingent monthly coupon on the securities and the amount of cash you receive at maturity, if any (depending also on
the performance of the other underlying index).
|
§
|
The calculation agent, which is a subsidiary of Morgan Stanley and an affiliate of MSFL, will make determinations with respect
to the securities.
As calculation agent, MS & Co. has determined the initial index value and coupon barrier level for each
underlying index and will determine the payment at maturity, if any, and whether you receive a contingent monthly coupon on each
coupon payment date. Moreover, certain determinations made by MS & Co., in its capacity as calculation agent, may require it
to exercise discretion and make subjective judgments, such as with respect to the occurrence or non-occurrence of market disruption
events and the selection of a successor index or calculation of the index closing value in the event of a market dis
ruption
event or discontinuance of an underlying index. These potentially subjective determinations may affect the payout to you upon an
optional early redemption or at maturity, if any. For further information regarding these types of determinations, see “Additional
Terms of the Securities—Additional Terms—Calculation agent,” “—Market disruption event,” “—Postponement
of observation dates,” “—Discontinuance of an underlying index; alteration of method of calculation” and
“—Alternate exchange calculation in case of an event of default” below. In addition, MS & Co. has determined
the estimated value of the securities on the pricing date.
|
|
§
|
Adjustments to the underlying indices could adversely affect the value of the securities.
The publisher of each underlying index may add, delete or substitute the component stocks of such underlying index or make
other methodological changes that could change the value of such underlying index. Any of these actions could adversely affect
the value of the s
ecurities. The publisher of each underlying index may also discontinue or suspend calculation or publication
of such underlying index at any time. In these circumstances, MS & Co., as the calculation agent, will have the sole discretion
to substitute a successor index that is comparable to the discontinued index. MS & Co. could have an economic interest that
is different than that of investors in the securities insofar as, for example, MS & Co. is permitted to consider indices that
are calculated and published by MS & Co. or any of its affiliates. If MS & Co. determines that there is no appropriate
successor index on any observation date, the determination of whether a contingent monthly coupon will be payable on the securities
on the applicable coupon payment date, and/or the amount payable at maturity, will be based on the value of such underlying index,
based on the closing prices of the stocks constituting such underlying index at the time of such discontinuance, without rebalancing
or substitution, computed by MS & Co. as calculation agent in accordance with the formula for calculating such underlying index
last in effect prior to such discontinuance, as compared to the coupon barrier level or initial index value (taking the buffer
amount into effect for the payment at maturity), as applicable (depending also on the performance of the other underlying index).
|
|
§
|
The U.S. federal income tax consequences of an investment in the securities are uncertain.
There is no direct legal
authority as to the proper treatment of the securities for U.S. federal income tax purposes, and, therefore, significant aspects
of the tax treatment of the securities are uncertain.
|
Please read the discussion under
“Additional Information—Tax considerations” in this document concerning the U.S. federal income tax consequences
of an investment in the securities. We intend to treat a security for U.S. federal income tax purposes as a single financial contract
that provides for a coupon that will be treated as gross income to you at the time received or accrued, in accordance with your
regular method of tax accounting. Under this treatment, the ordinary income treatment of the coupon payments, in conjunction with
the capital loss treatment of any loss recognized upon the sale, exchange or settlement of the securities, could result in adverse
tax consequences to holders of the securities because the deductibility of capital losses is subject to limitations. We do not
plan to request a ruling from the Internal Revenue Service (the “IRS”) regarding the tax treatment of the securities,
and the IRS or a court may not agree with the tax treatment described herein. If the IRS were successful in asserting an alternative
treatment for the securities, the timing and character of income or loss on the securities might differ significantly from the
tax treatment described herein. For example, under one possible treatment, the IRS could seek to recharacterize the securities
as debt instruments. In that event, U.S. Holders (as defined below) would be required to accrue into income original issue discount
on the securities every year at a “comparable yield” determined at the time of issuance (as adjusted based on the difference,
if any, between the actual and the projected amount of any contingent payments on the securities) and recognize all income and
gain in respect of the securities as ordinary income. The risk that financial instruments providing for buffers, triggers or similar
downside
Morgan Stanley Finance LLC
Callable Contingent Income Buffered Securities due August 18, 2022
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
protection features, such as the
securities, would be recharacterized as debt is greater than the risk of recharacterization for comparable financial instruments
that do not have such features.
Non-U.S. Holders (as defined
below) should note that we currently intend to withhold on any coupon paid to Non-U.S. Holders generally at a rate of 30%, or at
a reduced rate specified by an applicable income tax treaty under an “other income” or similar provision, and will
not be required to pay any additional amounts with respect to amounts withheld.
In 2007, the U.S. Treasury Department
and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts”
and similar instruments. While it is not clear whether the securities would be viewed as similar to the prepaid forward contracts
described in the notice, it is possible that any Treasury regulations or other guidance promulgated after consideration of these
issues could materially and adversely affect the tax consequences of an investment in the securities, possibly with retroactive
effect. The notice focuses on a number of issues, the most relevant of which for holders of the securities are the character and
timing of income or loss and the degree, if any, to which income realized by non-U.S. investors should be subject to withholding
tax. Both U.S. and Non-U.S. Holders should consult their tax advisers regarding the U.S. federal income tax consequences of an
investment in the securities, including possible alternative treatments, the issues presented by this notice and any tax consequences
arising under the laws of any state, local or non-U.S. taxing jurisdiction.
Morgan Stanley Finance LLC
Callable Contingent Income Buffered Securities due August 18, 2022
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Russell 2000
®
Index Historical Performance
The following graph sets forth the daily closing values of the
RTY Index for the period from January 1, 2014 through August 14, 2019. The related table sets forth the published high and low
closing values, as well as end-of-quarter closing values, of the RTY Index for each quarter in the same period. The closing value
of the underlying index on August 14, 2019 was 1,467.522. We obtained the information in the table and graph below from Bloomberg
Financial Markets, without independent verification. The RTY Index has at times experienced periods of high volatility, and you
should not take the historical values of the RTY Index as an indication of its future performance. No assurance can be given as
to the level of the RTY Index on any observation date, including the final observation date.
RTY Index Daily
Closing Values
January 1, 2014 to August
14, 2019
|
|
|
*The black solid line in the graph indicates the coupon barrier level of 1,159.342, which is approximately 79% of the initial index value.
|
Morgan Stanley Finance LLC
Callable Contingent Income Buffered Securities due August 18, 2022
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Russell 2000
®
Index
|
High
|
Low
|
Period End
|
2014
|
|
|
|
First Quarter
|
1,208.651
|
1,093.594
|
1,173.038
|
Second Quarter
|
1,192.964
|
1,095.986
|
1,192.964
|
Third Quarter
|
1,208.150
|
1,101.676
|
1,101.676
|
Fourth Quarter
|
1,219.109
|
1,049.303
|
1,204.696
|
2015
|
|
|
|
First Quarter
|
1,266.373
|
1,154.709
|
1,252.772
|
Second Quarter
|
1,295.799
|
1,215.417
|
1,253.947
|
Third Quarter
|
1,273.328
|
1,083.907
|
1,100.688
|
Fourth Quarter
|
1,204.159
|
1,097.552
|
1,135.889
|
2016
|
|
|
|
First Quarter
|
1,114.028
|
953.715
|
1,114.028
|
Second Quarter
|
1,188.954
|
1,089.646
|
1,151.923
|
Third Quarter
|
1,263.438
|
1,139.453
|
1,251.646
|
Fourth Quarter
|
1,388.073
|
1,156.885
|
1,357.130
|
2017
|
|
|
|
First Quarter
|
1,413.635
|
1,345.598
|
1,385.920
|
Second Quarter
|
1,425.985
|
1,345.244
|
1,415.359
|
Third Quarter
|
1,490.861
|
1,356.905
|
1,490.861
|
Fourth Quarter
|
1,548.926
|
1,464.095
|
1,535.511
|
2018
|
|
|
|
First Quarter
|
1,610.706
|
1,463.793
|
1,529.427
|
Second Quarter
|
1,706.985
|
1,492.531
|
1,643.069
|
Third Quarter
|
1,740.753
|
1,653.132
|
1,696.571
|
Fourth Quarter
|
1,672.992
|
1,266.925
|
1,348.559
|
2019
|
|
|
|
First Quarter
|
1,590.062
|
1,330.831
|
1,539.739
|
Second Quarter
|
1,614.976
|
1,465.487
|
1,566.572
|
Third Quarter (through August 14, 2019)
|
1,585.599
|
1,467.522
|
1,467.522
|
The
“Russell 2000
®
Index” is a trademark of FTSE Russell. For more information, see “Russell 2000
®
Index” in the accompanying index supplement.
Morgan Stanley Finance LLC
Callable Contingent Income Buffered Securities due August 18, 2022
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
S&P 500
®
Index Historical Performance
The following graph sets forth the daily closing values of the
SPX Index for the period from January 1, 2014 through August 14, 2019. The related table sets forth the published high and low
closing values, as well as end-of-quarter closing values, of the SPX Index for each quarter in the same period. The closing value
of the SPX Index on August 14, 2019 was 2,840.60. We obtained the information in the table and graph below from Bloomberg Financial
Markets, without independent verification. The SPX Index has at times experienced periods of high volatility, and you should not
take the historical values of the SPX Index as an indication of its future performance. No assurance can be given as to the level
of the SPX Index on any observation date, including the final observation date.
SPX Index Daily Closing Values
January 1, 2014 to August 14, 2019
|
|
|
*The black solid line in the graph indicates the coupon barrier level of 2,244.074, which is 79% of the initial index value.
|
Morgan Stanley Finance LLC
Callable Contingent Income Buffered Securities due August 18, 2022
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
S&P 500
®
Index
|
High
|
Low
|
Period End
|
2014
|
|
|
|
First Quarter
|
1,878.04
|
1,741.89
|
1,872.34
|
Second Quarter
|
1,962.87
|
1,815.69
|
1,960.23
|
Third Quarter
|
2,011.36
|
1,909.57
|
1,972.29
|
Fourth Quarter
|
2,090.57
|
1,862.49
|
2,058.90
|
2015
|
|
|
|
First Quarter
|
2,117.39
|
1,992.67
|
2,067.89
|
Second Quarter
|
2,130.82
|
2,057.64
|
2,063.11
|
Third Quarter
|
2,128.28
|
1,867.61
|
1,920.03
|
Fourth Quarter
|
2,109.79
|
1,923.82
|
2,043.94
|
2016
|
|
|
|
First Quarter
|
2,063.95
|
1,829.08
|
2,059.74
|
Second Quarter
|
2,119.12
|
2,000.54
|
2,098.86
|
Third Quarter
|
2,190.15
|
2,088.55
|
2,168.27
|
Fourth Quarter
|
2,271.72
|
2,085.18
|
2,238.83
|
2017
|
|
|
|
First Quarter
|
2,395.96
|
2,257.83
|
2,362.72
|
Second Quarter
|
2,453.46
|
2,328.95
|
2,423.41
|
Third Quarter
|
2,519.36
|
2,409.75
|
2,519.36
|
Fourth Quarter
|
2690.16
|
2529.12
|
2673.61
|
2018
|
|
|
|
First Quarter
|
2,872.87
|
2,581.00
|
2,640.87
|
Second Quarter
|
2,786.85
|
2,581.88
|
2,718.37
|
Third Quarter
|
2,930.75
|
2,713.22
|
2,913.98
|
Fourth Quarter
|
2,925.51
|
2,351.10
|
2,506.85
|
2019
|
|
|
|
First Quarter
|
2,854.88
|
2,447.89
|
2,834.40
|
Second Quarter
|
2,954.18
|
2,744.45
|
2,941.76
|
Third Quarter (through August 14, 2019)
|
3,025.86
|
2,840.60
|
2,840.60
|
“Standard & Poor’s
®
,” “S&P
®
,”
“S&P 500
®
,” “Standard & Poor’s 500” and “500” are trademarks of
Standard and Poor’s Financial Services LLC. See “S&P 500
®
Index” in the accompanying index
supplement.
Morgan Stanley Finance LLC
Callable Contingent Income Buffered Securities due August 18, 2022
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Additional Terms of the Securities
Please read this information in conjunction with the summary
terms on the front cover of this pricing supplement.
Additional
Terms:
|
|
If the terms described herein are inconsistent with those described in the accompanying prospectus supplement, index supplement or prospectus, the terms described herein shall control.
|
Day count convention:
|
Interest will be computed on the basis of a 360-day year of twelve 30-day months.
|
Underlying index publishers:
|
With respect to the RTY Index, FTSE Russell, or any successor
thereof.
With respect to the SPX Index, S&P Dow Jones Indices LLC,
or any successor thereof.
|
Denominations:
|
$1,000 per security and integral multiples thereof
|
Interest period:
|
The monthly period from and including the original issue date (in the case of the first interest period) or the previous scheduled coupon payment date, as applicable, to but excluding the following scheduled coupon payment date, with no adjustment for any postponement thereof.
|
Senior security or subordinated security:
|
Senior
|
Specified currency:
|
U.S. dollars
|
Record date:
|
One business day prior to the related scheduled coupon payment date;
provided
that any contingent monthly coupon payable at maturity shall be payable to the person to whom the payment at maturity shall be payable.
|
Postponement of observation dates:
|
The observation dates are subject to postponement due to non-index
business days or certain market disruption events, as described in the following paragraph.
If any scheduled observation date, including the final observation
date, is not an index business day with respect to any underlying index or if there is a market disruption event on such day with
respect to any underlying index, the relevant observation date solely with respect to that affected underlying index shall be the
next succeeding index business day with respect to that underlying index on which there is no market disruption event with respect
to that underlying index;
provided
that if a market disruption event with respect to that underlying index has occurred
on each of the five index business days with respect to that underlying index immediately succeeding any of the scheduled observation
dates, then (i) such fifth succeeding index business day shall be deemed to be the relevant observation date with respect to that
affected underlying index, notwithstanding the occurrence of a market disruption event with respect to that underlying index on
such day and (ii) with respect to any such fifth index business day on which a market disruption event occurs with respect to that
underlying index, the calculation agent shall determine the index closing value on such fifth index business day in accordance
with the formula for and method of calculating that underlying index last in effect prior to the commencement of the market disruption
event, using the closing price (or, if trading in the relevant securities has been materially suspended or materially limited,
its good faith estimate of the closing price that would have prevailed but for such suspension or limitation) at the close of the
principal trading session of the relevant exchange on such index business day of each security most recently constituting that
affected underlying index without any rebalancing or substitution of such securities following the commencement of the market disruption
event.
|
Postponement of coupon payment dates
(including the maturity date and redemption dates):
|
If any scheduled coupon payment date is not a business day, that monthly coupon, if any, shall be paid on the next succeeding business day;
provided
that the contingent monthly coupon, if any, with respect to the final observation date shall be paid on the maturity date;
provided further
that if, due to a market disruption event or otherwise, any observation date with respect to either underlying index is postponed so that it falls less than two business days prior to the scheduled coupon payment date, maturity date or redemption date, as applicable, the coupon payment date, maturity date or redemption date, as applicable, shall be postponed to the second business day following the observation date as postponed, by which date the index closing value of each underlying index has been determined. In any of these cases, no adjustment shall be made to any contingent monthly coupon payment, payment at maturity or redemption payment made on that postponed date.
|
Relevant exchange:
|
With respect to each underlying index or its successor index, the primary exchange(s) or market(s) of trading for (i) any security then included in such index and (ii) any futures or options contracts related to such index or to any security then included in such index.
|
Business day:
|
Any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in The City of New York.
|
Index business day:
|
With respect to each underlying index, a day, as determined by the calculation agent, on which trading is generally conducted on each of the relevant exchange(s) for such underlying index, other than a day on which trading on such exchange(s) is scheduled to close prior to the time of the posting of its regular final weekday closing price.
|
Index closing value:
|
With respect to the RTY Index, the index closing value on any index business day shall be determined by the
|
Morgan Stanley Finance LLC
Callable Contingent Income Buffered Securities due August 18, 2022
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
calculation agent and shall equal the closing value of such underlying
index or any successor index reported by Bloomberg Financial Services, or any successor reporting service the calculation agent
may select, on such index business day. In certain circumstances, the index closing value for the RTY Index will be based on the
alternate calculation of such underlying index as described under “Discontinuance of an underlying index; alteration of method
of calculation” below. The closing value of the RTY Index reported by Bloomberg Financial Services may be lower or higher
than the official closing value of the RTY Index published by the underlying index publisher for such underlying index.
With respect to the SPX Index, the index closing value on any
index business day shall be determined by the calculation agent and shall equal the official closing value of such underlying index,
or any successor index as defined under “Discontinuance of an underlying index; alteration of method of calculation”
below, published at the regular official weekday close of trading on such index business day by the underlying index publisher
for the SPX Index, as determined by the calculation agent. In certain circumstances, the index closing value for the SPX Index
will be based on the alternate calculation of such underlying index as described under “Discontinuance of an underlying index;
alteration of method of calculation” below.
|
Market disruption event:
|
With respect to each underlying index, market disruption event
means:
(i) the
occurrence or existence of any of:
(a) a suspension, absence or material
limitation of trading of securities then constituting 20 percent or more of the value of such underlying index (or a successor
index) on the relevant exchange(s) for such securities for more than two hours of trading or during the one-half hour period preceding
the close of the principal trading session on such relevant exchange(s), or
(b) a breakdown or failure in the
price and trade reporting systems of any relevant exchange as a result of which the reported trading prices for securities then
constituting 20 percent or more of the value of such underlying index (or a successor index) during the last one-half hour preceding
the close of the principal trading session on such relevant exchange(s) are materially inaccurate, or
(c) the suspension, material limitation
or absence of trading on any major U.S. securities market for trading in futures or options contracts or exchange-traded funds
related to such underlying index (or a successor index) for more than two hours of trading or during the one-half hour period preceding
the close of the principal trading session on such market,
in each case as determined by the
calculation agent in its sole discretion; and
(ii) a
determination by the calculation agent in its sole discretion that any event described in clause (i) above materially interfered
with our ability or the ability of any of our affiliates to unwind or adjust all or a material portion of the hedge position with
respect to the securities.
For the purpose of determining whether a market disruption event
exists at any time with respect to an underlying index, if trading in a security included in such underlying index is materially
suspended or materially limited at that time, then the relevant percentage contribution of that security to the value of such underlying
index shall be based on a comparison of (x) the portion of the value of such underlying index attributable to that security relative
to (y) the overall value of such underlying index, in each case immediately before that suspension or limitation.
For the purpose of determining whether a market disruption event
exists at any time with respect to an underlying index: (1) a limitation on the hours or number of days of trading will not constitute
a market disruption event if it results from an announced change in the regular business hours of the relevant exchange or market,
(2) a decision to permanently discontinue trading in the relevant futures or options contract or exchange-traded fund will not
constitute a market disruption event, (3) a suspension of trading in futures or options contracts or exchange-traded funds on such
underlying index by the primary securities market trading in such contracts or funds by reason of (a) a price change exceeding
limits set by such securities exchange or market, (b) an imbalance of orders relating to such contracts or funds or (c) a disparity
in bid and ask quotes relating to such contracts or funds will constitute a suspension, absence or material limitation of trading
in futures or options contracts or exchange-traded funds related to such underlying index and (4) a “suspension, absence
or material limitation of trading” on any relevant exchange or on the primary market on which futures or options contracts
or exchange-traded funds related to such underlying index are traded will not include any time when such securities market is itself
closed for trading under ordinary circumstances.
|
Discontinuance of an underlying index;
alteration of method of calculation:
|
If any underlying index publisher discontinues publication of the relevant underlying index and such underlying index publisher or another entity (including MS & Co.) publishes a successor or substitute index that the calculation agent determines, in its sole discretion, to be comparable to the discontinued index (such
|
Morgan Stanley Finance LLC
Callable Contingent Income Buffered Securities due August 18, 2022
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
index being referred to herein as the “successor index”),
then any subsequent index closing value for the discontinued index will be determined by reference to the published value of such
successor index at the regular weekday close of trading on any index business day that the index closing value for such underlying
index is to be determined, and, to the extent the index closing value of such successor index differs from the index closing value
of the relevant underlying index at the time of such substitution, proportionate adjustments shall be made by the calculation agent
to the relevant initial index value and coupon barrier level.
Upon any selection by the calculation agent of a successor index,
the calculation agent will cause written notice thereof to be furnished to the trustee, to us and to the depositary, as holder
of the securities, within three business days of such selection. We expect that such notice will be made available to you, as a
beneficial owner of the securities, in accordance with the standard rules and procedures of the depositary and its direct and indirect
participants.
If any underlying index publisher discontinues publication of
the relevant underlying index or a successor index prior to, and such discontinuance is continuing on, any observation date and
the calculation agent determines, in its sole discretion, that no successor index is available at such time, then the calculation
agent will determine the index closing value for such underlying index for such date. The index closing value of such underlying
index or such successor index will be computed by the calculation agent in accordance with the formula for and method of calculating
such index last in effect prior to such discontinuance, using the closing price (or, if trading in the relevant securities has
been materially suspended or materially limited, its good faith estimate of the closing price that would have prevailed but for
such suspension or limitation) at the close of the principal trading session of the relevant exchange on such date of each security
most recently constituting such index without any rebalancing or substitution of such securities following such discontinuance.
Notwithstanding these alternative arrangements, discontinuance of the publication of an underlying index may adversely affect the
value of the securities.
If at any time, the method of calculating any underlying index
or any successor index, or the value thereof, is changed in a material respect, or if any underlying index or any successor index
is in any other way modified so that such index does not, in the opinion of the calculation agent, fairly represent the value of
such index had such changes or modifications not been made, then, from and after such time, the calculation agent will, at the
close of business in New York City on each date on which the index closing value for such underlying index is to be determined,
make such calculations and adjustments as, in the good faith judgment of the calculation agent, may be necessary in order to arrive
at a value of a stock index comparable to such underlying index or such successor index, as the case may be, as if such changes
or modifications had not been made, and the calculation agent will calculate the index closing value with reference to such underlying
index or such successor index, as adjusted. Accordingly, if the method of calculating any underlying index or any successor index
is modified so that the value of such index is a fraction of what it would have been if it had not been modified (e.g., due to
a split in such underlying index), then the calculation agent will adjust such index in order to arrive at a value of such underlying
index or such successor index as if it had not been modified (e.g., as if such split had not occurred).
|
Alternate exchange calculation in case
of an event of default:
|
If an event of default with respect to the securities shall have
occurred and be continuing, the amount declared due and payable upon any acceleration of the securities (the “Acceleration
Amount”) will be an amount, determined by the calculation agent in its sole discretion, that is equal to the cost of having
a qualified financial institution, of the kind and selected as described below, expressly assume all our payment and other obligations
with respect to the securities as of that day and as if no default or acceleration had occurred, or to undertake other obligations
providing substantially equivalent economic value to you with respect to the securities. That cost will equal:
·
the
lowest amount that a qualified financial institution would charge to effect this assumption or undertaking, plus
·
the
reasonable expenses, including reasonable attorneys’ fees, incurred by the holders of the securities in preparing any documentation
necessary for this assumption or undertaking.
During the default quotation period for the securities, which
we describe below, the holders of the securities and/or we may request a qualified financial institution to provide a quotation
of the amount it would charge to effect this assumption or undertaking. If either party obtains a quotation, it must notify the
other party in writing of the quotation. The amount referred to in the first bullet point above will equal the lowest—or,
if there is only one, the only—quotation obtained, and as to which notice is so given, during the default quotation period.
With respect to any quotation, however, the party not obtaining the quotation may object, on reasonable and significant grounds,
to the assumption or undertaking by the qualified financial institution providing the quotation and notify the other party in writing
of those grounds within two business days after the last day of the default quotation period, in which case that quotation will
be disregarded in determining the Acceleration Amount.
|
Morgan Stanley Finance LLC
Callable Contingent Income Buffered Securities due August 18, 2022
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
Notwithstanding the foregoing, if a voluntary or involuntary
liquidation, bankruptcy or insolvency of, or any analogous proceeding is filed with respect to MSFL or Morgan Stanley, then depending
on applicable bankruptcy law, your claim may be limited to an amount that could be less than the Acceleration Amount.
If the maturity of the securities is accelerated because of an
event of default as described above, we shall, or shall cause the calculation agent to, provide written notice to the trustee at
its New York office, on which notice the trustee may conclusively rely, and to the depositary of the Acceleration Amount and the
aggregate cash amount due, if any, with respect to the securities as promptly as possible and in no event later than two business
days after the date of such acceleration.
Default quotation period
The default quotation period is the period beginning on the day
the Acceleration Amount first becomes due and ending on the third business day after that day, unless:
·
no
quotation of the kind referred to above is obtained, or
·
every
quotation of that kind obtained is objected to within five business days after the due date as described above.
If either of these two events occurs, the default quotation period
will continue until the third business day after the first business day on which prompt notice of a quotation is given as described
above. If that quotation is objected to as described above within five business days after that first business day, however, the
default quotation period will continue as described in the prior sentence and this sentence.
In any event, if the default quotation period and the subsequent
two business day objection period have not ended before the final observation date, then the Acceleration Amount will equal the
principal amount of the securities.
Qualified financial institutions
For the purpose of determining the Acceleration Amount at any
time, a qualified financial institution must be a financial institution organized under the laws of any jurisdiction in the United
States or Europe, which at that time has outstanding debt obligations with a stated maturity of one year or less from the date
of issue and rated either:
·
A-2
or higher by Standard & Poor’s Ratings Services or any successor, or any other comparable rating then used by that rating
agency, or
·
P-2
or higher by Moody’s Investors Service or any successor, or any other comparable rating then used by that rating agency.
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Trustee:
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The Bank of New York Mellon, a New York banking corporation
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Calculation
agent:
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The calculation agent for the securities will be MS & Co.
All determinations made by the calculation agent will be at the sole discretion of the calculation agent and will, in the absence
of manifest error, be conclusive for all purposes and binding on you, the trustee and us.
All calculations with respect to the contingent monthly coupon,
the redemption payment and the payment at maturity, if any, shall be made by the calculation agent and shall be rounded to the
nearest one hundred-thousandth, with five one-millionths rounded upward (e.g., .876545 would be rounded to .87655); all dollar
amounts related to determination of the amount of cash payable per stated principal amount, if any, shall be rounded to the nearest
ten-thousandth, with five one hundred-thousandths rounded upward (e.g., .76545 would be rounded up to .7655); and all dollar amounts
paid on the aggregate principal amount of the securities shall be rounded to the nearest cent, with one-half cent rounded upward.
Because the calculation agent is our affiliate, the economic
interests of the calculation agent and its affiliates may be adverse to your interests as an investor in the securities, including
with respect to certain determinations and judgments that the calculation agent must make in determining the payment that you will
receive, if any, on each coupon payment date, upon early redemption or at maturity or whether a market disruption event has occurred.
See “Market disruption event” and “Discontinuance of an underlying index; alteration of method of calculation.”
MS & Co. is obligated to carry out its duties and functions as calculation agent in good faith and using its reasonable judgment.
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Issuer
notices to registered security holders, the trustee and the depositary:
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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
|
Morgan Stanley Finance LLC
Callable Contingent Income Buffered Securities due August 18, 2022
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
upon the registry books, (ii) to the trustee by facsimile, confirmed
by mailing such notice to the trustee by first class mail, postage prepaid, at its New York office and (iii) to the depositary
by telephone or facsimile confirmed by mailing such notice to the depositary by first class mail, postage prepaid. Any
notice that is mailed to a registered holder of the securities in the manner herein provided shall be conclusively presumed to
have been duly given to such registered holder, whether or not such registered holder receives the notice. The issuer
shall give such notice as promptly as possible, and in no case later than (i) with respect to notice of postponement of the maturity
date, the business day immediately preceding the scheduled maturity date and (ii) with respect to notice of the date to which the
maturity date has been rescheduled, the business day immediately following the final observation date as postponed.
The issuer shall, or shall cause the calculation agent to, (i)
provide written notice to the trustee, on which notice the trustee may conclusively rely, and to the depositary of the amount of
cash to be delivered as contingent monthly coupon, if any, with respect to the securities on or prior to 10:30 a.m. (New York City
time) on the business day preceding each coupon payment date, and (ii) deliver the aggregate cash amount due with respect to the
applicable coupon to the trustee for delivery to the depositary, as holder of the securities, on the applicable coupon payment
date.
In the event that any coupon payment date is postponed due to
the postponement of the relevant observation date, the issuer shall give notice of such postponement and, once it has been determined,
of the date to which the applicable coupon payment date has been rescheduled (i) to each registered holder of the securities by
mailing notice of such postponement by first class mail, postage prepaid, to such registered holder’s last address as it
shall appear upon the registry books, (ii) to the trustee by facsimile confirmed by mailing such notice to the trustee by first
class mail, postage prepaid, at its New York office and (iii) to the depositary by telephone or facsimile confirmed by mailing
such notice to the depositary by first class mail, postage prepaid. Any notice that is mailed to a registered holder
of the securities in the manner herein provided shall be conclusively presumed to have been duly given to such registered holder,
whether or not such registered holder receives the notice. The issuer shall give such notice as promptly as possible,
and in no case later than (i) with respect to notice of postponement of any coupon payment date, the business day immediately preceding
the applicable scheduled coupon payment date and (ii) with respect to notice of the date to which the applicable coupon payment
date has been rescheduled, the business day immediately following the applicable observation date as postponed.
The issuer shall, or shall cause the calculation agent to, (i)
provide written notice to the trustee, on which notice the trustee may conclusively rely, and to the depositary of the amount of
cash, if any, to be delivered with respect to the securities, on or prior to 10:30 a.m. (New York City time) on the business day
preceding the redemption date or the business day preceding the maturity date, as applicable, and (ii) deliver the aggregate cash
amount due with respect to the securities, if any, to the trustee for delivery to the depositary, as holder of the securities,
on the redemption date or maturity date, as applicable.
|
Morgan Stanley Finance LLC
Callable Contingent Income Buffered Securities due August 18, 2022
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities