CALCULATION
OF REGISTRATION FEE
|
|
Maximum Aggregate
|
|
Amount of Registration
|
Title of Each Class of Securities Offered
|
|
Offering Price
|
|
Fee
|
Contingent Income Auto-
|
|
$1,105,000
|
|
$133.93
|
Callable Securities due 2021
|
|
|
|
|
August 2019
Pricing Supplement No. 2,389
Registration Statement Nos.
333-221595; 333-221595-01
Dated August 14, 2019
Filed pursuant to Rule 424(b)(2)
M
organ
S
tanley
F
inance
LLC
Structured
Investments
Opportunities in U.S. and
International Equities
Contingent Income Auto-Callable Securities with
Daily Trigger Monitoring due February 19, 2021
All Payments on the Securities Based on the
Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Fully and Unconditionally Guaranteed by Morgan
Stanley
Principal at Risk Securities
The securities are unsecured obligations of Morgan Stanley Finance
LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley. The securities
have
the terms described in the accompanying product supplement, index supplement and prospectus, as supplemented or modified by this
document. The securities do not guarantee the repayment of principal and do not provide for the regular payment of interest. Instead,
the securities will pay a contingent quarterly coupon
but only if
the closing level of
each
of the Russell 2000
®
Index, the
NASDAQ-100 Index
®
and
the
iShares
®
MSCI Emerging Markets ETF
is
at or above
70% of its respective initial level, which we refer to as the respective
coupon threshold level
, on the related observation
date. However, if the closing level of
any
underlying is
less than
its
coupon threshold level
on any observation
date, we will pay no interest for the related quarterly period. In addition, the securities will be automatically redeemed if
the closing level of
each
underlying is
greater than or equal to
its respective
initial level
on any quarterly
redemption determination date, for the early redemption payment equal to the sum of the stated principal amount plus the related
contingent quarterly coupon. No further payments will be made on the securities once they have been redeemed. At maturity, i
f
the securities have not previously been redeemed and the final level of
each
underlying has remained
greater than or
equal to
70% of its respective initial level, which we refer to as the respective downside threshold level, on each index
business day or each trading day, as applicable, from but excluding the pricing date to and including the final observation date
(the “observation period”), the payment at maturity will be the stated principal amount and the related contingent
quarterly coupon. If, however, the final level of
any
underlying is
less than
its respective downside threshold
level on any index business day or any trading day, as applicable, during the observation period, a trigger event will have occurred
and investors will be fully exposed to the decline in the worst performing underlying on a 1-to-1 basis and, if the final level
of
any
underlying is less than its initial level, investors will receive a payment at maturity that is
less than
the
stated principal amount of the securities and could be zero.
Accordingly,
i
nvestors in the securities must be willing
to accept the risk of losing their entire initial investment and also the risk of not receiving any contingent quarterly coupons
throughout the 2-year term of the securities.
Because all payments on the securities are based on the worst performing of
the underlyings, a decline beyond the respective coupon threshold level or respective downside threshold level, as applicable,
of any underlying will result in few or no contingent coupon payments and a potentially significant loss of your investment, even
if one or both of the other underlyings have appreciated or have not declined as much. The securities are for investors who are
willing to risk their principal based on the worst performing of three underlyings and who seek an opportunity to earn interest
at a potentially above-market rate in exchange for the risk of receiving no quarterly coupons over the entire 2-year term. Investors
will not participate in any appreciation of any underlying.
The securities
are notes issued as part of MSFL’s Series A Global Medium-Term Notes program.
All payments are subject to our credit risk. If we default
on our obligations, you could lose some or all of your investment. These securities are not secured obligations and you will not
have any security interest in, or otherwise have any access to, any underlying reference asset or assets.
FINAL TERMS
|
Issuer:
|
Morgan Stanley Finance LLC
|
Guarantor:
|
Morgan Stanley
|
Underlyings:
|
Russell 2000
®
Index (the “RTY Index”), NASDAQ-100 Index
®
(the “NDX Index”) and iShares
®
MSCI Emerging Markets ETF (the “EEM Shares”)
|
Aggregate principal amount:
|
$1,105,000
|
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 (5 business days after the pricing date)
|
Maturity date:
|
February 19, 2021
|
Contingent quarterly coupon:
|
A
contingent
coupon will be paid on the securities
on each coupon payment date
but only if
the closing level of
each
underlying is at or above its respective
coupon threshold level
on the related observation date. If payable, the contingent quarterly coupon will be an amount in
cash per stated principal amount corresponding to a return of 8.75%
per annum
for each interest payment period for each
applicable observation date.
If, on any observation date, the closing level of
any underlying is less than its respective coupon threshold level, we will pay no coupon for the applicable quarterly period. It
is possible that any underlying will remain below its respective coupon threshold level for extended periods of time or even throughout
the entire 2-year term of the securities so that you will receive few or no contingent quarterly coupons.
|
Trigger event:
|
A trigger event occurs if, on any index business day (with respect to the RTY Index and the NDX Index) or any trading day (with respect to the EEM Shares) from but excluding the pricing date to and including the final observation date (the “observation period”), the closing level of an applicable underlying is less than its respective downside threshold level. If a trigger event occurs on
any index business day or any trading day
, as applicable, during the observation period, you will be exposed to the downside performance of the worst performing underlying at maturity.
|
Payment at maturity:
|
At maturity, investors will receive, in addition to
the final contingent quarterly coupon payment, if payable, a payment at maturity determined as follows:
If a trigger event HAS NOT occurred on any index
business day (with respect to the RTY Index and the NDX Index) or any trading day (with respect to the EEM Shares) from but excluding
the pricing date to and including the final observation date
: the stated principal amount
If a trigger event HAS occurred on any index business
day (with respect to the RTY Index and the NDX Index) or any trading day (with respect to the EEM Shares) from but excluding the
pricing date to and including the final observation date:
(i) the stated principal amount
multiplied by
(ii) the performance
factor of the worst performing underlying, subject to a maximum payment at maturity of the stated principal amount.
If a trigger event occurs and the final level of
any
underlying is less than its initial level, the payment at maturity will be less than the stated principal amount of the securities
and could be zero.
Under no circumstances will investors participate in
any appreciation of any underlying.
|
|
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:
|
$954.90 per security. See “Investment Summary” beginning on page 3.
|
Commissions and issue price:
|
Price to public
|
Agent’s commissions
(1)
|
Proceeds to us
(2)
|
Per security
|
$1,000
|
$23.75
|
$976.25
|
Total
|
$1,105,000
|
$26,243.75
|
$1,078,756.25
|
|
(1)
|
Selected dealers
and their financial advisors will collectively receive from the agent, MS & Co.,
a fixed sales commission of $23.75 for each security they sell. See “Supplemental
information regarding plan of distribution; conflicts of interest.” For additional
information, see “Plan of Distribution (Conflicts of Interest)” in the accompanying
product supplement.
|
|
(2)
|
See “Use
of proceeds and hedging” on page 35.
|
The
securities involve risks not associated with an investment in ordinary debt securities. See “Risk Factors” beginning
on page 13.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these securities, or determined if this document or the accompanying product supplement,
index supplement and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The securities are not deposits or savings accounts and are
not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they obligations
of, or guaranteed by, a bank.
You should read this document together with the related product
supplement, index supplement and prospectus, each of which can be accessed via the hyperlinks below. Please also see “Additional
Terms of the Securities” and “Additional Information About the Securities” at the end of this document.
As used in this document, “we,” “us”
and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Product
Supplement for Auto-Callable Securities dated November 16, 2017
Index
Supplement dated November 16, 2017
Prospectus
dated November 16, 2017
Morgan Stanley Finance LLC
Contingent
Income Auto-Callable Securities with Daily Trigger Monitoring due February 19, 2021
All Payments on the Securities Based on the
Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at
Risk Securities
Terms continued from previous page:
|
Early redemption:
|
If on any redemption determination date, beginning on November
14, 2019, the closing level of
each
underlying is
greater than or equal to
its respective initial level, the securities
will be automatically redeemed for an early redemption payment on the related early redemption date. No further payments will be
made on the securities once they have been redeemed.
The securities will not be redeemed early on any early redemption
date if the closing level of any underlying is below the respective initial level for such underlying on the related redemption
determination date.
|
Early redemption payment:
|
The early redemption payment will be an amount equal to the stated principal amount for each security you hold
plus
the contingent quarterly coupon with respect to the related observation date.
|
Redemption determination dates:
|
Quarterly, as set forth under “Observation Dates, Redemption Determination Dates, Coupon Payment Dates and Early Redemption Dates” below, subject to postponement for non-index business days and non-trading days, as applicable, and certain market disruption events.
|
Early redemption dates:
|
Beginning on November 19, 2019, quarterly. See “Observation Dates, Redemption Determination Dates, Coupon Payment Dates and Early Redemption Dates” below. If any such day is not a business day, that early redemption payment will be made on the next succeeding business day and no adjustment will be made to any early redemption payment made on that succeeding business day
|
Downside threshold level:
|
With respect to the RTY Index: 1,027.265, which is approximately
70% of its initial level
With respect to the NDX Index: 5,243.091, which is 70% of its
initial level
With respect to the EEM Shares: $27.118, which is 70% of its
initial level
|
Coupon threshold level:
|
With respect to the RTY Index: 1,027.265, which is approximately
70% of its initial level
With respect to the NDX Index: 5,243.091, which is 70% of its
initial level
With respect to the EEM Shares: $27.118, which is 70% of its
initial level
|
Initial level:
|
With respect to the RTY Index: 1,467.522, which is its closing
level on the pricing date
With respect to the NDX Index: 7,490.130, which is its closing
level on the pricing date
With respect to the EEM Shares: $38.74, which is its closing
level on the pricing date
|
Final level:
|
With respect to each underlying, the respective closing level on the final observation date
|
Closing level:
|
With respect to each of the RTY Index and the NDX Index, on any
index business day, the respective index closing value on such day
With respect to the EEM Shares, on any trading day, the closing
price of one EEM Share on such day times the adjustment factor on such day
|
Worst performing underlying:
|
The underlying with the largest percentage decrease from the respective initial level to the respective final level
|
Performance factor:
|
Final level
divided by
the initial level
|
Coupon payment dates:
|
Quarterly, beginning November 19, 2019, as set forth under “Observation Dates, Redemption Determination Dates, Coupon Payment Dates and Early Redemption Dates” below;
provided
that if any such day is not a business day, that coupon payment will be made on the next succeeding business day and no adjustment will be made to any coupon payment made on that succeeding business day. The contingent quarterly coupon, if any, with respect to the final observation date will be paid on the maturity date
|
Observation dates:
|
Quarterly, as set forth under “Observation Dates, Redemption Determination Dates, Coupon Payment Dates and Early Redemption Dates” below, subject to postponement for non-index business days and non-trading days, as applicable, and certain market disruption events. We also refer to the observation date immediately prior to the scheduled maturity date as the final observation date.
|
Adjustment factor:
|
With respect to the EEM Shares, 1.0, subject to adjustment in the event of certain events affecting the EEM Shares
|
CUSIP / ISIN:
|
61769HQM0 / US61769HQM06
|
Listing:
|
The securities will not be listed on any securities exchange.
|
Observation Dates, Redemption
Determination Dates, Coupon Payment Dates and Early Redemption Dates
Observation Dates / Redemption Determination Dates
|
Coupon Payment Dates / Early Redemption Dates
|
November 14, 2019
|
November 19, 2019
|
February 14, 2020
|
February 20, 2020
|
May 14, 2020
|
May 19, 2020
|
August 14, 2020
|
August 19, 2020
|
November 16, 2020
|
November 19, 2020
|
February 16, 2021 (final observation date)
|
February 19, 2021 (maturity date)
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities with Daily Trigger Monitoring due February 19, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
Investment Summary
Contingent Income Auto-Callable Securities
Principal at Risk Securities
Contingent Income Auto-Callable Securities with Daily Trigger
Monitoring due February 19, 2021 All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF (the “securities”)
do not provide for the regular payment of interest. Instead, the securities will pay a contingent quarterly coupon
but only
if
the closing level of
each
underlying is
at or above
its respective
coupon threshold level
on the related
observation date. However, if the closing level of
any
underlying is
less than
its respective
coupon threshold
level
on any observation date, we will pay no interest for the related quarterly period. If the closing level of
any
underlying is
less than
its respective
coupon threshold level
on each observation date, you will not receive any
contingent quarterly coupon for the entire 2-year term of the securities. We refer to these coupons as contingent, because there
is no guarantee that you will receive a coupon payment on any coupon payment date. Even if each underlying were to be at or above
its respective coupon threshold level on some quarterly observation dates, they may not all close at or above their respective
coupon threshold levels on other observation dates, in which case you will not receive some contingent quarterly coupon payments.
In addition, if the securities have not been automatically called prior to maturity and the final level of
any underlying
is
less than
its respective downside threshold level on
any index business day or any trading day
, as applicable, during
the observation period, a trigger event will have occurred and investors will be fully exposed to the decline in the worst performing
underlying on a 1-to-1 basis and, if the final level of
any
underlying is less than its respective initial level, investors
will receive a payment at maturity that is less than the stated principal amount of the securities and could be zero. Investors
will not participate in any appreciation of any underlying.
Accordingly,
i
nvestors in the securities must be willing
to accept the risk of losing their entire initial investment and also the risk of not receiving any contingent quarterly coupons
throughout the entire 2-year term of the securities.
Maturity:
|
Approximately 2 years
|
Contingent quarterly coupon:
|
A
contingent
quarterly coupon will be paid on the securities on each coupon payment date
but only if
the closing level of
each
underlying is at or above its respective
coupon threshold level
on the related observation date. If payable, the contingent quarterly coupon will be an amount in cash per stated principal amount corresponding to a return of 8.75%
per annum
for each interest payment period for each applicable observation date.
If, on any observation date, the closing level of any underlying is less than the respective coupon threshold level, we will pay no coupon for the applicable quarterly period.
|
Automatic early redemption:
|
If the closing level of
each
underlying is
greater than or equal to
its
initial level
on any quarterly redemption determination date, beginning on November 14, 2019, the securities will be automatically redeemed for an early redemption payment equal to the stated principal amount
plus
the contingent quarterly coupon with respect to the related observation date. No further payments will be made on the securities once they have been redeemed.
|
Trigger event:
|
A trigger event occurs if, on any index business day (with respect to the RTY Index and the NDX Index) or any trading day (with respect to the EEM Shares) from but excluding the pricing date to and including the final observation date (the “observation period”), the closing level of an applicable underlying is less than its respective downside threshold level. If a trigger event occurs on
any index business day or any trading day
, as applicable, during the observation period, you will be exposed to the downside performance of the worst performing underlying at maturity.
|
Payment at maturity:
|
At maturity, investors will receive, in addition to the final
contingent quarterly coupon payment, if payable, a payment at maturity determined as follows:
If a trigger event HAS NOT occurred on any index business
day or any trading day from but excluding the pricing date to and including the final observation date
, investors will receive
at maturity the stated principal amount.
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities with Daily Trigger Monitoring due February 19, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
If a trigger event HAS occurred on any index business day
or any trading day from but excluding the pricing date to and including the final observation date
, investors will receive
a payment at maturity equal to: (i) the stated principal amount
multiplied by
(ii) the performance factor of the worst performing
underlying, subject to a maximum payment at maturity of the stated principal amount.
If a trigger event occurs and the final level of
any
underlying
is less than its initial level, the payment at maturity will be less than the stated principal amount of the securities and could
be zero.
Accordingly, investors in the securities must be willing to
accept the risk of losing their entire initial investment. Investors will not participate in any appreciation of any underlying.
|
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 $954.90.
What goes into the estimated value on the pricing date?
In valuing the securities on the pricing date, we take into account
that the securities comprise both a debt component and a performance-based component linked to the underlyings. The estimated value
of the securities is determined using our own pricing and valuation models, market inputs and assumptions relating to the underlyings,
instruments based on the underlyings, volatility and other factors including current and expected interest rates, as well as an
interest rate related to our secondary market credit spread, which is the implied interest rate at which our conventional fixed
rate debt trades in the secondary market.
What determines the economic terms of the securities?
In determining the economic terms of the securities, including
the contingent quarterly coupon rate, the coupon threshold levels and the downside threshold levels, we use an internal funding
rate, which is likely to be lower than our secondary market credit spreads and therefore advantageous to us. If the issuing, selling,
structuring and hedging costs borne by you were lower or if the internal funding rate were higher, one or more of the economic
terms of the securities would be more favorable to you.
What is the relationship between the estimated value on the
pricing date and the secondary market price of the securities?
The price at which MS & Co. purchases the securities in the
secondary market, absent changes in market conditions, including those related to the underlyings, may vary from, and be lower
than, the estimated value on the pricing date, because the secondary market price takes into account our secondary market credit
spread as well as the bid-offer spread that MS & Co. would charge in a secondary market transaction of this type and other
factors. However, because the costs associated with issuing, selling, structuring and hedging the securities are not fully deducted
upon issuance, for a period of up to 6 months following the issue date, to the extent that MS & Co. may buy or sell the securities
in the secondary market, absent changes in market conditions, including those related to the underlyings, and to our secondary
market credit spreads, it would do so based on values higher than the estimated value. We expect that those higher values will
also be reflected in your brokerage account statements.
MS & Co. may, but is not obligated to, make a market in the
securities, and, if it once chooses to make a market, may cease doing so at any time.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities with Daily Trigger Monitoring due February 19, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
Key Investment Rationale
The securities do not provide for the regular payment of interest.
Instead, the securities will pay a contingent quarterly coupon
but only if
the closing level of
each
underlying is
at or above
its respective
coupon threshold level
on the related observation date. However, if the closing level
of
any
underlying is
less than
its respective
coupon threshold level
on any observation date, we will pay
no interest for the related quarterly period. The securities have been designed for investors who are willing to forgo market floating
interest rates and accept the risk of receiving no coupon payments for the entire 2-year term of the securities in exchange for
an opportunity to earn interest at a potentially above-market rate if each underlying closes at or above its respective coupon
threshold level on the quarterly observation dates until the securities are redeemed early or reach maturity.
The following scenarios are for illustrative purposes only to
demonstrate how the coupon and the payment at maturity (if the securities have not previously been redeemed) are calculated, and
do not attempt to demonstrate every situation that may occur. Accordingly, the securities may or may not be redeemed, the contingent
quarterly coupon may be payable in none of, or some but not all of, the quarterly periods during the 2-year term of the securities
and the payment at maturity may be less than 70% of the stated principal amount of the securities and may be zero.
Scenario 1: The securities are redeemed prior to maturity
|
This scenario assumes that, prior to early redemption, each underlying
closes at or above its
coupon threshold level
on some quarterly observation dates, but one or more underlyings close below
the respective coupon threshold level(s) on the others. Investors receive the contingent quarterly coupon, corresponding to a return
of 8.75%
per annum
, for the quarterly periods for which each closing level is at or above the respective coupon threshold
level on the related observation date, but not for the quarterly periods for which any closing level is below the respective coupon
threshold level on the related observation date.
When
each
underlying closes at or above its respective
initial level
on a quarterly redemption determination date, the securities will be automatically redeemed for the stated
principal amount
plus
the contingent quarterly coupon with respect to the related observation date.
|
Scenario 2: The securities are not redeemed prior to maturity, and investors receive principal back at maturity
|
This scenario assumes that a trigger event has not occurred, as each underlying has closed at or above the respective downside threshold level on each index business day or each trading day, as applicable, during the observation period. In addition, each underlying closes below the respective initial level on every quarterly redemption determination date. Consequently, the securities are not automatically redeemed, and investors receive the contingent quarterly coupon for each quarterly period, as each underlying closing level was at or above the respective coupon barrier level on each observation date. Because a trigger event has not occurred on
any index business day or any trading day
, as applicable, during the observation period, at maturity, investors will receive the stated principal amount and the contingent quarterly coupon with respect to the final observation date.
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities with Daily Trigger Monitoring due February 19, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
Scenario 3: The securities are not redeemed prior to maturity, a trigger event occurs on any index business day or any trading day, as applicable, during the observation period and investors suffer a loss of principal at maturity
|
This scenario assumes that each underlying closes at or above
its respective coupon barrier level on some quarterly observation dates, but one or more underlying close below the respective
coupon barrier level(s) on the others, and each underlying closes below the respective initial level on every quarterly redemption
determination date. Consequently, the securities are not automatically redeemed and a trigger event will have occurred. Investors
receive the contingent quarterly coupon for the quarterly periods for which each underlying closing level is at or above the respective
coupon barrier level on the related observation date, but not for the quarterly periods for which any underlying closing level
is below the respective coupon barrier level on the related observation date. On the final observation date, one or more underlying
close below the respective initial level(s). At maturity, investors will receive an amount equal to the stated principal amount
multiplied by the performance factor of the worst performing underlying. Under these circumstances, the payment at maturity will
be less than the stated principal amount and could be zero.
If a trigger event occurs on
any index business day or any
trading day
, as applicable, during the observation period, investors will have full downside exposure to the worst performing
underlying at maturity. Under these circumstances, if the final level of
any
underlying is less than its respective initial
level, investors will lose some or all of their investment in the securities.
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities with Daily Trigger Monitoring due February 19, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
How the Securities Work
The following diagrams illustrate the potential outcomes for
the securities depending on (1) the closing levels on each quarterly observation date, (2) the closing levels on each quarterly
redemption determination date and (3) the final levels. Please see “Hypothetical Examples” beginning on page 9 for
illustration of hypothetical payouts on the securities.
Diagram #1: Contingent Quarterly Coupons
(Beginning on the First Coupon Payment Date until Early Redemption or Maturity)
Diagram #2: Automatic Early Redemption
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities with Daily Trigger Monitoring due February 19, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
Diagram #3: Payment at Maturity if No Automatic
Early Redemption Occurs
For more information about the payout upon an early redemption
or at maturity in different hypothetical scenarios, see “Hypothetical Examples” starting on page 9.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities with Daily Trigger Monitoring due February 19, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
Hypothetical Examples
The following hypothetical examples illustrate how to determine
whether a contingent quarterly coupon is paid with respect to an observation date and how to calculate the payment at maturity,
if any, if the securities have not been automatically redeemed early. The following examples are for illustrative purposes only.
Whether you receive a contingent quarterly coupon will be determined by reference to the closing level of each underlying on each
quarterly observation date, and the amount you will receive at maturity, if any, will be determined by reference to the closing
level of each underlying throughout the observation period. The actual initial level, coupon threshold level and downside threshold
level for each underlying are set forth on the cover of this document. All payments on the securities, if any, are subject to our
credit risk. The numbers in the hypothetical examples below may have been rounded for the ease of analysis. The below examples
are based on the following terms:
Contingent Quarterly Coupon:
|
A
contingent
quarterly coupon will be paid on the securities on each coupon payment date
but only if
the closing level of
each
underlying is at or above its respective
coupon threshold level
on the related observation date. If payable, the contingent quarterly coupon will be an amount in cash per stated principal amount corresponding to a return of 8.75%
per annum
for each interest payment period for each applicable observation date. These hypothetical examples reflect the contingent quarterly coupon rate of 8.75%
per annum
(corresponding to approximately $21.875 per quarter per security*).
|
Automatic Early Redemption (beginning after three months):
|
If the closing level of
each
underlying is greater than or equal to its respective
initial level
on any quarterly redemption determination date, the securities will be automatically redeemed for an early redemption payment equal to the stated principal amount
plus
the contingent quarterly coupon with respect to the related observation date.
|
Trigger event:
|
A trigger event occurs if, on any index business day (with respect to the RTY Index and the NDX Index) or any trading day (with respect to the EEM Shares) from but excluding the pricing date to and including the final observation date (the “observation period”), the closing level of an applicable underlying is less than its respective downside threshold level. If a trigger event occurs on
any index business day or any trading day
, as applicable, during the observation period, investors will be exposed to the downside performance of the worst performing underlying at maturity.
|
Payment at Maturity (if the securities have not been automatically redeemed early):
|
At maturity, investors will receive, in addition to the final
contingent quarterly coupon payment, if payable, a payment at maturity determined as follows:
If a trigger event HAS NOT occurred on any index business
day or any trading day from but excluding the pricing date to and including the final observation date
: the stated principal
amount
If a trigger event HAS occurred on any index business day
or any trading day from but excluding the pricing date to and including the final observation date:
(i) the stated principal
amount
multiplied by
(ii) the performance factor of the worst performing underlying, subject to a maximum payment at maturity
of the stated principal amount.
If a trigger event occurs and the final level of
any
underlying
is less than its initial level, the payment at maturity will be less than the stated principal amount of the securities and could
be zero.
Under no circumstances will investors participate in any appreciation
of any underlying.
|
Stated Principal Amount:
|
$1,000
|
Hypothetical Initial Level:
|
With respect to the RTY Index: 1,200
With respect to the NDX Index: 6,500
With respect to the EEM Shares: $40
|
Hypothetical Coupon Threshold
|
With respect to the RTY Index: 840, which is 70% of the hypothetical
initial level for such
|
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Level.
|
underlying
With respect to the NDX Index: 4,550, which is 70% of the hypothetical
initial level for such underlying
With respect to the EEM Shares: $28, which is 70% of the hypothetical
initial level for such underlying
|
Hypothetical Downside Threshold Level:
|
With respect to the RTY Index: 840, which is 70% of the hypothetical
initial level for such underlying
With respect to the NDX Index: 4,550, which is 70% of the hypothetical
initial level for such underlying
With respect to the EEM Shares: $28, which is 70% of the hypothetical
initial level for such underlying
|
* The actual contingent quarterly coupon will be an amount determined
by the calculation agent based on the number of days in the applicable payment period, calculated on a 30/360 basis. The hypothetical
contingent quarterly coupon of $21.875 is used in these examples for ease of analysis.
How to determine whether a contingent quarterly
coupon is payable with respect to an observation date:
|
Closing Level
|
Contingent Quarterly Coupon
|
|
RTY Index
|
NDX Index
|
EEM Shares
|
Hypothetical Observation Date 1
|
1,750 (
at or above
the coupon threshold level)
|
7,280 (
at or above
the coupon threshold level)
|
$50 (
at or above
the coupon threshold level)
|
$21.875
|
Hypothetical Observation Date 2
|
800 (
below
the coupon threshold level)
|
5,525 (
at or above
the coupon threshold level)
|
$70 (
at or above
the coupon threshold level)
|
$0
|
Hypothetical Observation Date 3
|
1,400 (
at or above
the coupon threshold level)
|
2,950 (
below
the coupon threshold level)
|
$25 (
below
the coupon threshold level)
|
$0
|
Hypothetical Observation Date 4
|
700 (
below
the coupon threshold level)
|
2,080 (
below
the coupon threshold level)
|
$20 (
below
the coupon threshold level)
|
$0
|
On hypothetical observation date 1, each underlying closes at
or above its respective coupon threshold level. Therefore, a contingent quarterly coupon of $21.875 is paid on the relevant coupon
payment date.
On each of hypothetical observation dates 2 and 3, at least one
underlying closes at or above its respective coupon threshold level, but one or both of the other underlyings close below their
respective coupon threshold levels. Therefore, no contingent quarterly coupon is paid on the relevant coupon payment date.
On hypothetical observation date 4, each underlying closes below
its respective coupon threshold level, and, accordingly, no contingent quarterly coupon is paid on the relevant coupon payment
date.
If the closing level of any underlying is less than its respective
coupon threshold level on each observation date, you will not receive any contingent quarterly coupons for the entire 2-year term
of the securities.
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How to calculate the payment at maturity (if
the securities have not been automatically redeemed):
Example 1: A trigger event HAS NOT occurred.
Final Level
|
|
RTY Index: 1,700
NDX Index: 8,000
|
|
|
EEM Shares: $45
|
Payment at Maturity
|
=
|
$1,000.00 + $21.875 (contingent quarterly coupon for the final quarterly period)
|
|
=
|
$1,021.875
|
In example 1, the closing levels of the RTY Index and the NDX
Index and the EEM Shares are all at or above their respective downside threshold levels on
each index business day or each trading
day, as applicable,
during the observation period. Therefore, a trigger event has not occurred and investors receive at maturity
the stated principal amount of the securities and the contingent quarterly coupon with respect to the final observation date. However,
investors do not participate in any appreciation of any underlying index.
Example 2: A trigger event HAS occurred.
Final Level
|
|
RTY Index: 2,500
NDX Index: 5,200
EEM Shares: $50
|
Payment at Maturity
|
=
|
$21.875 (contingent quarterly coupon for the final quarterly period) + [$1,000 x performance factor of the worst performing underlying, subject to a maximum of the stated principal amount]
|
|
=
|
$21.875 + [$1,000 x (5,200 / 6,500)]
|
|
=
|
$821.875
|
In example 2, the closing levels of two underlying are at or
above their respective downside threshold levels
on each index business day or each trading day
, as applicable, during the
observation period, but the closing level of the other underlying is below its downside threshold level on one or more index business
days or trading days during the observation period. The final levels of the RTY Index and the NDX Index and the EEM Shares are
at or above the respective coupon barrier levels on the final observation date. However, because a trigger event has occurred,
investors are exposed to the downside performance of the worst performing underlying at maturity, even though two of the underlying
have appreciated. Because the final level of each underlying is greater than its respective coupon barrier level, investors receive
the contingent quarterly coupon with respect to the final observation date. The payment at maturity is an amount equal to the contingent
quarterly coupon with respect to the final observation date
plus
(i) the stated principal amount
times
(ii) the performance
factor of the worst performing underlying.
Example 3: A trigger event HAS occurred.
Final Level
|
|
RTY Index: 600
|
|
|
NDX Index: 4,225
|
|
|
EEM Shares: $32
|
Payment at Maturity
|
=
|
$1,000 x index performance factor of the worst performing underlying index
|
|
=
|
$1,000 x (600 / 1,200) = $500
|
|
=
|
$500
|
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In example 3, the closing levels of the RTY Index and the NDX
Index and the EEM Shares are all below the respective downside threshold levels on one or more index business days or trading days,
as applicable, during the observation period. Therefore, a trigger event has occurred, and investors are exposed to the downside
performance of the worst performing underlying at maturity. Because the final level of one or more of the underlying is below the
respective coupon barrier levels, investors do not receive the contingent quarterly coupon with respect to the final observation
date. The payment at maturity is an amount equal to the stated principal amount
times
the performance factor of the worst
performing underlying.
If a trigger event occurs on any business day or any trading
day, as applicable, during the observation period, investors will have full downside exposure to the worst performing underlying
at maturity. Under these circumstances, if the final level of any underlying is less than its respective initial level, investors
will lose some or all of their investment in the securities.
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Principal at Risk Securities
Risk Factors
The
following is a list of certain key risk factors for investors in the securities. For further discussion of these and other risks,
you should read the section entitled “Risk Factors” in the accompanying product supplement, index supplement and prospectus.
We also urge you to consult with your investment, legal, tax, accounting and other advisers
in connection with your
investment in the securities
.
|
§
|
The
securities do not guarantee the return of any principal
.
The terms of the
securities differ from those of ordinary debt securities in that they do not guarantee
the repayment of any principal. If the securities have not been automatically redeemed
prior to maturity and the closing level of
any
underlying is less than its respective
downside threshold level on
any index business day or any trading day
, as applicable,
during the observation period, a trigger event will have occurred and you will be exposed
to the decline in the closing value of the worst performing underlying, as compared to
its initial value, on a 1-to-1 basis at maturity. If a trigger event occurs on any index
business day or any trading day, as applicable, during the observation period, investors
will have full downside exposure to the worst performing underlying at maturity. Under
these circumstances, if the final level of
any
underlying is less than its respective
initial level, investors will lose some or all of their investment in the securities.
In this case, you will receive for each security that you hold at maturity an amount
equal to the stated principal amount
times
the performance factor of the worst
performing underlying, subject to a maximum payment at maturity of the stated principal
amount.
In this case, the payment at maturity will be less than the stated principal
amount and could be zero.
|
|
§
|
The
securities do not provide for the regular payment of interest
.
The terms of
the securities differ from those of ordinary debt securities in that they do not provide
for the regular payment of interest. Instead, the securities will pay a contingent quarterly
coupon
but only if
the closing level of
each
underlying is
at or above
its respective
coupon threshold level
on the related observation date. If
the closing level of
any
underlying is lower than its
coupon threshold level
on the relevant observation date for any interest period, we will pay no coupon on
the applicable coupon payment date. Moreover, in such a case, a trigger event will necessarily
have occurred, and you will have full downside exposure to the worst performing underlying
at maturity. It is possible that the closing level of any underlying will be less than
its respective
coupon threshold level
for extended periods of time or even throughout
the entire term of the securities so that you will receive few or no contingent quarterly
coupons
.
If you do not earn sufficient contingent quarterly coupons over the term
of the securities, the overall return on the securities may be less than the amount that
would be paid on a conventional debt security of ours of comparable maturity.
|
|
§
|
You
are exposed to the price risk of each underlying, with respect to both the contingent
quarterly coupons, if any, and the payment at maturity, if any
.
Your
return on the securities is not linked to a basket consisting of the underlyings. Rather,
it will be contingent upon the independent performance of each underlying. Unlike an
instrument with a return linked to a basket of underlying assets, in which risk is mitigated
and diversified among all the components of the basket, you will be exposed to the risks
related to each underlying. Poor performance by
any
underlying
over the term of the securities will negatively affect your return and will not be offset
or mitigated by any positive performance by the other underlyings. To receive
any
contingent quarterly coupons,
each
underlying must close at or above its respective coupon
threshold level on the applicable observation date. In addition, if
the
securities have not been automatically redeemed early and
any
underlying has declined to below its respective downside
threshold level on
any index business day or any trading day
,
as applicable, during the observation period, a trigger event will have occurred and
you will be
fully exposed
to the decline
in the worst performing underlying over the term of the securities on a 1-to-1 basis,
even if one or both of the other underlyings have appreciated or have not declined as
much, and even if the worst performing underlying is not the underlying that originally
caused the occurrence of the trigger event. Under this scenario, the value of any such
payment will be less than the stated principal amount and could be zero. Accordingly,
your investment is subject to the price risk of each underlying.
|
|
§
|
Because the securities are linked to the performance of the worst performing underlying, you are exposed to greater risks
of receiving no contingent quarterly coupons and sustaining a significant loss on your investment than if the securities were linked
to just one underlying.
The risk that you will not receive any contingent quarterly coupons, or that you will suffer a loss
on your investment, is greater if you invest in the securities as opposed to substantially similar securities that are linked to
the performance of just one underlying. With three underlyings, it is
|
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more likely that any underlying
will close below its coupon threshold level on any observation date, and below its downside threshold level on
any index business
day or any trading day
, as applicable, during the observation period, which would constitute a trigger event, than if the securities
were linked to only one underlying. Therefore, it is more likely that you will not receive any contingent quarterly coupons and
that you will suffer a significant loss on your investment. In addition, because each underlying must close above its initial level
on a quarterly redemption determination date in order for the securities to be called prior to maturity, the securities are less
likely to be called on any early redemption date than if the securities were linked to just one underlying.
|
§
|
The contingent quarterly coupon, if any, is based on the value of each underlying on only the related quarterly observation
date at the end of the related interest period
.
Whether the
contingent quarterly coupon will be paid on any coupon payment date will be determined at the end of the relevant interest period
based on the closing level of each underlying on the relevant quarterly observation date. As a result, you will not know whether
you will receive the contingent quarterly coupon on any coupon payment date until near the end of the relevant interest period.
Moreover, because the contingent quarterly coupon is based solely on the value of each underlying on quarterly observation dates,
if the closing level of any underlying on any observation date is below the coupon threshold level for such underlying, you will
not receive the contingent quarterly coupon for the related interest period, even if the level of such underlying was at or above
its respective coupon threshold level on other days during that interest period, and even if the closing level(s) of one or both
of the other underlyings are at or above their respective coupon threshold level(s).
|
|
§
|
Investors will not participate in any appreciation in any underlying.
Regardless of whether or not a trigger event occurs,
investors will not participate in any appreciation in any underlying from the initial level for such underlying, and the return
on the securities will be limited to the contingent quarterly coupons, if any, that are paid with respect to each observation date
on which the closing level of each underlying is greater than or equal to its respective coupon threshold level, if any.
|
|
§
|
The
market price will be influenced by many unpredictable factors
.
Several
factors, many of which are beyond our control, will influence the value of the securities
in the secondary market and the price at which MS & Co. may be willing to purchase
or sell the securities in the secondary market. We expect that generally the level of
interest rates available in the market and the value of each
underlying
on
any
index business day or any trading day
, including in
relation to its respective coupon threshold level, downside threshold level and initial
level, will affect the value of the securities more than any other factors. Other factors
that may influence the value of the securities include:
|
|
o
|
the volatility (frequency and magnitude of changes in value) of each underlying and of the stocks composing the RTY Index,
the NDX Index and the share underlying index,
|
|
o
|
whether a trigger event has occurred on
any index business day or any trading day
, as applicable, during the observation
period,
|
|
o
|
whether the closing level of any underlying has been below its respective coupon threshold level on any observation date,
|
|
o
|
geopolitical conditions and economic, financial, political, regulatory or judicial events that affect the component stocks
of the RTY Index, the NDX Index and the share underlying index or securities markets generally and which may affect the value of
each underlying,
|
|
o
|
dividend rates on the securities underlying the RTY Index, the NDX Index and the share underlying index,
|
|
o
|
the time remaining until the securities mature,
|
|
o
|
interest and yield rates in the market,
|
|
o
|
the availability of comparable instruments,
|
|
o
|
the composition of the underlyings and changes in the constituent stocks of the RTY Index, the NDX Index and the share underlying
index,
|
Morgan Stanley Finance LLC
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®
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®
MSCI Emerging Markets ETF
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|
o
|
the occurrence of certain events affecting the EEM Shares that may or may not require an adjustment to the adjustment factor,
and
|
|
o
|
any actual or anticipated changes in our credit ratings or credit spreads.
|
Some
or all of these factors will influence the price that you will receive if you sell your securities prior to maturity. In particular,
if any underlying has closed near or below its coupon threshold level and downside threshold level, the market value of the securities
is expected to decrease substantially, and you may have to sell your securities at a substantial discount from the stated principal
amount of $1,000 per security.
You cannot predict the future performance
of any underlying based on its historical performance. The value of any underlying may decrease and be below the respective coupon
threshold level for such underlying on each observation date so that you will receive no return on your investment, and any or
all of the underlyings may close below the respective downside threshold level(s) on
any index business day or any trading day
,
as applicable, during the observation period so that you are exposed to the negative performance of the worst performing underlying
at maturity. There can be no assurance that the closing level of each underlying will be at or above the respective coupon threshold
level on any observation date so that you will receive a coupon payment on the securities for the applicable interest period, or
that it will be at or above its respective downside threshold level on each index business day or each trading day, as applicable,
during the observation period so that you do not suffer a loss on your initial investment in the securities. See “Russell
2000
®
Index Overview,” “NASDAQ-100 Index
®
Overview” and “iShares
®
MSCI Emerging Markets ETF Overview” below.
|
§
|
The antidilution adjustments the calculation agent is required to make do not cover every event that could affect the EEM
Shares.
MS & Co., as calculation agent, will adjust the adjustment factor for certain events affecting the EEM Shares.
However, the calculation agent will not make an adjustment for every event that could affect the EEM Shares. If an event occurs
that does not require the calculation agent to adjust the adjustment factor, the market price of the securities may be materially
and adversely affected.
|
|
§
|
Adjustments to the EEM Shares or the share underlying index could adversely affect the value of the securities.
The
investment adviser to the EEM Shares (the “Investment Adviser”) seeks investment results that correspond generally
to the total return performance, before fees and expenses, of the Dow Jones Industrial Average
SM
(the “share underlying
index”). Pursuant to its investment strategy or otherwise, the Investment Adviser may add, delete or substitute the stocks
composing the EEM Shares. Any of these actions could adversely affect the price of the EEM Shares and, consequently, the value
of the securities. S&P Dow Jones Indices LLC (“S&P”) is responsible for calculating and maintaining the Dow
Jones Industrial Average
SM
. S&P may add, delete or substitute the stocks constituting the Dow Jones Industrial Average
SM
or make other methodological changes that could change the value of the Dow Jones Industrial Average
SM
. S&P may
discontinue or suspend calculation or publication of the Dow Jones Industrial Average
SM
at any time. Any of these actions
could adversely affect the value of the Dow Jones Industrial Average
SM
, and, consequently, the price of the EEM Shares
and the value of the securities.
|
|
§
|
The performance and market price of the EEM Shares, particularly during periods of market volatility, may not correlate
with the performance of the share underlying index, the performance of the component securities of the share underlying index or
the net asset value per share of the EEM Shares.
The EEM Shares do not fully replicate the share underlying index and may hold
securities that are different than those included in the share underlying index. In addition, the performance of the EEM Shares
will reflect additional transaction costs and fees that are not included in the calculation of the share underlying index. All
of these factors may lead to a lack of correlation between the performance of EEM Shares and the share underlying index. In addition,
corporate actions (such as mergers and spin-offs) with respect to the equity securities underlying the EEM Shares may impact the
variance between the performances of EEM Shares and the share underlying index. Finally, because the shares of the EEM Shares are
traded on an exchange and are subject to market supply and investor demand, the market price of one share of the EEM Shares may
differ from the net asset value per share of the EEM Shares.
|
In particular, during periods of
market volatility, or unusual trading activity, trading in the securities underlying the EEM Shares may be disrupted or limited,
or such securities may be unavailable in the secondary market. Under these
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circumstances, the liquidity of
the EEM Shares may be adversely affected, market participants may be unable to calculate accurately the net asset value per share
of the EEM Shares, and their ability to create and redeem shares of the EEM Shares may be disrupted. Under these circumstances,
the market price of shares of the EEM Shares may vary substantially from the net asset value per share of the EEM Shares or the
level of the share underlying index.
For all of the foregoing reasons,
the performance of the EEM Shares may not correlate with the performance of the share underlying index, the performance of the
component securities of the share underlying index or the net asset value per share of the EEM Shares. Any of these events could
materially and adversely affect the price of the shares of the EEM Shares and, therefore, the value of the securities. Additionally,
if market volatility or these events were to occur on the final observation date, the calculation agent would maintain discretion
to determine whether such market volatility or events have caused a market disruption event to occur, and such determination may
affect the payment at maturity of the securities. If the calculation agent determines that no market disruption event has taken
place, the payment at maturity would be based on the published closing price per share of the EEM Shares on the final observation
date, even if the EEM Shares’ shares are underperforming the share underlying index or the component securities of the share
underlying index and/or trading below the net asset value per share of the EEM Shares.
|
§
|
The securities are subject to our credit risk, and any actual or anticipated changes to our credit ratings or credit spreads
may adversely affect the market value of the securities.
You are dependent on our ability to pay all amounts due on the securities
at maturity, upon early redemption or on any coupon payment date, and therefore you are subject to our credit risk. The securities
are not guaranteed by any other entity. If we default on our obligations under the securities, your investment would be at risk
and you could lose some or all of your investment. As a result, the market value of the securities prior to maturity will be affected
by changes in the market’s view of our creditworthiness. Any actual or anticipated decline in our credit ratings or increase
in the credit spreads charged by the market for taking our credit risk is likely to adversely affect the market value of the securities.
|
|
§
|
As a finance subsidiary, MSFL has no independent operations and will have no independent assets
. As a finance subsidiary,
MSFL has no independent operations beyond the issuance and administration of its securities and will have no independent assets
available for distributions to holders of MSFL securities if they make claims in respect of such securities in a bankruptcy, resolution
or similar proceeding. Accordingly, any recoveries by such holders will be limited to those available under the related guarantee
by Morgan Stanley and that guarantee will rank
pari passu
with all other unsecured, unsubordinated obligations of Morgan
Stanley. Holders will have recourse only to a single claim against Morgan Stanley and its assets under the guarantee. Holders of
securities issued by MSFL should accordingly assume that in any such proceedings they would not have any priority over and should
be treated
pari passu
with the claims of other unsecured, unsubordinated creditors of Morgan Stanley, including holders
of Morgan Stanley-issued securities.
|
|
§
|
The securities are linked to the Russell 2000
®
Index and are subject to risks associated with small-capitalization
companies.
As the Russell 2000
®
Index is one of the underlyings, and the Russell 2000
®
Index consists of stocks issued by companies with relatively small market capitalization, the securities are linked to the value
of small-capitalization companies. These companies often have greater stock price volatility, lower trading volume and
less liquidity than large-capitalization companies and therefore the Russell 2000
®
Index may be more volatile than
indices that consist of stocks issued by large-capitalization companies. Stock prices of small-capitalization companies
are also more vulnerable than those of large-capitalization companies to adverse business and economic developments, and the stocks
of small-capitalization companies may be thinly traded. In addition, small capitalization companies are typically less
well-established and less stable financially than large-capitalization companies and may depend on a small number of key personnel,
making them more vulnerable to loss of personnel. Such companies tend to have smaller revenues, less diverse product
lines, smaller shares of their product or service markets, fewer financial resources and less competitive strengths than large-capitalization
companies and are more susceptible to adverse developments related to their products.
|
|
§
|
There are risks associated with investments in securities linked to the value of foreign equity securities.
The securities
are linked to the value of foreign equity securities. Investments in securities linked to the value of foreign equity securities
involve risks associated with the securities markets in those countries, including risks of volatility in
|
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®
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®
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those markets, governmental intervention
in those markets and cross-shareholdings in companies in certain countries. Also, there is generally less publicly available information
about foreign companies than about U.S. companies that are subject to the reporting requirements of the United States Securities
and Exchange Commission, and foreign companies are subject to accounting, auditing and financial reporting standards and requirements
different from those applicable to U.S. reporting companies. The prices of securities issued in foreign markets may be affected
by political, economic, financial and social factors in those countries, or global regions, including changes in government, economic
and fiscal policies and currency exchange laws. Local securities markets may trade a small number of securities and may be unable
to respond effectively to increases in trading volume, potentially making prompt liquidation of holdings difficult or impossible
at times. Moreover, the economies in such countries may differ favorably or unfavorably from the economy in the United States in
such respects as growth of gross national product, rate of inflation, capital reinvestment, resources, self-sufficiency and balance
of payment positions.
|
§
|
There are risks associated with investments in securities linked to the value of foreign (and especially emerging markets)
equity securities.
The price of the EEM Shares tracks the performance of the MSCI Emerging Markets Index
SM
, which
measures the value of foreign (and especially emerging markets) equity securities. Investments in securities linked to the value
of foreign equity securities involve risks associated with the securities markets in those countries, including risks of volatility
in those markets, governmental intervention in those markets and cross-shareholdings in companies in certain countries. Also, there
is generally less publicly available information about foreign companies than about U.S. companies that are subject to the reporting
requirements of the Securities and Exchange Commission, and foreign companies are subject to accounting, auditing and financial
reporting standards and requirements different from those applicable to U.S. reporting companies. The prices of securities issued
in foreign markets may be affected by political, economic, financial and social factors in those countries, or global regions,
including changes in government, economic and fiscal policies and currency exchange laws. In addition, the stocks included in the
MSCI Emerging Markets Index
SM
and that are generally tracked by the EEM Shares have been issued by companies in various
emerging markets countries, which pose further risks in addition to the risks associated with investing in foreign equity markets
generally. Countries with emerging markets may have relatively unstable governments, may present the risks of nationalization of
businesses, restrictions on foreign ownership and prohibitions on the repatriation of assets, and may have less protection of property
rights than more developed countries. The economies of countries with emerging markets may be based on only a few industries, may
be highly vulnerable to changes in local or global trade conditions, and may suffer from extreme and volatile debt burdens or inflation
rates. Local securities markets may trade a small number of securities and may be unable to respond effectively to increases in
trading volume, potentially making prompt liquidation of holdings difficult or impossible at times. Moreover, the economies in
such countries may differ unfavorably from the economy in the United States in such respects as growth of gross national product,
rate of inflation, capital reinvestment, resources, self-sufficiency and balance of payment positions between countries.
|
|
§
|
The securities are subject to currency exchange risk
. Because the price of the EEM Shares tracks the performance of
the MSCI Emerging Markets Index
SM
, holders of the securities will be exposed to currency exchange rate risk with respect
to each of the currencies in which such component securities trade. Exchange rate movements for a particular currency are volatile
and are the result of numerous factors including the supply of, and the demand for, those currencies, as well as relevant government
policy, intervention or actions, but are also influenced significantly from time to time by political or economic developments,
and by macroeconomic factors and speculative actions related to the relevant region. An investor’s net exposure will depend
on the extent to which the currencies of the component securities strengthen or weaken against the U.S. dollar and the relative
weight of each security. If, taking into account such weighting, the dollar strengthens against the currencies of the component
securities represented in the EEM Shares, the price of the EEM Shares will be adversely affected and the payment at maturity on
the securities may be reduced.
|
Of particular importance to potentially
currency exchange risk are:
|
o
|
existing and expected rates of inflation;
|
|
o
|
existing and expected interest rate levels;
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities with Daily Trigger Monitoring due February 19, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
o
|
the balance of payments; and
|
|
o
|
the extent of governmental surpluses or deficits in the countries represented in the MSCI Emerging Markets Index
SM
and the United States.
|
All of these factors are in turn
sensitive to the monetary, fiscal and trade policies pursued by the governments of various countries represented in the MSCI Emerging
Markets Index
SM
and the United States and other countries important to international trade and finance.
|
§
|
Investing in the securities is not equivalent to investing in the underlyings or the
stocks composing the RTY Index, the NDX Index or the share underlying index.
Investing in the securities is not equivalent
to investing in any of the underlyings or the component stocks of the RTY Index, the NDX Index or the share underlying index. Investors
in the securities will not participate in any positive performance of any underlying, and will not have voting rights or rights
to receive dividends or other distributions or any other rights with respect to stocks that constitute the RTY Index, the NDX Index
or the share underlying index.
|
|
§
|
Reinvestment risk.
The term
of your investment in the securities may be shortened due to the automatic early redemption feature of the securities. If the securities
are redeemed prior to maturity, you will receive no more contingent quarterly coupons and may be forced to invest in a lower interest
rate environment and may not be able to reinvest at comparable terms or returns. However, under no circumstances will the securities
be redeemed in the first three months of the term of the securities.
|
|
§
|
The securities will not be listed on any securities exchange and secondary trading may be limited
.
A
ccordingly, you should be willing to hold your securities for the entire 2-year term of the securities.
The securities
will not be listed on any securities exchange. Therefore, there may be little or no secondary market for the securities. MS &
Co. may, but is not obligated to, make a market in the securities and, if it once chooses to make a market, may cease doing so
at any time. When it does make a market, it will generally do so for transactions of routine 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
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities with Daily Trigger Monitoring due February 19, 2021
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®
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®
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®
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Principal at Risk Securities
underlyings, and to our secondary
market credit spreads, it would do so based on values higher than the estimated value, and we expect that those higher values will
also be reflected in your brokerage account statements.
|
§
|
The estimated value of the securities is determined by reference to our pricing and valuation models, which may differ from
those of other dealers and is not a maximum or minimum secondary market price.
These pricing and valuation models are proprietary
and rely in part on subjective views of certain market inputs and certain assumptions about future events, which may prove to be
incorrect. As a result, because there is no market-standard way to value these types of securities, our models may yield a higher
estimated value of the securities than those generated by others, including other dealers in the market, if they attempted to value
the securities. In addition, the estimated value on the pricing date does not represent a minimum or maximum price at which dealers,
including MS & Co., would be willing to purchase your notes in the secondary market (if any exists) at any time. The value
of your securities at any time after the date of this document will vary based on many factors that cannot be predicted with accuracy,
including our creditworthiness and changes in market conditions. See also “The market price will be influenced by many unpredictable
factors” above.
|
|
§
|
Hedging and trading activity by our affiliates could potentially affect the value of the securities.
One or more of
our affiliates and/or third-party dealers have carried out, and will continue to carry out, hedging activities related to the securities
(and to other instruments linked to the underlyings and the share underlying index), including trading in the EEM Shares, the stocks
that constitute the RTY Index, the NDX Index or the share underlying index as well as in other instruments related to the underlyings.
As a result, these entities may be unwinding or adjusting hedge positions during the term of the securities, and the hedging strategy
may involve greater and more frequent dynamic adjustments to the hedge as the final observation date approaches. Some of our affiliates
also trade the underlyings and other financial instruments related to the underlyings and the share underlying index on a regular
basis as part of their general broker-dealer and other businesses. Any of these hedging or trading activities on or prior to the
pricing date could have increased the initial level of an underlying, and, therefore, could have increased (i) the level at or
above which such underlying must close on any redemption determination date so that the securities are redeemed prior to maturity
for the early redemption payment (depending also on the performance of the other underlyings), (ii) the level at or above which
such underlying must close on each observation date in order for you to earn a contingent quarterly coupon (depending also on the
performance of the other underlyings) and (iii) the level at or above which such underlying must close on each index business day
or each trading day, as applicable, during the observation period so that you are not exposed to the negative performance of the
worst performing underlying at maturity (depending also on the performance of the other underlyings). Additionally, such hedging
or trading activities during the term of the securities could affect the value of an underlying throughout the observation period,
and, accordingly, whether we redeem the securities prior to maturity, whether we pay a contingent quarterly coupon on the securities
and the amount of cash you receive at maturity, if any (depending also on the performance of the other underlyings).
|
|
§
|
The calculation agent, which is a subsidiary of Morgan Stanley and an affiliate of MSFL, will make determinations with respect
to the securities.
As calculation agent, MS & Co. has determined the initial level, coupon threshold level and downside
threshold level for each underlying and will determine whether you receive a contingent quarterly coupon on each coupon payment
date and/or at maturity, whether the securities will be redeemed on any early redemption date, whether a trigger event has occurred
and the payment at maturity, if any. Moreover, certain determinations made by MS & Co., in its capacity as calculation agent,
may require it to exercise discretion and make subjective judgments, such as with respect to the occurrence or non-occurrence of
market disruption events, any adjustments to the adjustment factor and the selection of a successor index or calculation of the
closing level of any underlying in the event of a market disruption event or discontinuance of the RTY Index, the NDX Index or
the share underlying index. These potentially subjective determinations may adversely affect the payout to you at maturity, if
any. For further information regarding these types of determinations, see “Description of Auto-Callable Securities—Postponement
of Determination Dates,” “—Alternate Exchange Calculation in Case of an Event of Default,” “—Discontinuance
of Any Underlying Index; Alternation of Method of Calculation,” “Discontinuance of the Underlying Shares of an Exchange-Traded
Fund and/or Share Underlying Index; Alteration of Method of Calculation,” “—Antidilution Adjustments” and
“—Calculation Agent and Calculations” in the accompanying product supplement. In addition, MS & Co. has determined
the estimated value of the securities on the pricing date.
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities with Daily Trigger Monitoring due February 19, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
§
|
Adjustments to the RTY Index or the NDX Index could adversely affect the value of the securities.
The publisher of each
of the RTY Index or the NDX Index may add, delete or substitute the component stocks of such underlying or make other methodological
changes that could change the value of such underlying. Any of these actions could adversely affect the value of the securities.
The publisher of each of the RTY Index or the NDX Index may also discontinue or suspend calculation or publication of such underlying
at any time. In these circumstances, MS & Co., as the calculation agent, will have the sole discretion to substitute a successor
index that is comparable to the discontinued index. MS & Co. could have an economic interest that is different than that of
investors in the securities insofar as, for example, MS & Co. is permitted to consider indices that are calculated and published
by MS & Co. or any of its affiliates. If MS & Co. determines that there is no appropriate successor index on any observation
date, the determination of whether a contingent quarterly coupon will be payable on the securities on the applicable coupon payment
date, whether the securities will be redeemed and/or the amount payable at maturity, if any, will be based on the value of such
underlying, based on the closing prices of the stocks constituting such underlying at the time of such discontinuance, without
rebalancing or substitution, computed by MS & Co. as calculation agent in accordance with the formula for calculating such
underlying last in effect prior to such discontinuance, as compared to the relevant initial level, coupon threshold level or downside
threshold level, as applicable (depending also on the performance of the other underlyings).
|
|
§
|
The U.S. federal income tax consequences of an investment in the securities are uncertain.
There is no direct legal
authority as to the proper treatment of the securities for U.S. federal income tax purposes, and, therefore, significant aspects
of the tax treatment of the securities are uncertain.
|
Please read the discussion under
“Additional Information—Tax considerations” in this document concerning the U.S. federal income tax consequences
of an investment in the securities. We intend to treat a security for U.S. federal income tax purposes as a single financial contract
that provides for a coupon that will be treated as gross income to you at the time received or accrued, in accordance with your
regular method of tax accounting. Under this treatment, the ordinary income treatment of the coupon payments, in conjunction with
the capital loss treatment of any loss recognized upon the sale, exchange or settlement of the securities, could result in adverse
tax consequences to holders of the securities because the deductibility of capital losses is subject to limitations. We do not
plan to request a ruling from the Internal Revenue Service (the “IRS”) regarding the tax treatment of the securities,
and the IRS or a court may not agree with the tax treatment described herein. If the IRS were successful in asserting an alternative
treatment for the securities, the timing and character of income or loss on the securities might differ significantly from the
tax treatment described herein. For example, under one possible treatment, the IRS could seek to recharacterize the securities
as debt instruments. In that event, U.S. Holders (as defined below) would be required to accrue into income original issue discount
on the securities every year at a “comparable yield” determined at the time of issuance (as adjusted based on the difference,
if any, between the actual and the projected amount of any contingent payments on the securities) and recognize all income and
gain in respect of the securities as ordinary income. The risk that financial instruments providing for buffers, triggers or similar
downside protection features, such as the securities, would be recharacterized as debt is greater than the risk of recharacterization
for comparable financial instruments that do not have such features.
Non-U.S. Holders (as defined
below) should note that we currently intend to withhold on any coupon paid to Non-U.S. Holders generally at a rate of 30%, or at
a reduced rate specified by an applicable income tax treaty under an “other income” or similar provision, and will
not be required to pay any additional amounts with respect to amounts withheld.
In 2007, the U.S. Treasury Department
and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts”
and similar instruments. While it is not clear whether the securities would be viewed as similar to the prepaid forward contracts
described in the notice, it is possible that any Treasury regulations or other guidance promulgated after consideration of these
issues could materially and adversely affect the tax consequences of an investment in the securities, possibly with retroactive
effect. The notice focuses on a number of issues, the most relevant of which for holders of the securities are the character and
timing of income or loss and the degree, if any, to which income realized by non-U.S. investors should be subject to withholding
tax. Both U.S. and Non-U.S. Holders should consult their tax advisers regarding the U.S. federal income tax consequences of an
investment in
Morgan Stanley Finance LLC
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All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
the securities, including possible
alternative treatments, the issues presented by this notice and any tax consequences arising under the laws of any state, local
or non-U.S. taxing jurisdiction.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities with Daily Trigger Monitoring due February 19, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
Russell 2000
®
Index Overview
The Russell 2000
®
Index is an index calculated,
published and disseminated by FTSE Russell, and measures the composite price performance of stocks of 2,000 companies incorporated
in the U.S. and its territories. All 2,000 stocks are traded on a major U.S. exchange and are the 2,000 smallest securities
that form the Russell 3000
®
Index. The Russell 3000
®
Index is composed of the 3,000
largest U.S. companies as determined by market capitalization and represents approximately 98% of the U.S. equity market. The
Russell 2000
®
Index consists of the smallest 2,000 companies included in the Russell 3000
®
Index and represents a small portion of the total market capitalization of the Russell 3000
®
Index. The
Russell 2000
®
Index is designed to track the performance of the small capitalization segment of the U.S.
equity market. For additional information about the Russell 2000
®
Index, see the information set forth
under “Russell 2000
®
Index” in the accompanying index supplement.
Information as of market close on August 14, 2019:
Bloomberg Ticker Symbol:
|
RTY
|
52 Week High (on 8/31/2018):
|
1,740.753
|
Current Index Value:
|
1,467.522
|
52 Week Low (on 12/24/2018):
|
1,266.925
|
52 Weeks Ago:
|
1,692.578
|
|
|
The following graph sets forth the daily index 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 index closing values, as well as end-of-quarter index closing values, of the RTY Index for each quarter for the period from
January 1, 2014 through August 14, 2019. The index closing value of the RTY Index on August 14, 2019 was 1,467.522. We obtained
the information in the table below from Bloomberg Financial Markets, without independent verification. The RTY Index has experienced
periods of high volatility, and you should not take the historical values of the RTY Index as an indication of its future performance.
RTY Index Daily Index
Closing Values
January 1, 2014 to August
14, 2019
|
|
|
* The red line in the graph indicates both the downside threshold level and the coupon threshold level of 1,027.265, each of which is approximately 70% of the initial level.
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities with Daily Trigger Monitoring due February 19, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
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
Contingent Income Auto-Callable Securities with Daily Trigger Monitoring due February 19, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
The NASDAQ-100 Index
®
Overview
The NASDAQ-100 Index
®
, which is calculated, maintained
and published by Nasdaq, Inc., is a modified capitalization-weighted index of 100 of the largest and most actively traded equity
securities of non-financial companies listed on The NASDAQ Stock Market LLC. The NASDAQ-100 Index includes companies across a variety
of major industry groups. At any moment in time, the value of the NASDAQ-100 Index equals the aggregate value of the then-current
NASDAQ-100 Index share weights of each of the NASDAQ-100 Index component securities, which are based on the total shares outstanding
of each such NASDAQ-100 Index component security, multiplied by each such security’s respective last sale price on NASDAQ
(which may be the official closing price published by NASDAQ), and divided by a scaling factor, which becomes the basis for the
reported NASDAQ-100 Index value. For additional information about the NASDAQ-100 Index
®
, see the information
set forth under “NASDAQ-100 Index
®
” in the accompanying index supplement.
Information as of market close on August 14, 2019:
Bloomberg Ticker Symbol:
|
NDX
|
52 Week High (on 7/26/2019):
|
8,016.953
|
Current Index Value:
|
7,490.130
|
52 Week Low (on 12/24/2018):
|
5,899.354
|
52 Weeks Ago:
|
7,447.168
|
|
|
The following graph sets forth the daily index closing values
of the NDX Index for in the period from January 1, 2014 through August 14, 2019. The related table sets forth the published high
and low index closing values, as well as end-of-quarter index closing values, of the NDX Index for each quarter for the period
from January 1, 2014 to August 14, 2019. The index closing value of the NDX Index on August 14, 2019 was 7,490.130. We obtained
the information in the table and graph below from Bloomberg Financial Markets, without independent verification. The NDX Index
has at times experienced periods of high volatility, and you should not take the historical values of the NDX Index as an indication
of its future performance.
NDX Index Daily
Index Closing Values
January 1, 2014 to August
14, 2019
|
|
|
* The red line in the graph indicates both the downside threshold level and the coupon threshold level of 5,243.091, each of which is 70% of the initial level.
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities with Daily Trigger Monitoring due February 19, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
NASDAQ-100 Index
®
|
High
|
Low
|
Period End
|
2014
|
|
|
|
First Quarter
|
3,727.185
|
3,440.502
|
3,595.736
|
Second Quarter
|
3,849.479
|
3,446.845
|
3,849.479
|
Third Quarter
|
4,103.083
|
3,857.938
|
4,049.445
|
Fourth Quarter
|
4,337.785
|
3,765.281
|
4,236.279
|
2015
|
|
|
|
First Quarter
|
4,483.049
|
4,089.648
|
4,333.688
|
Second Quarter
|
4,548.740
|
4,311.257
|
4,396.761
|
Third Quarter
|
4,679.675
|
4,016.324
|
4,181.060
|
Fourth Quarter
|
4,719.053
|
4,192.963
|
4,593.271
|
2016
|
|
|
|
First Quarter
|
4,497.857
|
3,947.804
|
4,483.655
|
Second Quarter
|
4,565.421
|
4,201.055
|
4,417.699
|
Third Quarter
|
4,891.363
|
4,410.747
|
4,875.697
|
Fourth Quarter
|
4,965.808
|
4,660.457
|
4,863.620
|
2017
|
|
|
|
First Quarter
|
5,439.742
|
4,911.333
|
5,436.232
|
Second Quarter
|
5,885.296
|
5,353.586
|
5,646.917
|
Third Quarter
|
6,004.380
|
5,596.956
|
5,979.298
|
Fourth Quarter
|
6,513.269
|
5,981.918
|
6,396.422
|
2018
|
|
|
|
First Quarter
|
7,131.121
|
6,306.100
|
6,581.126
|
Second Quarter
|
7,280.705
|
6,390.837
|
7,040.802
|
Third Quarter
|
7,660.180
|
7,014.554
|
7,627.650
|
Fourth Quarter
|
7,645.453
|
5,899.354
|
6,329.964
|
2019
|
|
|
|
First Quarter
|
7,493.270
|
6,147.128
|
7,378.771
|
Second Quarter
|
7,845.729
|
6,978.018
|
7,671.075
|
Third Quarter (through August 14, 2019)
|
8,016.953
|
7,415.691
|
7,490.130
|
“Nasdaq
®
,” “NASDAQ-100
®
”
and “NASDAQ-100 Index
®
” are trademarks of Nasdaq, Inc. For more information, see “NASDAQ-100 Index
®
”
in the accompanying index supplement.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities with Daily Trigger Monitoring due February 19, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
iShares
®
MSCI Emerging Markets
ETF Overview
The iShares
®
MSCI Emerging Markets ETF is an exchange-traded
fund that seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the
MSCI Emerging Markets Index
SM
. The iShares
®
MSCI Emerging Markets ETF is managed by iShares
®
,
Inc. (“iShares”), a registered investment company that consists of numerous separate investment portfolios, including
the iShares
®
MSCI Emerging Markets ETF. Information provided to or filed with the Securities and Exchange Commission
(the “Commission”) by iShares pursuant to the Securities Act of 1933 and the Investment Company Act of 1940 can be
located by reference to Commission file numbers 033-97598 and 811-09102, respectively, through the Commission’s website at
www.sec.gov. In addition, information may be obtained from other publicly available sources. We make no representation or warranty
as to the accuracy or completeness of such information.
Information as of market close on August 14, 2019:
Bloomberg Ticker Symbol:
|
EEM
|
52 Week High (on 4/17/2019):
|
$44.59
|
Current Share Price:
|
$38.74
|
52 Week Low (on 10/29/2018):
|
$38.00
|
52 Weeks Ago:
|
$42.74
|
|
|
The following graph sets forth the daily closing prices of the
EEM Shares for the period from January 1, 2014 through August 14, 2019. The related table sets forth the published high and low
closing prices, as well as end-of-quarter closing prices, of the EEM Shares for each quarter for the period from January 1, 2014
through August 14, 2019. The closing price of the EEM Shares on August 14, 2019 was $38.74. We obtained the information in the
table and graph below from Bloomberg Financial Markets, without independent verification. The EEM Shares have experienced periods
of high volatility, and you should not take the historical prices of the EEM Shares as an indication of their future performance.
EEM Shares Daily Index Closing Prices
January 1, 2014 to August 14, 2019
|
|
* The red line in the graph indicates both the downside threshold
level and the coupon threshold level of $27.118, each of which is 70% of the initial level.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities with Daily Trigger Monitoring due February 19, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
iShares
®
MSCI Emerging Markets ETF (CUSIP 464287234)
|
High ($)
|
Low ($)
|
Period End ($)
|
2014
|
|
|
|
First Quarter
|
40.99
|
37.09
|
40.99
|
Second Quarter
|
43.95
|
40.82
|
43.23
|
Third Quarter
|
45.85
|
41.56
|
41.56
|
Fourth Quarter
|
42.44
|
37.73
|
39.29
|
2015
|
|
|
|
First Quarter
|
41.07
|
37.92
|
40.13
|
Second Quarter
|
44.09
|
39.04
|
39.62
|
Third Quarter
|
39.78
|
31.32
|
32.78
|
Fourth Quarter
|
36.29
|
31.55
|
32.19
|
2016
|
|
|
|
First Quarter
|
34.28
|
28.25
|
34.25
|
Second Quarter
|
35.26
|
31.87
|
34.36
|
Third Quarter
|
38.20
|
33.77
|
37.45
|
Fourth Quarter
|
38.10
|
34.08
|
35.01
|
2017
|
|
|
|
First Quarter
|
39.99
|
35.43
|
39.39
|
Second Quarter
|
41.93
|
38.81
|
41.39
|
Third Quarter
|
45.85
|
41.05
|
44.81
|
Fourth Quarter
|
47.81
|
44.82
|
47.12
|
2018
|
|
|
|
First Quarter
|
52.08
|
45.69
|
48.28
|
Second Quarter
|
48.14
|
42.33
|
43.33
|
Third Quarter
|
45.03
|
41.14
|
42.92
|
Fourth Quarter
|
42.93
|
38.00
|
39.06
|
2019
|
|
|
|
First Quarter
|
43.71
|
38.45
|
42.92
|
Second Quarter
|
44.59
|
39.91
|
42.91
|
Third Quarter (through August 14, 2019)
|
43.42
|
38.74
|
38.74
|
|
|
|
|
This document relates only to the securities referenced hereby
and does not relate to the EEM Shares. We have derived all disclosures contained in this document regarding iShares from the publicly
available documents described above. In connection with the offering of the securities, neither we nor the agent has participated
in the preparation of such documents or made any due diligence inquiry with respect to iShares. Neither we nor the agent makes
any representation that such publicly available documents or any other publicly available information regarding iShares is accurate
or complete. Furthermore, we cannot give any assurance that all events occurring prior to the date hereof (including events that
would affect the accuracy or completeness of the publicly available documents described above) that would affect the trading price
of the EEM Shares (and therefore the price of the EEM Shares at the time we priced the securities) have been publicly disclosed.
Subsequent disclosure of any such events or the disclosure of or failure to disclose material future events concerning iShares
could affect the value received with respect to the securities and therefore the value of the securities.
Neither we nor any of our affiliates makes any representation
to you as to the performance of the EEM Shares.
We and/or our affiliates may presently or from time to time engage
in business with iShares. In the course of such business, we and/or our affiliates may acquire non-public information with respect
to iShares, and neither we nor any of our affiliates undertakes to disclose any such information to you. In addition, one or more
of our affiliates may publish research reports with respect to the EEM Shares. The statements in the preceding two sentences are
not intended to affect the rights of investors in the securities under the securities laws. As a purchaser of the securities, you
should undertake an independent investigation of iShares as in your judgment is appropriate to make an informed decision with respect
to an investment linked to the EEM Shares.
“iShares
®
” is a registered mark
of BlackRock Institutional Trust Company, N.A. (“BTC”). The securities are not sponsored, endorsed, sold, or promoted
by BTC. BTC makes no representations or warranties to the owners of the securities or any member of the public regarding the advisability
of investing in the securities. BTC has no obligation or liability in connection with the operation, marketing, trading or sale
of the securities.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities with Daily Trigger Monitoring due February 19, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
The MSCI Emerging
Markets Index
SM
.
The MSCI Emerging Markets Index
SM
is a stock index calculated, published
and disseminated daily by MSCI Inc. and is intended to provide performance benchmarks for certain emerging equity markets including
Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Pakistan, Peru,
Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates. The MSCI Emerging Markets
Index
SM
is described in “MSCI Emerging Markets Index
SM
” and “MSCI Global Investable
Market Indices Methodology” in the accompanying index supplement.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities with Daily Trigger Monitoring due February 19, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
Additional Terms of the Securities
Please read this information in conjunction with the summary
terms on the front cover of this document.
Additional Terms:
|
If
the terms described herein are inconsistent with those described in the accompanying product supplement, index supplement
or prospectus, the terms described herein shall control.
|
Underlying index publishers:
|
With respect to the RTY Index, FTSE Russell, or any successor
thereof.
With respect to the NDX Index, Nasdaq, Inc., or any successor
thereof.
|
Index closing value:
|
With respect to the RTY Index, the index closing value on any
index business day shall be determined by the calculation agent and shall equal the closing value of the RTY Index or any successor
index reported by Bloomberg Financial Services, or any successor reporting service the calculation agent may select, on such index
business day. In certain circumstances, the index closing value for the RTY Index will be based on the alternate calculation of
the RTY Index as described under “Discontinuance of Any Underlying Index; Alteration of Method of Calculation” in the
accompanying product supplement. The closing value of the RTY Index reported by Bloomberg Financial Services may be lower or higher
than the official closing value of the RTY Index published by the underlying index publisher for the RTY Index.
With respect to the NDX Index, the index closing value on any
index business day shall be determined by the calculation agent and shall equal the official closing value of the NDX Index, or
any successor index as defined under “Discontinuance of Any Underlying Index; Alteration of Method of Calculation”
in the accompanying product supplement, published at the regular official weekday close of trading on such index business day by
the underlying index publisher for the NDX Index, as determined by the calculation agent. In certain circumstances, the index closing
value for the NDX Index will be based on the alternate calculation of the NDX Index as described under “Discontinuance of
Any Underlying Index; Alteration of Method of Calculation” in the accompanying product supplement.
|
Share underlying index:
|
The MSCI Emerging Markets Index
SM
|
Share underlying index publisher:
|
MSCI Inc. or any successor thereof
|
Interest period:
|
The quarterly period from and including the original issue date (in the case of the first interest period) or the previous scheduled coupon payment date, as applicable, to but excluding the following scheduled coupon payment date, with no adjustment for any postponement thereof.
|
Record date:
|
The record date for each coupon payment date shall be the date one business day prior to such scheduled coupon payment date;
provided
, however, that any coupon payable at maturity (or upon early redemption) shall be payable to the person to whom the payment at maturity or early redemption payment, as the case may be, shall be payable.
|
Threshold level:
|
The accompanying product supplement refers to the threshold level as the “trigger level.”
|
Day count convention:
|
Interest will be computed on the basis of a 360-day year of twelve 30-day months.
|
Postponement of coupon payment dates (including the maturity date) and early redemption dates:
|
If any observation date or redemption determination date is postponed due to a non-index business day or non-trading day, as applicable, or certain market disruption events so that it falls less than two business days prior to the relevant scheduled coupon payment date (including the maturity date) or early redemption date, as applicable, the coupon payment date (or the maturity date) or the early redemption date will be postponed to the second business day following that observation date or redemption determination date as postponed, and no adjustment will be made to any coupon payment or early redemption payment made on that postponed date.
|
Denominations:
|
$1,000 per security and integral multiples thereof
|
Trustee:
|
The Bank of New York Mellon
|
Calculation agent:
|
MS & Co.
|
Issuer notices to registered security holders, the trustee and the depositary:
|
In the event that the maturity date
is postponed due to postponement of the final observation date, the issuer shall give notice of such postponement and, once it
has been determined, of the date to which the maturity date has been rescheduled (i) to each registered holder of the securities
by mailing notice of such postponement by first class mail, postage prepaid, to such registered holder’s last address as
it shall appear upon the registry books, (ii) to the trustee by facsimile, confirmed by mailing such notice to the trustee by first
class mail, postage prepaid, at its New York office and (iii) to The Depository Trust Company (the “depositary”) by
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities with Daily Trigger Monitoring due February 19, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities
|
telephone or facsimile confirmed by
mailing such notice to the depositary by first class mail, postage prepaid. Any notice that is mailed to a registered holder of
the securities in the manner herein provided shall be conclusively presumed to have been duly given to such registered holder,
whether or not such registered holder receives the notice. The issuer shall give such notice as promptly as possible, and in no
case later than (i) with respect to notice of postponement of the maturity date, the business day immediately preceding the scheduled
maturity date and (ii) with respect to notice of the date to which the maturity date has been rescheduled, the business day immediately
following the final observation date as postponed.
In
the event that the securities are subject to early redemption, the issuer shall, (i) on the business day following the applicable
redemption determination date, give notice of the early redemption and the early redemption payment, including specifying the payment
date of the amount due upon the early redemption, (x) to each registered holder of the securities by mailing notice of such early
redemption by first class mail, postage prepaid, to such registered holder’s last address as it shall appear upon the registry
books, (y) to the trustee by facsimile confirmed by mailing such notice to the trustee by first class mail, postage prepaid, at
its New York office and (z) to the depositary by telephone or facsimile confirmed by mailing such notice to the depositary by first
class mail, postage prepaid, and (ii) on or prior to the early redemption date, deliver the aggregate cash amount due with respect
to the securities to the trustee for delivery to the depositary, as holder of the securities. Any notice that is mailed to a registered
holder of the securities in the manner herein provided shall be conclusively presumed to have been duly given to such registered
holder, whether or not such registered holder receives the notice. This notice shall be given by the issuer or, at the issuer’s
request, by the trustee in the name and at the expense of the issuer, with any such request to be
accompanied by a copy
of the notice to be given.
The issuer shall, or
shall cause the calculation agent to, (i) provide written notice to the trustee, on which notice the trustee may conclusively rely,
and to the depositary of the amount of cash to be delivered as contingent quarterly coupon, if any, with respect to each security
on or prior to 10:30 a.m. (New York City time) on the business day preceding each coupon payment date, and (ii) deliver the aggregate
cash amount due, if any, with respect to the contingent quarterly coupon to the trustee for delivery to the depositary, as holder
of the securities, on the applicable coupon payment date.
The
issuer shall, or shall cause the calculation agent to, (i) provide written notice to the trustee, on which notice the trustee may
conclusively rely, and to the depositary of the amount of cash, if any, to be delivered with respect to each stated principal amount
of the securities, on or prior to 10:30 a.m. (New York City time) on the business day preceding the maturity date, and (ii) deliver
the aggregate cash amount due with respect to the securities to the trustee for delivery to the depositary, if any, as holder of
the securities, on the maturity date.
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities with Daily Trigger Monitoring due February 19, 2021
All Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index, the NASDAQ-100 Index
®
and the iShares
®
MSCI Emerging Markets ETF
Principal at Risk Securities