CALCULATION
OF REGISTRATION FEE
|
|
Maximum
Aggregate
|
|
Amount
of Registration
|
Title
of Each Class of Securities Offered
|
|
Offering
Price
|
|
Fee
|
Contingent Income Auto- Callable Securities
due 2024
|
|
$1,200,000
|
|
$145.44
|
August 2019
Pricing Supplement No. 2,437
Registration Statement Nos.
333-221595; 333-221595-01
Dated August 28, 2019
Filed pursuant to Rule 424(b)(2)
Morgan
Stanley Finance LLC
Structured
Investments
Opportunities in U.S. Equities
Contingent Income Auto-Callable Securities due
September 3, 2024, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst
Performing of the Common Stock of McDonald’s Corporation, the Common Stock of AT&T Inc. and the Common Stock of Johnson
& Johnson
Fully and Unconditionally
Guaranteed by Morgan Stanley
Principal at Risk Securities
The securities
are unsecured obligations of Morgan Stanley Finance LLC (“MSFL”) and are fully and unconditionally guaranteed
by Morgan Stanley. The securities have the terms described in the accompanying
product supplement and prospectus, as supplemented or modified by this document. The securities do not guarantee the repayment
of principal and do not provide for the regular payment of interest. Instead, the securities will pay a contingent quarterly coupon
but only if the determination closing price of each of the common stock of McDonald’s Corporation, the common
stock of AT&T Inc. and the common stock of Johnson & Johnson, which we refer to collectively as the underlying stocks,
is at or above 60% of its respective initial share price,
which we refer to as the respective downside threshold level, on the related
observation date. If, however, the determination closing price of any underlying stock is less than its respective downside
threshold level on any observation date, we will pay no interest for the related quarterly period. In addition, the securities
will be automatically redeemed if the determination closing price of each underlying stock is greater than or
equal to 100% of its respective initial share price, which we refer to as the respective call threshold level, on
any quarterly redemption determination date (beginning approximately six months after the original issue date) for the early redemption
payment equal to the sum of the stated principal amount plus the related contingent quarterly coupon. At maturity, if the
securities have not previously been redeemed and the final share price of each underlying stock is greater than or equal
to its respective downside threshold level, the payment at maturity will also be the sum of the stated principal amount and
the related contingent quarterly coupon. However, if the final share price of any underlying stock is less than its
respective downside threshold level, investors will be exposed to the decline in the worst performing underlying stock on a 1-to-1
basis and will receive a payment at maturity that is less than 60% of 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
and also the risk of not receiving any contingent quarterly coupons throughout the 5-year term of the securities. These long-dated
securities are for investors who are willing to risk their principal and seek an opportunity to earn interest at a potentially
above-market rate in exchange for the risk of receiving no quarterly interest over the entire 5-year term and in exchange for the
possibility of an automatic early redemption prior to maturity. Because the payment of contingent quarterly coupons is based on
the worst performing of the underlying stocks, the fact that the securities are linked to three underlying stocks does not provide
any asset diversification benefits and instead means that a decline of any underlying stock below the relevant downside
threshold level will result in no contingent quarterly coupons, even if one or more of the other underlying stocks close at or
above the respective downside threshold levels. Because all payments on the securities are based on the worst performing of the
underlying stocks, a decline beyond the respective downside threshold level of any underlying stock will result in no contingent
quarterly coupon payments and a significant loss of your investment, even if one or more of the other underlying stocks have appreciated
or have not declined as much. Investors will not participate in any appreciation of any underlying stock. The securities are notes
issued as part of MSFL’s Series A Global Medium-Term Notes program.
All payments are subject to our credit risk. If we default
on our obligations, you could lose some or all of your investment. These securities are not secured obligations and you will not
have any security interest in, or otherwise have any access to, any underlying reference asset or assets.
FINAL TERMS
|
Issuer:
|
Morgan Stanley Finance LLC
|
Guarantor:
|
Morgan Stanley
|
Underlying stocks:
|
McDonald’s Corporation common stock (the “MCD Stock”), AT&T Inc. common stock (the “T Stock”) and Johnson & Johnson common stock (the “JNJ Stock”)
|
Aggregate principal amount:
|
$1,200,000
|
Stated principal amount:
|
$1,000 per security
|
Issue price:
|
$1,000 per security
|
Pricing date:
|
August 28, 2019
|
Original issue date:
|
September 3, 2019 (3 business days after the pricing date)
|
Maturity date:
|
September 3, 2024
|
Early redemption:
|
The securities are not subject to early redemption until six
months after the original issue date. Following this six-month non-call period, if, on any redemption determination date, beginning
on February 28, 2020, the determination closing price of each underlying stock is greater than or equal to its respective
call threshold level, the securities will be automatically redeemed for an early redemption payment on the related early redemption
date. No further payments will be made on the securities once they have been redeemed.
The securities will not be redeemed early on any early redemption
date if the determination closing price of any underlying stock is below its respective call threshold level on the related redemption
determination date.
|
Early redemption payment:
|
The early redemption payment will be an amount equal to (i) the stated principal amount for each security you hold plus (ii) the contingent quarterly coupon with respect to the related observation date.
|
Determination closing price:
|
With respect to each underlying stock, the closing price of such underlying stock on any redemption determination date or observation date (other than the final observation date), times the adjustment factor on such determination date or observation date, as applicable
|
Redemption determination dates:
|
Beginning after six months, quarterly, as set forth under “Observation Dates, Redemption Determination Dates, Coupon Payment Dates and Early Redemption Dates” below, subject to postponement for non-trading days and certain market disruption events
|
Early redemption dates:
|
Starting on March 4, 2020, 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.
|
Contingent quarterly coupon:
|
A contingent quarterly coupon at an annual rate of 11.00%
(corresponding to approximately $27.50 per quarter per security) will be paid on the securities on each coupon payment date but
only if the determination closing price of each underlying stock is at or above its respective downside threshold
level on the related observation date.
If, on any observation date, the determination closing price
of any underlying stock is less than its respective downside threshold level, no contingent quarterly coupon will be paid with
respect to that observation date. It is possible that one or more underlying stocks will remain below their respective downside
threshold levels for extended periods of time or even throughout the entire 5-year term of the securities so that you will receive
few or no contingent quarterly coupons.
|
Downside threshold level:
|
With respect to the MCD Stock, $130.842, which is equal to 60%
of its initial share price
With respect to the T Stock, $20.976, which is equal to 60% of
its initial share price
With respect to the JNJ Stock, $77.208, which is equal to 60%
of its initial share price
|
Call threshold level:
|
With respect to the MCD Stock, $218.07, which is equal to 100%
of its initial share price
With respect to the T Stock, $34.96, which is equal to 100% of
its initial share price
With respect to the JNJ Stock, $128.68, which is equal to 100%
of its initial share price
|
Payment at maturity:
|
If the securities are not redeemed prior to maturity, investors
will receive a payment at maturity determined as follows:
· If the final share price of each underlying stock is greater than or equal to its respective downside threshold level:
(i) the stated principal amount plus (ii) the contingent quarterly coupon with respect to the final observation date
· If the final share price of any underlying stock is less than its respective downside threshold level: (i) the stated
principal amount multiplied by (ii) the share performance factor of the worst performing underlying stock
Under these circumstances, the payment at maturity
will be significantly less than the stated principal amount of $1,000, and will represent a loss of more than 40%, and possibly
all, of your investment.
|
|
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:
|
$969.30 per security. See “Investment Summary” beginning on page 3.
|
Commissions and issue price:
|
Price to public
|
Agent’s commissions and fees(1)
|
Proceeds to us(2)
|
Per security
|
$1,000
|
$7.50
|
$992.50
|
Total
|
$1,200,000
|
$9,000
|
$1,191,000
|
|
(1)
|
Selected dealers and their financial advisors will
collectively receive from the agent, MS & Co., a fixed sales commission of $7.50 for each security they sell. See
“Supplemental information regarding plan of distribution; conflicts of interest.” For additional information,
see “Plan of Distribution (Conflicts of Interest)” in the accompanying product supplement.
|
|
(2)
|
See “Use of proceeds and hedging” on page 32.
|
The securities involve risks not associated
with an investment in ordinary debt securities. See “Risk Factors” beginning on page 12.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these securities, or determined if this document or the accompanying product supplement
and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The securities are not deposits or saving accounts and are
not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they obligations
of, or guaranteed by, a bank.
You should read this document together with the related product
supplement and prospectus, each of which can be accessed via the hyperlinks below. Please also see “Additional Terms of the
Securities” and “Additional Information About the Securities” at the end of this document.
As used in this document, “we,” “us”
and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Morgan Stanley Finance LLC
Contingent
Income Auto-Callable Securities due September 3, 2024, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the
Worst Performing of the Common Stock of McDonald’s Corporation, the Common Stock of AT&T Inc. and the Common Stock of
Johnson & Johnson
Principal at Risk Securities
Terms continued from previous page:
|
Initial share price:
|
With respect to the MCD Stock, $218.07, which is its closing
price on the pricing date
With respect to the T Stock, $34.96, which is its closing price
on the pricing date
With respect to the JNJ Stock, $128.68, which is its closing
price on the pricing date
|
Coupon payment dates:
|
Quarterly, as set forth under “Observation Dates, Redemption Determination Dates, Coupon Payment Dates and Early Redemption Dates” below. 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 shall 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, independently in the case of each underlying stock, to postponement for non-trading days and certain market disruption events. We also refer to August 28, 2024 as the final observation date.
|
Final share price:
|
With respect to each underlying stock, the closing price of such underlying stock on the final observation date times the adjustment factor on such date
|
Adjustment factor:
|
With respect to each underlying stock, 1.0, subject to adjustment in the event of certain corporate events affecting such underlying stock
|
Worst performing underlying stock:
|
The underlying stock with the largest percentage decrease from the respective initial share price to the respective final share price
|
Share performance factor:
|
Final share price divided by the initial share price
|
CUSIP / ISIN:
|
61769HRW7 / US61769HRW78
|
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 29, 2019*
|
December 4, 2019*
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February 28, 2020
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March 4, 2020
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May 28, 2020
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June 2, 2020
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August 28, 2020
|
September 2, 2020
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November 30, 2020
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December 3, 2020
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February 26, 2021
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March 3, 2021
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May 28, 2021
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June 3, 2021
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August 30, 2021
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September 2, 2021
|
November 29, 2021
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December 2, 2021
|
February 28, 2022
|
March 3, 2022
|
May 31, 2022
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June 3, 2022
|
August 29, 2022
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September 1, 2022
|
November 28, 2022
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December 1, 2022
|
February 28, 2023
|
March 3, 2023
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May 30, 2023
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June 2, 2023
|
August 28, 2023
|
August 31, 2023
|
November 28, 2023
|
December 1, 2023
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February 28, 2024
|
March 4, 2024
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May 28, 2024
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May 31, 2024
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August 28, 2024 (final observation date)
|
September 3, 2024 (maturity date)
|
* The securities are not subject to automatic early redemption
until the second coupon payment date, which is March 4, 2020.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 3, 2024, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of McDonald’s Corporation, the Common Stock of AT&T Inc. and the Common Stock of Johnson & Johnson
Principal at Risk Securities
Investment Summary
Contingent Income Auto-Callable Securities
Principal at Risk Securities
Contingent Income Auto-Callable Securities due September 3, 2024,
with 6-month Initial Non-Call Period All Payments on the Securities Based on the Worst Performing of the Common Stock of McDonald’s
Corporation, the Common Stock of AT&T Inc. and the Common Stock of Johnson & Johnson (the “securities”) do
not provide for the regular payment of interest. Instead, the securities will pay a contingent quarterly coupon at an annual rate
of 11.00% but only if the determination closing price of each underlying stock is at or above 60% of its respective
initial share price, which we refer to as the respective downside threshold level, on the related observation date. If the determination
closing price of any underlying stock is less than its downside threshold level on any observation date, we will pay no
coupon for the related quarterly period. It is possible that the determination closing price of one or more underlying stocks
will remain below their respective downside threshold levels for extended periods of time or even throughout the entire 5-year
term of the securities so that you will receive few or no contingent quarterly coupons during the entire term of the securities.
We refer to these coupons as contingent, because there is no guarantee that you will receive a coupon payment on any coupon payment
date. Even if all of the underlying stocks were to be at or above their respective downside threshold levels on some quarterly
observation dates, one or more underlying stocks may fluctuate below the respective downside threshold level(s) on others. In addition,
if the securities have not been automatically called prior to maturity and the final share price of any underlying stock
is less than its respective downside threshold level, investors will be exposed to the decline in the worst performing underlying
stock on a 1-to-1 basis, and will receive a payment at maturity that is less than 60% of 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 and also the risk of not receiving any contingent quarterly payments throughout the entire 5-year term of the
securities.
Maturity:
|
5 years
|
Contingent quarterly coupon:
|
A contingent quarterly coupon at an annual rate of 11.00%
(corresponding to approximately $27.50 per quarter per security) will be paid on the securities on each coupon payment date but
only if the determination closing price of each underlying stock is at or above its respective downside threshold level
on the related observation date.
If on any observation date, the determination closing price
of any underlying stock is less than its respective downside threshold level, we will pay no coupon for the applicable quarterly
period.
|
Automatic early redemption quarterly beginning after six months:
|
Starting after six months, if the determination closing price of each underlying stock is greater than or equal to their respective call threshold level on any quarterly redemption determination date, beginning on February 28, 2020 (approximately six months after the original issue date), the securities will be automatically redeemed for an early redemption payment equal to the stated principal amount plus the contingent quarterly coupon with respect to the related observation date.
|
Payment at maturity:
|
If the securities have not previously been redeemed and the final
share price of each underlying stock is greater than or equal to its respective downside threshold level, the payment
at maturity will be the sum of the stated principal amount and the related contingent quarterly coupon.
If the final share price of any underlying stock is less
than its downside threshold level, investors will receive a payment at maturity based on the decline in the worst performing underlying
stock over the term of the securities. Under these circumstances, the payment at maturity will be less than 60% of 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.
|
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 $969.30.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 3, 2024, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of McDonald’s Corporation, the Common Stock of AT&T Inc. and the Common Stock of Johnson & Johnson
Principal at Risk Securities
What goes into the estimated value on the pricing date?
In valuing the securities on the pricing date,
we take into account that the securities comprise both a debt component and a performance-based component linked to the underlying
stocks. The estimated value of the securities is determined using our own pricing and valuation models, market inputs and assumptions
relating to the underlying stocks, instruments based on the underlying stocks, volatility and other factors including current and
expected interest rates, as well as an interest rate related to our secondary market credit spread, which is the implied interest
rate at which our conventional fixed rate debt trades in the secondary market.
What determines the economic terms of the securities?
In determining the economic terms of the securities,
including the contingent quarterly coupon rate and the downside threshold levels, we use an internal funding rate, which is likely
to be lower than our secondary market credit spreads and therefore advantageous to us. If the issuing, selling, structuring and
hedging costs borne by you were lower or if the internal funding rate were higher, one or more terms of the securities would be
more favorable to you.
What is the relationship between the estimated value on the
pricing date and the secondary market price of the securities?
The price at which MS & Co. purchases the
securities in the secondary market, absent changes in market conditions, including those related to the underlying stocks, may
vary from, and be lower than, the estimated value on the pricing date, because the secondary market price takes into account our
secondary market credit spread as well as the bid-offer spread that MS & Co. would charge in a secondary market transaction
of this type and other factors. However, because the costs associated with issuing, selling, structuring and hedging the securities
are not fully deducted upon issuance, for a period of up to 6 months following the issue date, to the extent that MS & Co.
may buy or sell the securities in the secondary market, absent changes in market conditions, including those related to the underlying
stocks, and to our secondary market credit spreads, it would do so based on values higher than the estimated value. We expect that
those higher values will also be reflected in your brokerage account statements.
MS & Co. may, but is not obligated to,
make a market in the securities, and, if it once chooses to make a market, may cease doing so at any time.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 3, 2024, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of McDonald’s Corporation, the Common Stock of AT&T Inc. and the Common Stock of Johnson & Johnson
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 determination closing price of each underlying
stock is at or above its respective downside threshold level on the related observation date. The securities have been
designed for investors who are willing to forgo market floating interest rates and risk the loss of principal and accept the risk
of receiving few or no coupon payments for the entire 5-year term of the securities in exchange for an opportunity to earn interest
at a potentially above-market rate if all of the underlying stocks close at or above their respective downside threshold levels
on each quarterly observation date, unless the securities are redeemed early. The following scenarios are for illustration purposes
only to demonstrate how the coupon and the payment at maturity (if the securities have not previously been redeemed) are calculated,
and do not attempt to demonstrate every situation that may occur. Accordingly, the securities may or may not be redeemed, the contingent
coupon may be payable in none of, or some but not all of, the quarterly periods during the 5-year term of the securities, and the
payment at maturity may be less than 60% of the stated principal amount of the securities and may be zero.
Scenario 1: The securities are redeemed prior to maturity
|
This scenario assumes that, prior to early redemption, all of
the underlying stocks close at or above their respective downside threshold levels on some quarterly observation dates, but one
or more underlying stocks close below the respective downside threshold level(s) on the others. Investors receive the contingent
quarterly coupon for the quarterly periods for which the determination closing prices of all of the underlying stocks are at or
above their respective downside threshold levels on the related observation date, but not for the quarterly periods for which the
determination closing prices of one or more underlying stocks are below the respective downside threshold level(s) on the related
observation date.
Starting on February 28, 2020, when all of the underlying stocks
close at or above their respective call threshold levels 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 all of the underlying stocks close at or above their respective downside threshold levels on some quarterly observation dates, but one or more underlying stocks close below the respective downside threshold level(s) on the others, and at least one of the underlying stocks closes below its call threshold level on every quarterly redemption determination date. Consequently, the securities are not redeemed early, and investors receive the contingent quarterly coupon for the quarterly periods for which the determination closing prices of all of the underlying stocks are at or above their respective downside threshold levels on the related observation date, but not for the quarterly periods for which the determination closing prices of one or more underlying stocks are below the respective downside threshold level(s) on the related observation date. On the final observation date, all of the underlying stocks close at or above their respective downside threshold levels. At maturity, in addition to the contingent quarterly coupon with respect to the final observation date, investors will receive the stated principal amount.
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 3, 2024, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of McDonald’s Corporation, the Common Stock of AT&T Inc. and the Common Stock of Johnson & Johnson
Principal at Risk Securities
Scenario 3: The securities are not redeemed prior to maturity, and investors suffer a substantial loss of principal at maturity
|
This scenario assumes that all of the underlying stocks close at or above their respective downside threshold levels on some quarterly observation dates, but one or more underlying stocks close below the respective downside threshold level(s) on the others, and at least one of the underlying stocks closes below its call threshold level on every quarterly redemption determination date. Consequently, the securities are not redeemed early, and investors receive the contingent quarterly coupon for the quarterly periods for which the determination closing prices of all of the underlying stocks are greater than or equal to their respective downside threshold levels on the related observation date, but not for the quarterly periods for which the determination closing prices of one or more underlying stocks are below the respective downside threshold level(s) on the related observation date. On the final observation date, one or more underlying stocks close below the respective downside threshold level(s). At maturity, investors will receive an amount equal to the stated principal amount multiplied by the share performance factor of the worst performing underlying stock. Under these circumstances, the payment at maturity will be less than 60% of the stated principal amount and could be zero. No coupon will be paid at maturity in this scenario.
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 3, 2024, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of McDonald’s Corporation, the Common Stock of AT&T Inc. and the Common Stock of Johnson & Johnson
Principal at Risk Securities
How the Securities Work
The following diagrams illustrate the potential outcomes for
the securities depending on (1) the determination closing prices on each quarterly observation date, (2) the determination closing
prices on each quarterly redemption determination date and (3) the final share prices. Please see “Hypothetical Examples”
below for an illustration of hypothetical payouts on the securities.
Diagram #1: Contingent Quarterly Coupons
(Beginning on the First Coupon Payment Date until Early Redemption or Maturity)
Diagram #2: Automatic Early Redemption (Beginning
After Six Months)
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 3, 2024, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of McDonald’s Corporation, the Common Stock of AT&T Inc. and the Common Stock of Johnson & Johnson
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” below.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 3, 2024, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of McDonald’s Corporation, the Common Stock of AT&T Inc. and the Common Stock of Johnson & Johnson
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, assuming the securities are not redeemed prior to maturity. The following examples are for illustrative purposes only.
Whether you receive a contingent quarterly coupon will be determined by reference to the determination closing price of each underlying
stock on each quarterly observation date, and the amount you will receive at maturity, if any, will be determined by reference
to the final share price of each underlying stock on the final observation date. The actual initial share price, call threshold
level and downside threshold level for each underlying stock are set forth on the cover of this document. All payments on the securities,
if any, are subject to our credit risk. The below examples are based on the following terms:
Contingent Quarterly Coupon:
|
11.00% per annum (corresponding to approximately $27.50 per quarter
per security)1
With respect to each coupon payment date, a contingent quarterly
coupon is paid but only if the determination closing price of each underlying stock is at or above its respective downside threshold
level on the related observation date.
|
Payment at Maturity (if the securities are not redeemed prior to maturity):
|
If the final share price of each underlying stock is greater
than or equal to its respective downside threshold level: the stated principal amount and the contingent quarterly coupon with
respect to the final observation date
If the final share price of any underlying stock is less
than its respective downside threshold level: (i) the stated principal amount multiplied by (ii) the share performance
factor of the worst performing underlying stock
|
Stated Principal Amount:
|
$1,000
|
Hypothetical Initial Share Price:
|
With respect to the MCD Stock: $200.00
With respect to the T Stock: $35.00
With respect to the JNJ Stock: $130.00
|
Hypothetical Call Threshold Level:
|
With respect to the MCD Stock: $200.00, which is 100% of its
hypothetical initial share price
With respect to the T Stock: $35.00, which is 100% of its hypothetical
initial share price
With respect to the JNJ Stock: $130.00, which is 100% of its
hypothetical initial share price
|
Hypothetical Downside Threshold Level:
|
With respect to the MCD Stock: $120.00, which is 60% of its hypothetical
initial share price
With respect to the T Stock: $21.00, which is 60% of its hypothetical
initial share price
With respect to the JNJ Stock: $78.00, which is 60% of its hypothetical
initial share price
|
1 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 day-count basis. The hypothetical contingent quarterly coupon of $27.50 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:
|
Determination Closing Price
|
Hypothetical Contingent Quarterly Coupon
|
|
MCD Stock
|
T Stock
|
JNJ Stock
|
|
Hypothetical Observation Date 1
|
$250.00 (at or above its downside threshold level)
|
$50.00 (at or above its downside threshold level)
|
$140.00 (at or above its downside threshold level)
|
$27.50
|
Hypothetical Observation Date 2
|
$110.00 (below its downside threshold level)
|
$34.00 (at or above its downside threshold level)
|
$150.00 (at or above its downside threshold level)
|
$0
|
Hypothetical Observation Date 3
|
$220.00 (at or above its downside threshold level)
|
$20.00 (below its downside threshold level)
|
$55.00 (below its downside threshold level)
|
$0
|
Hypothetical Observation Date 4
|
$85.00 (below its downside threshold level)
|
$15.00 (below its downside threshold level)
|
$45.00 (below its downside threshold level)
|
$0
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 3, 2024, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of McDonald’s Corporation, the Common Stock of AT&T Inc. and the Common Stock of Johnson & Johnson
Principal at Risk Securities
On hypothetical observation date 1, each of the underlying stocks
closes at or above its respective downside threshold level. Therefore, a contingent quarterly coupon of $27.50 is paid on the relevant
coupon payment date.
On each of hypothetical observation dates 2 and 3, at least one
underlying stock closes at or above its downside threshold level, but one or more of the other underlying stocks close below their
respective downside threshold level(s). Therefore, no contingent quarterly coupon is paid on the relevant coupon payment date.
On hypothetical observation date 4, each of the underlying stocks
closes below its respective downside threshold level, and accordingly no contingent quarterly coupon is paid on the relevant coupon
payment date.
You will not receive a contingent quarterly coupon on any
coupon payment date if the determination closing price of any underlying stock is below its respective downside threshold level
on the related observation date.
How to calculate the payment at maturity:
In the following examples, one or more underlying stocks close
below the respective call threshold level(s) on each redemption determination date, and, consequently, the securities are not automatically
redeemed prior to, and remain outstanding until, maturity.
|
Final Share Price
|
Payment at Maturity
|
|
MCD Stock
|
T Stock
|
JNJ Stock
|
|
Example 1:
|
$215.00 (at or above its downside threshold level)
|
$58.00 (at or above its downside threshold level)
|
$180.00 (at or above its downside threshold level)
|
$1,027.50 (the stated principal amount plus the contingent quarterly coupon with respect to the final observation date)
|
Example 2:
|
$80.00 (below its downside threshold level)
|
$40.00 (at or above its initial share price)
|
$180.00 (at or above its initial share price)
|
$1,000 x share performance factor of the worst performing underlying stock = $1,000 x ($80.00 / $200.00) = $400.00
|
Example 3:
|
$220.00 (at or above its downside threshold level)
|
$65.00 (at or above its downside threshold level)
|
$39.00 (below its downside threshold level)
|
$1,000 x ($39.00 / $130.00) = $300.00
|
Example 4:
|
$60.00 (below its downside threshold level)
|
$14.00 (below its downside threshold level)
|
$52.00 (below its downside threshold level)
|
$1,000 x ($60.00 / $200.00) = $300.00
|
Example 5:
|
$80.00 (below its downside threshold level)
|
$10.50 (below its downside threshold level)
|
$26.00 (below its downside threshold level)
|
$1,000 x ($26.00 / $130.00) = $200.00
|
In example 1, the final share prices of each of the MCD Stock,
the T Stock and the JNJ Stock are at or above their respective downside threshold levels. Therefore, investors receive at maturity
the stated principal amount of the securities and the contingent quarterly coupon with respect to the final observation date. Investors
do not participate in the appreciation of any of the underlying stocks.
In example 2, the final share prices of two underlying stocks
are above their respective initial share prices, but the final share price of the other underlying stock is below its downside
threshold level. Therefore, investors are exposed to the downside performance of the worst performing underlying stock at maturity
and receive an amount equal to the stated principal amount times the share performance factor of the worst performing underlying
stock.
In example 3, the final share prices of two underlying stocks
are at or above their respective downside threshold levels, but the final share price of the other underlying stock is below its
downside threshold level. Therefore, investors are exposed to the downside performance of the worst performing underlying stock
at maturity and receive at maturity an amount equal to the stated principal amount times the share performance factor of the worst
performing underlying stock.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 3, 2024, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of McDonald’s Corporation, the Common Stock of AT&T Inc. and the Common Stock of Johnson & Johnson
Principal at Risk Securities
In examples 4 and 5, the final share prices of all of the underlying
stocks are below their respective downside threshold levels, and investors receive at maturity an amount equal to the stated principal
amount times the share performance factor of the worst performing underlying stock. In example 4, the MCD Stock has declined
70% from its initial share price to its final share price, the T Stock has declined 60% from its initial share price to its final
share price and the JNJ Stock has declined 60% from its initial share price to its final share price. Therefore, the payment at
maturity equals the stated principal amount times the share performance factor of the MCD Stock, which represents the worst
performing underlying stock in this example. In example 5, the MCD Stock has declined 60% from its initial share price to its final
share price, the T Stock has declined 70% from its initial share price to its final share price and the JNJ Stock has declined
80% from its initial share price to its final share price. Therefore the payment at maturity equals the stated principal amount
times the share performance factor of the JNJ Stock, which represents the worst performing underlying stock in this example.
If the final share price of ANY underlying stock is below
its respective downside threshold level, you will be exposed to the downside performance of the worst performing underlying stock
at maturity, and your payment at maturity will be less than 60% of the stated principal amount per security and could be zero.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 3, 2024, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of McDonald’s Corporation, the Common Stock of AT&T Inc. and the Common Stock of Johnson & Johnson
Principal at Risk Securities
Risk Factors
The
following is a list of certain key risk factors for investors in the securities. For further discussion of these and other risks,
you should read the section entitled “Risk Factors” in the accompanying product supplement and prospectus. You should
also consult with your investment, legal, tax, accounting and other advisers in connection with your investment in
the securities.
|
§
|
The securities do not guarantee the return of any principal. The
terms of the securities differ from those of ordinary debt securities in that they do not guarantee the return of any of the principal
amount at maturity. If the securities have not been automatically redeemed prior to maturity and if the final share price of any
underlying stock is less than its downside threshold level of 60% of its initial share price, you will be exposed to the decline
in the closing price of the worst performing underlying stock, as compared to its initial share price, on a 1-to-1 basis, and you
will receive for each security that you hold at maturity an amount equal to the stated principal amount times the share
performance factor of the worst performing underlying stock. In this case, the payment at maturity will be less than 60% of the
stated principal amount and could be zero. You could lose up to your entire investment in the securities.
|
|
§
|
The securities do not provide for the regular payment of interest
and may pay no interest over the entire term of the securities. The terms of the securities differ from those of ordinary
debt securities in that they do not provide for the regular payment of interest. Instead, the securities will pay a contingent
quarterly coupon but only if the determination closing price of each underlying stock is at or above 60% of
its respective initial share price, which we refer to as the respective downside threshold level, on the related observation date.
If, on the other hand, the determination closing price of any underlying stock is lower than its downside threshold level
on the relevant observation date for any interest period, we will pay no coupon on the applicable coupon payment date. It is possible
that the determination closing price(s) of one or more underlying stocks could remain below the respective downside threshold level(s)
for extended periods of time or even throughout the entire 5-year term of the securities so that you will receive few or no contingent
quarterly coupons. If you do not earn sufficient contingent coupons over the term of the securities, the overall return on the
securities may be less than the amount that would be paid on a conventional debt security of ours of comparable maturity.
|
|
§
|
You are exposed to the price risk of all of the underlying stocks,
with respect to both the contingent 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 underlying stocks. Rather, it will be contingent upon the
independent performance of each underlying stock. Unlike an instrument with a return linked to a basket of underlying assets, in
which risk is mitigated and diversified among all the components of the basket, you will be exposed to the risks related to each
of the underlying stocks. Poor performance by any underlying stock over the term
of the securities may negatively affect your return and will not be offset or mitigated by any positive performance by the other
underlying stocks. To receive any contingent quarterly coupons, all
of the underlying stocks must close at or above their respective downside threshold levels on
the applicable observation date. In addition, if any underlying stock has declined
to below its respective downside threshold level as of the final observation date, you will be fully exposed to
the decline in the worst performing underlying stock over the term of the securities on a 1-to-1 basis, even if the other underlying
stock has appreciated. Under this scenario, the value of any such payment will be less than 60% of the stated principal amount
and could be zero. Accordingly, your investment is subject to the price risk of all of the underlying stocks.
|
|
§
|
The contingent coupon, if any, is based only on the determination closing prices of the underlying stocks on the related
quarterly observation date at the end of the related interest period.
Whether the contingent coupon will be paid on any coupon payment date will be determined at the end of the relevant interest period
based on the determination closing price of each underlying stock on the relevant quarterly observation date. As a result, you
will not know whether you will receive the contingent coupon on any coupon payment date until near the end of the relevant interest
period. Moreover, because the contingent coupon is based solely on the price of each underlying stock on quarterly observation
dates, if the determination closing price of any underlying stock on any observation date is below the respective downside threshold
level, you will receive no coupon for the related interest period, even if the price(s) of one or more of the underlying stocks
were higher on other days during that interest period.
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 3, 2024, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of McDonald’s Corporation, the Common Stock of AT&T Inc. and the Common Stock of Johnson & Johnson
Principal at Risk Securities
|
§
|
Investors will not participate in any appreciation in the price of any underlying stock. Investors will not participate
in any appreciation in the price of any underlying stock from its initial share price, and the return on the securities will be
limited to the contingent quarterly coupon, if any, that is paid with respect to each observation date on which all determination
closing prices are greater than or equal to their respective downside threshold levels, if any.
|
|
§
|
The market price will be influenced by many unpredictable factors.
Several factors, many of which are beyond our control, will influence the value of the securities
in the secondary market and the price at which MS & Co. may be willing to purchase or sell the securities in the secondary
market. We expect that generally the level of interest rates available in the market and the prices of the underlying
stocks on any day, including in relation to the respective
downside threshold levels, will affect the value of the securities more than any other factors. Other factors that may influence
the value of the securities include:
|
|
o
|
the trading price and volatility (frequency and magnitude of changes in value) of the underlying stocks,
|
|
o
|
whether the determination closing price of any underlying stock has been below its respective downside threshold level on any
observation date,
|
|
o
|
dividend rates on the underlying stocks,
|
|
o
|
geopolitical conditions and economic, financial, political, regulatory or judicial events that affect the underlying stocks
and which may affect the prices of the underlying stocks,
|
|
o
|
the time remaining until the securities mature,
|
|
o
|
interest and yield rates in the market,
|
|
o
|
the availability of comparable instruments,
|
|
o
|
the occurrence of certain events affecting the underlying stock that may or may not require an adjustment to the adjustment
factor, and
|
|
o
|
any actual or anticipated changes in our credit ratings or credit spreads.
|
Generally,
the longer the time remaining to maturity, the more the market price of the securities will be affected by the other factors described
above. Some or all of these factors will influence
the price that you will receive if you sell your securities prior to maturity. For example, you may have to sell your securities
at a substantial discount from the stated principal amount of $1,000 per security if the price of any underlying stock at the time
of sale is near or below its downside threshold level or if market interest rates rise.
The
prices of the underlying stocks may be, and have recently been, volatile, and we can give you no assurance that the volatility
will lessen. The prices of the underlying stocks may decrease and be below the respective downside threshold level(s) on
each observation date so that you will receive no return on your investment and receive a payment at maturity that is less than
60% of the stated principal amount. There can be no assurance that the determination closing prices of all of the underlying stocks
will be at or above their respective downside threshold levels on any observation date so that you will receive a coupon payment
on the securities for the applicable interest period, or, with respect to the final observation date, so that you do no suffer
a significant loss on your initial investment in the securities. See
“McDonald’s Corporation Overview,” “AT&T Inc. Overview” and “Johnson & Johnson Overview”.
|
§
|
The securities are subject to our credit risk, and any actual or anticipated changes to our credit ratings or credit spreads
may adversely affect the market value of the securities. You are dependent on our ability to pay all amounts due on the securities
on each coupon payment date, upon automatic redemption and at maturity and therefore you are subject to our credit risk. The securities
are not guaranteed by any other entity. If we default on our obligations under the securities, your investment would be at risk
and you could lose some or all of your investment. As a result, 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
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 3, 2024, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of McDonald’s Corporation, the Common Stock of AT&T Inc. and the Common Stock of Johnson & Johnson
Principal at Risk Securities
will have no independent assets
available for distributions to holders of MSFL securities if they make claims in respect of such securities in a bankruptcy, resolution
or similar proceeding. Accordingly, any recoveries by such holders will be limited to those available under the related guarantee
by Morgan Stanley and that guarantee will rank pari passu with all other unsecured, unsubordinated obligations of Morgan
Stanley. Holders will have recourse only to a single claim against Morgan Stanley and its assets under the guarantee. Holders of
securities issued by MSFL should accordingly assume that in any such proceedings they would not have any priority over and should
be treated pari passu with the claims of other unsecured, unsubordinated creditors of Morgan Stanley, including holders
of Morgan Stanley-issued securities.
|
§
|
Reinvestment risk. The term
of your investment in the securities may be shortened due to the automatic early redemption feature of the securities. If the securities
are redeemed prior to maturity, you will receive no more contingent 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 six months of the term of the securities.
|
|
§
|
Investing in the securities is not equivalent to investing in the
common stock of McDonald’s Corporation, the common stock of AT&T Inc. or the common stock of Johnson & Johnson.
Investors in the securities will not participate in any appreciation in the underlying stocks,
and will not have voting rights or rights to receive dividends or other distributions or any other rights with respect to the underlying
stocks. As a result, any return on the securities will not reflect the return you would realize if you actually owned shares of
the underlying stocks and received the dividends paid or distributions made on them.
|
|
§
|
No affiliation with McDonald’s Corporation, AT&T Inc. or Johnson & Johnson. McDonald’s Corporation,
AT&T Inc. and Johnson & Johnson are not affiliates of ours, are not involved with this offering in any way, and have no
obligation to consider your interests in taking any corporate actions that might affect the value of the securities. We have not
made any due diligence inquiry with respect to McDonald’s Corporation, AT&T Inc. or Johnson & Johnson in connection
with this offering.
|
|
§
|
We may engage in business with or involving McDonald’s Corporation, AT&T Inc. or Johnson & Johnson without
regard to your interests. We or our affiliates may presently or from time to time engage in business with McDonald’s
Corporation, AT&T Inc. or Johnson & Johnson without regard to your interests and thus may acquire non-public information
about McDonald’s Corporation, AT&T Inc. or Johnson & Johnson. Neither we nor any of our affiliates undertakes to
disclose any such information to you. In addition, we or our affiliates from time to time have published and in the future may
publish research reports with respect to McDonald’s Corporation, AT&T Inc. or Johnson & Johnson, which may or may
not recommend that investors buy or hold the underlying stock(s).
|
|
§
|
The antidilution adjustments the calculation agent is required to make do not cover every corporate event that could affect
the underlying stocks. MS & Co., as calculation agent, will adjust the adjustment factors for certain corporate events
affecting the underlying stocks, such as stock splits, stock dividends and extraordinary dividends,
and certain other corporate actions involving the issuers of the underlying stocks, such as mergers. However, the calculation agent
will not make an adjustment for every corporate event that can affect the underlying stocks. For example, the calculation agent
is not required to make any adjustments if the issuers of the underlying stocks or anyone else makes a partial tender or partial
exchange offer for the underlying stocks, nor will adjustments be made following the final observation date. In addition, no adjustments
will be made for regular cash dividends, which are expected to reduce the price of the underlying stocks by the amount of such
dividends. If an event occurs that does not require the calculation agent to adjust an adjustment factor, such as a regular cash
dividend, the market price of the securities and your return on the securities may be materially and adversely affected. For example,
if the record date for a regular cash dividend were to occur on or shortly before an observation date, this may decrease the determination
closing price of an underlying stock to be less than the respective downside threshold level (resulting in no contingent quarterly
coupon being paid with respect to such date) or the final share price to be less than the respective downside threshold level (resulting
in a loss of a significant portion of all of your investment in the securities), materially and adversely affecting your return.
|
|
§
|
The securities will not be listed on any securities exchange and secondary trading may be limited,
and accordingly, you should be willing to hold your securities for the entire 5-year term of the securities. The
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 3, 2024, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of McDonald’s Corporation, the Common Stock of AT&T Inc. and the Common Stock of Johnson & Johnson
Principal at Risk Securities
securities will not be listed on
any securities exchange. Therefore, there may be little or no secondary market for the securities. MS & Co. may, but is not
obligated to, make a market in the securities and, if it once chooses to make a market, may cease doing so at any time. When it
does make a market, it will generally do so for transactions of routine secondary market size at prices based on its estimate of
the current value of the securities, taking into account its bid/offer spread, our credit spreads, market volatility, the notional
size of the proposed sale, the cost of unwinding any related hedging positions, the time remaining to maturity and the likelihood
that it will be able to resell the securities. Even if there is a secondary market, it may not provide enough liquidity to allow
you to trade or sell the securities easily. Since other broker-dealers may not participate significantly in the secondary market
for the securities, the price at which you may be able to trade your securities is likely to depend on the price, if any, at which
MS & Co. is willing to transact. If, at any time, MS & Co. were to cease making a market in the securities, it is likely
that there would be no secondary market for the securities. Accordingly, you should be willing to hold your securities to maturity.
|
§
|
The rate we are willing to pay for securities of this type, maturity and issuance size is likely to be lower than the rate
implied by our secondary market credit spreads and advantageous to us. Both the lower rate and the inclusion of costs associated
with issuing, selling, structuring and hedging the securities in the original issue price reduce the economic terms of the securities,
cause the estimated value of the securities to be less than the original issue price and will adversely affect secondary market
prices. Assuming no change in market conditions or any other relevant factors, the prices, if any, at which dealers, including
MS & Co., may be willing to purchase the securities in secondary market transactions will likely be significantly lower than
the original issue price, because secondary market prices will exclude the issuing, selling, structuring and hedging-related costs
that are included in the original issue price and borne by you and because the secondary market prices will reflect our secondary
market credit spreads and the bid-offer spread that any dealer would charge in a secondary market transaction of this type as well
as other factors.
|
The inclusion of the costs of issuing,
selling, structuring and hedging the securities in the original issue price and the lower rate we are willing to pay as issuer
make the economic terms of the securities less favorable to you than they otherwise would be.
However, because the costs associated
with issuing, selling, structuring and hedging the securities are not fully deducted upon issuance, for a period of up to 6 months
following the issue date, to the extent that MS & Co. may buy or sell the securities in the secondary market, absent changes
in market conditions, including those related to the underlying stocks, and to our secondary market credit spreads, it would do
so based on values higher than the estimated value, and we expect that those higher values will also be reflected in your brokerage
account statements.
|
§
|
The estimated value of the securities is determined by reference to our pricing and valuation models, which may differ from
those of other dealers and is not a maximum or minimum secondary market price. These pricing and valuation models are proprietary
and rely in part on subjective views of certain market inputs and certain assumptions about future events, which may prove to be
incorrect. As a result, because there is no market-standard way to value these types of securities, our models may yield a higher
estimated value of the securities than those generated by others, including other dealers in the market, if they attempted to value
the securities. In addition, the estimated value on the pricing date does not represent a minimum or maximum price at which dealers,
including MS & Co., would be willing to purchase your securities in the secondary market (if any exists) at any time. The value
of your securities at any time after the date of this document will vary based on many factors that cannot be predicted with accuracy,
including our creditworthiness and changes in market conditions. See also “The market price will be influenced by many unpredictable
factors” above.
|
|
§
|
Hedging and trading activity by our affiliates could potentially affect the value of the securities. One or more of
our affiliates and/or third-party dealers have carried out, and will continue to carry out, hedging activities related to the securities
(and to other instruments linked to the underlying stocks), including trading in the underlying stocks. Some of our affiliates
also trade the underlying stocks and other financial instruments related to the underlying stocks on a regular basis as part of
their general broker-dealer and other businesses. As a result, these entities may be unwinding or adjusting hedge positions during
the term of the securities, and the hedging strategy may involve greater and more frequent dynamic adjustments to the hedge as
the final observation date approaches. Any of these hedging or trading activities on or prior to the pricing date could have increased
the initial share price of an underlying stock, and,
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 3, 2024, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of McDonald’s Corporation, the Common Stock of AT&T Inc. and the Common Stock of Johnson & Johnson
Principal at Risk Securities
therefore, could have increased
(i) the value at or above which such underlying stock must close on the redemption determination dates so that the securities are
redeemed prior to maturity for the early redemption payment (depending also on the performance of the other underlying stocks)
and (ii) the downside threshold level for such underlying stock, which is the value at or above which the underlying stock must
close on the observation dates so that you receive a contingent quarterly coupon on the securities (depending also on the performance
of the other underlying stocks), and, with respect to the final observation date, so that you are not exposed to the negative performance
of the worst performing underlying stock at maturity (depending also on the performance of the other underlying stocks). Additionally,
such hedging or trading activities during the term of the securities could potentially affect the value of any underlying stock
on the redemption determination dates and the observation dates, and, accordingly, whether we redeem the securities prior to maturity,
whether we pay a contingent quarterly coupon on the securities and the amount of cash you will receive at maturity, if any (depending
also on the performance of the other underlying stocks).
|
§
|
The calculation agent, which is a subsidiary of Morgan Stanley and an affiliate of MSFL, will make determinations with respect
to the securities. As calculation agent, MS & Co. has determined the initial share prices, the call threshold levels and
the downside threshold levels and will determine the final share prices, the payment at maturity, if any, whether you receive a
contingent quarterly coupon on each coupon payment date and/or at maturity, whether the securities will be redeemed on any early
redemption date, whether a market disruption event has occurred and whether to make any adjustments to the adjustment factors.
Moreover, certain determinations made by MS & Co., in its capacity as calculation agent, may require it to exercise discretion
and make subjective judgments, such as with respect to the occurrence or non-occurrence of market disruption events and certain
adjustments to the adjustment factors. These potentially subjective determinations may affect the payout to you upon an automatic
early redemption or at maturity, if any. For further information regarding these types of determinations, see “Description
of Auto-Callable Securities—Auto-Callable Securities Linked to Underlying Shares” and “—Calculation Agent
and Calculations” and related definitions in the accompanying product supplement. In addition, MS & Co. has determined
the estimated value of the securities on the pricing date.
|
|
§
|
The U.S. federal income tax consequences of an investment in the securities are uncertain. There is no direct legal
authority as to the proper treatment of the securities for U.S. federal income tax purposes, and, therefore, significant aspects
of the tax treatment of the securities are uncertain.
|
Please read the discussion under
“Additional Information—Tax considerations” in this document concerning the U.S. federal income tax consequences
of an investment in the securities. We intend to treat a security for U.S. federal income tax purposes as a single financial contract
that provides for a coupon that will be treated as gross income to you at the time received or accrued, in accordance with your
regular method of tax accounting. Under this treatment, the ordinary income treatment of the coupon payments, in conjunction with
the capital loss treatment of any loss recognized upon the sale, exchange or settlement of the securities, could result in adverse
tax consequences to holders of the securities because the deductibility of capital losses is subject to limitations. We do not
plan to request a ruling from the Internal Revenue Service (the “IRS”) regarding the tax treatment of the securities,
and the IRS or a court may not agree with the tax treatment described herein. If the IRS were successful in asserting an alternative
treatment for the securities, the timing and character of income or loss on the securities might differ significantly from the
tax treatment described herein. For example, under one possible treatment, the IRS could seek to recharacterize the securities
as debt instruments. In that event, U.S. Holders (as defined below) would be required to accrue into income original issue 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.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 3, 2024, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of McDonald’s Corporation, the Common Stock of AT&T Inc. and the Common Stock of Johnson & Johnson
Principal at Risk Securities
In 2007, the U.S. Treasury Department
and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts”
and similar instruments. While it is not clear whether the securities would be viewed as similar to the prepaid forward contracts
described in the notice, it is possible that any Treasury regulations or other guidance promulgated after consideration of these
issues could materially and adversely affect the tax consequences of an investment in the securities, possibly with retroactive
effect. The notice focuses on a number of issues, the most relevant of which for holders of the securities are the character and
timing of income or loss and the degree, if any, to which income realized by non-U.S. investors should be subject to withholding
tax. Both U.S. and Non-U.S. Holders should consult their tax advisers regarding the U.S. federal income tax consequences of an
investment in the securities, including possible alternative treatments, the issues presented by this notice and any tax consequences
arising under the laws of any state, local or non-U.S. taxing jurisdiction.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 3, 2024, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of McDonald’s Corporation, the Common Stock of AT&T Inc. and the Common Stock of Johnson & Johnson
Principal at Risk Securities
McDonald’s Corporation Overview
McDonald’s Corporation operates and franchises McDonald’s
restaurants, which serve a locally relevant menu of food and beverages in more than 100 countries. The MCD Stock is registered
under the Exchange Act. Information provided to or filed with the Securities and Exchange Commission by McDonald’s Corporation
pursuant to the Exchange Act can be located by reference to the Securities and Exchange Commission file number 001-05231 through
the Securities and Exchange Commission’s website at .www.sec.gov. In addition, information regarding McDonald’s Corporation
may be obtained from other sources including, but not limited to, press releases, newspaper articles and other publicly disseminated
documents. Neither the issuer nor the agent makes any representation that such publicly available documents or any other publicly
available information regarding the issuer of the MCD Stock is accurate or complete.
Information as of market close on August 28, 2019:
Bloomberg Ticker Symbol:
|
MCD
|
Exchange:
|
NYSE
|
Current Stock Price:
|
$218.07
|
52 Weeks Ago:
|
$161.64
|
52 Week High (on 8/9/2019):
|
$221.15
|
52 Week Low (on 9/18/2018):
|
$157.77
|
Current Dividend Yield:
|
2.13%
|
The following table sets forth the published
high and low closing prices of, as well as dividends on, the MCD Stock for each quarter from January 1, 2016 through August 28,
2019. The closing price of the MCD Stock on August 28, 2019 was $218.07. The associated graph shows the closing prices of the MCD
Stock for each day from January 1, 2014 through August 28, 2019. We obtained the information in the table and graph below from
Bloomberg Financial Markets, without independent verification. The historical performance of the MCD Stock should not be taken
as an indication of its future performance, and no assurance can be given as to the price of the MCD Stock at any time, including
on the redemption determination dates or the observation dates.
Common Stock of McDonald’s Corporation (CUSIP 580135101)
|
High ($)
|
Low ($)
|
Dividends ($)
|
2016
|
|
|
|
First Quarter
|
125.83
|
115.12
|
0.89
|
Second Quarter
|
131.60
|
116.30
|
0.89
|
Third Quarter
|
128.26
|
114.44
|
0.89
|
Fourth Quarter
|
123.72
|
110.57
|
0.94
|
2017
|
|
|
|
First Quarter
|
129.61
|
119.48
|
0.94
|
Second Quarter
|
154.80
|
129.29
|
0.94
|
Third Quarter
|
161.53
|
151.85
|
0.94
|
Fourth Quarter
|
174.20
|
156.86
|
1.01
|
2018
|
|
|
|
First Quarter
|
178.36
|
148.27
|
1.01
|
Second Quarter
|
169.48
|
155.94
|
1.01
|
Third Quarter
|
167.29
|
155.41
|
1.01
|
Fourth Quarter
|
189.26
|
162.97
|
1.16
|
2019
|
|
|
|
First Quarter
|
189.90
|
173.97
|
1.16
|
Second Quarter
|
207.66
|
188.35
|
1.16
|
Third Quarter (through August 28, 2019)
|
221.15
|
206.30
|
1.16
|
We make no representation as to the amount of dividends, if any,
that McDonald’s Corporation may pay in the future. In any event, as an investor in the Contingent Income Auto-Callable Securities,
you will not be entitled to receive dividends, if any, that may be payable on the common stock of McDonald’s Corporation.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 3, 2024, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of McDonald’s Corporation, the Common Stock of AT&T Inc. and the Common Stock of Johnson & Johnson
Principal at Risk Securities
Common Stock of McDonald’s Corporation – Daily Closing Prices
January 1, 2014 to August 28, 2019
|
|
* The red solid line indicates the downside threshold level of
$130.842, which is 60% of the initial share price.
This document relates only to the securities
referenced hereby and does not relate to the MCD Stock or other securities of McDonald’s Corporation. We have derived all
disclosures contained in this document regarding McDonald’s Corporation stock from the publicly available documents described
above. In connection with the offering of the securities, neither we nor the agent has participated in the preparation of such
documents or made any due diligence inquiry with respect to McDonald’s Corporation. Neither we nor the agent makes any representation
that such publicly available documents or any other publicly available information regarding McDonald’s Corporation is accurate
or complete. Furthermore, we cannot give any assurance that all events occurring prior to the date hereof (including events that
would affect the accuracy or completeness of the publicly available documents described above) that would affect the trading price
of the MCD Stock (and therefore the price of the MCD Stock at the time we priced the securities) have been publicly disclosed.
Subsequent disclosure of any such events or the disclosure of or failure to disclose material future events concerning McDonald’s
Corporation could affect the value received with respect to the securities and therefore the value of the securities.
Neither the issuer nor any of its affiliates
makes any representation to you as to the performance of the MCD Stock.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 3, 2024, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of McDonald’s Corporation, the Common Stock of AT&T Inc. and the Common Stock of Johnson & Johnson
Principal at Risk Securities
AT&T Inc. Overview
AT&T Inc. is a provider of telecommunications, media and
technology services globally. The T Stock is registered under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). Information provided to or filed with the Securities and Exchange Commission by AT&T Inc. pursuant to the Exchange
Act can be located by reference to the Securities and Exchange Commission file number 001-08610 through the Securities and Exchange
Commission’s website at .www.sec.gov. In addition, information regarding AT&T Inc. may be obtained from other sources
including, but not limited to, press releases, newspaper articles and other publicly disseminated documents. Neither the issuer
nor the agent makes any representation that such publicly available documents or any other publicly available information regarding
the issuer of the T Stock is accurate or complete.
Information as of market close on August 28, 2019:
Bloomberg Ticker Symbol:
|
T
|
Exchange:
|
NYSE
|
Current Stock Price:
|
$34.96
|
52 Weeks Ago:
|
$32.67
|
52 Week High (on 8/22/2019):
|
$35.39
|
52 Week Low (on 12/24/2018):
|
$27.36
|
Current Dividend Yield:
|
5.84%
|
The following table sets forth the published
high and low closing prices of, as well as dividends on, the common stock of AT&T Inc. for each quarter from January 1, 2016
through August 28, 2019. The closing price of the T Stock on August 28, 2019 was $34.96. The associated graph shows the closing
prices of the common stock of AT&T Inc. for each day from January 1, 2014 through August 28, 2019.
We obtained the information in the table and graph below from Bloomberg Financial Markets, without independent verification. The
historical performance of the T Stock should not be taken as an indication of its future performance, and no assurance can be given
as to the price of the T Stock at any time, including on the determination dates.
Common Stock of AT&T Inc. (CUSIP 00206R102)
|
High ($)
|
Low ($)
|
Dividends ($)
|
2016
|
|
|
|
First Quarter
|
39.45
|
33.51
|
0.48
|
Second Quarter
|
43.21
|
37.86
|
0.48
|
Third Quarter
|
43.47
|
39.71
|
0.48
|
Fourth Quarter
|
42.73
|
36.13
|
0.49
|
2017
|
|
|
|
First Quarter
|
43.02
|
40.61
|
0.49
|
Second Quarter
|
41.69
|
37.46
|
0.49
|
Third Quarter
|
39.41
|
35.59
|
0.49
|
Fourth Quarter
|
39.51
|
32.86
|
0.50
|
2018
|
|
|
|
First Quarter
|
39.16
|
34.69
|
0.50
|
Second Quarter
|
36.14
|
31.40
|
0.50
|
Third Quarter
|
33.91
|
30.25
|
0.50
|
Fourth Quarter
|
34.12
|
27.36
|
0.51
|
2019
|
|
|
|
First Quarter
|
31.40
|
29.37
|
0.51
|
Second Quarter
|
33.51
|
30.30
|
0.51
|
Third Quarter (through August 28, 2019)
|
35.39
|
32.09
|
-
|
We make no representation as to the amount
of dividends, if any, that AT&T Inc. may pay in the future. In any event, as an investor in the Contingent Income Auto-Callable
Securities, you will not be entitled to receive dividends, if any, that may be payable on the common stock of AT&T Inc.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 3, 2024, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of McDonald’s Corporation, the Common Stock of AT&T Inc. and the Common Stock of Johnson & Johnson
Principal at Risk Securities
Common Stock of AT&T Inc. – Daily Closing Prices
January 1, 2014 to August 28, 2019
|
|
* The red solid line indicates the downside threshold level of
$20.976, which is 60% of the initial share price.
This document relates only to the securities
referenced hereby and does not relate to the T Stock or other securities of AT&T Inc. We have derived all disclosures contained
in this document regarding AT&T Inc. stock from the publicly available documents described above. In connection with the offering
of the securities, neither we nor the agent has participated in the preparation of such documents or made any due diligence inquiry
with respect to AT&T Inc. Neither we nor the agent makes any representation that such publicly available documents or any other
publicly available information regarding AT&T Inc. 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 T Stock (and therefore the price of the T Stock
at the time we priced the securities) have been publicly disclosed. Subsequent disclosure of any such events or the disclosure
of or failure to disclose material future events concerning AT&T Inc. could affect the value received with respect to the securities
and therefore the value of the securities.
Neither the issuer nor any of its affiliates makes any representation
to you as to the performance of the T Stock.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 3, 2024, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of McDonald’s Corporation, the Common Stock of AT&T Inc. and the Common Stock of Johnson & Johnson
Principal at Risk Securities
Johnson & Johnson Overview
Johnson & Johnson is engaged in the research and development,
manufacture and sale of a range of products in the health-care field. The JNJ Stock is registered under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”). Information provided to or filed with the Securities and Exchange Commission
by Johnson & Johnson pursuant to the Exchange Act can be located by reference to the Securities and Exchange Commission file
number 001-03215 through the Securities and Exchange Commission’s website at .www.sec.gov. In addition, information regarding
Johnson & Johnson may be obtained from other sources including, but not limited to, press releases, newspaper articles and
other publicly disseminated documents. Neither the issuer nor the agent makes any representation that such publicly available
documents or any other publicly available information regarding the issuer of the JNJ Stock is accurate or complete.
Information as of market close on August 28, 2019:
Bloomberg Ticker Symbol:
|
JNJ
|
Exchange:
|
NYSE
|
Current Stock Price:
|
$128.68
|
52 Weeks Ago:
|
$134.32
|
52 Week High (on 12/13/2018):
|
$147.84
|
52 Week Low (on 12/24/2018):
|
$122.84
|
Current Dividend Yield:
|
2.95%
|
The following table sets forth the published high and low closing
prices of, as well as dividends on, the JNJ Stock for each quarter from January 1, 2016 through August 28, 2019. The closing price
of the JNJ Stock on August 28, 2019 was $128.68. The associated graph shows the closing prices of the JNJ Stock for each day from
January 1, 2014 through August 28, 2019. We obtained the information in the table and graph below from Bloomberg Financial Markets,
without independent verification. The historical performance of the JNJ Stock should not be taken as an indication of its future
performance, and no assurance can be given as to the price of the JNJ Stock at any time, including on the redemption determination
dates or the observation dates.
Common Stock of Johnson & Johnson (CUSIP 478160104)
|
High ($)
|
Low ($)
|
Dividends ($)
|
2016
|
|
|
|
First Quarter
|
109.14
|
95.75
|
0.75
|
Second Quarter
|
121.30
|
108.59
|
0.80
|
Third Quarter
|
125.40
|
117.27
|
0.80
|
Fourth Quarter
|
120.31
|
110.99
|
0.80
|
2017
|
|
|
|
First Quarter
|
128.96
|
111.76
|
0.80
|
Second Quarter
|
136.43
|
121.37
|
0.84
|
Third Quarter
|
136.57
|
129.47
|
0.84
|
Fourth Quarter
|
143.62
|
131.22
|
0.84
|
2018
|
|
|
|
First Quarter
|
148.14
|
125.10
|
0.84
|
Second Quarter
|
131.76
|
119.40
|
0.90
|
Third Quarter
|
142.88
|
121.58
|
0.90
|
Fourth Quarter
|
147.84
|
122.84
|
0.90
|
2019
|
|
|
|
First Quarter
|
139.79
|
125.72
|
0.90
|
Second Quarter
|
144.24
|
131.15
|
0.95
|
Third Quarter (through August 28, 2019)
|
142.14
|
127.73
|
0.95
|
We make no representation as to the amount of dividends, if any,
that Johnson & Johnson may pay in the future. In any event, as an investor in the Contingent Income Auto-Callable Securities,
you will not be entitled to receive dividends, if any, that may be payable on the common stock of Johnson & Johnson.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 3, 2024, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of McDonald’s Corporation, the Common Stock of AT&T Inc. and the Common Stock of Johnson & Johnson
Principal at Risk Securities
Common Stock of Johnson & Johnson – Daily Closing Prices
January 1, 2014 to August 28, 2019
|
|
* The red solid line indicates the downside threshold level of
$77.208, which is 60% of the initial share price.
This document relates only to the securities
referenced hereby and does not relate to the JNJ Stock or other securities of Johnson & Johnson. We have derived all disclosures
contained in this document regarding Johnson & Johnson stock from the publicly available documents described above. In connection
with the offering of the securities, neither we nor the agent has participated in the preparation of such documents or made any
due diligence inquiry with respect to Johnson & Johnson. Neither we nor the agent makes any representation that such publicly
available documents or any other publicly available information regarding Johnson & Johnson is accurate or complete. Furthermore,
we cannot give any assurance that all events occurring prior to the date hereof (including events that would affect the accuracy
or completeness of the publicly available documents described above) that would affect the trading price of the JNJ Stock (and
therefore the price of the JNJ Stock at the time we priced the securities) have been publicly disclosed. Subsequent disclosure
of any such events or the disclosure of or failure to disclose material future events concerning Johnson & Johnson could affect
the value received with respect to the securities and therefore the value of the securities.
Neither the issuer nor any of its affiliates makes any representation
to you as to the performance of the JNJ Stock.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 3, 2024, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of McDonald’s Corporation, the Common Stock of AT&T Inc. and the Common Stock of Johnson & Johnson
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 or prospectus, the terms described herein shall control.
|
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.
|
Underlying stock:
|
The accompanying product supplement refers to the underlying stock as the “underlying shares.”
|
Underlying stock issuer:
|
With respect to the MCD Stock, McDonald’s Corporation
With respect to the T Stock, AT&T Inc.
With respect to the JNJ Stock, Johnson & Johnson
The accompanying product supplement refers to the underlying
stock issuer as the “underlying company.”
|
Downside threshold level:
|
The accompanying product supplement refers to the downside threshold level as the “trigger level.”
|
Day count convention:
|
Interest will be computed on the basis of a 360-day year of twelve 30-day months.
|
Postponement of 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-trading day or certain market disruption events with respect to each underlying stock 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, early redemption payment or payment at maturity made on that postponed date.
|
Antidilution adjustments:
|
The following replaces in its entirety the portion of the
section entitled “Antidilution Adjustments” in the accompanying product supplement for auto-callable securities from
the start of paragraph 5 to the end of such section.
5. If, with respect to one or more of the underlying stocks,
(i) there occurs any reclassification or change of such underlying stock, including, without limitation, as a result of the issuance
of any tracking stock by the underlying stock issuer for such underling stock, (ii) such underlying stock issuer or any surviving
entity or subsequent surviving entity of such underlying stock issuer (the “successor corporation”) has been subject
to a merger, combination or consolidation and is not the surviving entity, (iii) any statutory exchange of securities of such underlying
stock issuer or any successor corporation with another corporation occurs (other than pursuant to clause (ii) above), (iv) such
underlying stock issuer is liquidated, (v) such underlying stock issuer issues to all of its shareholders equity securities of
an issuer other than such underlying stock issuer (other than in a transaction described in clause (ii), (iii) or (iv) above) (a
“spin-off event”) or (vi) a tender or exchange offer or going-private transaction is consummated for all the outstanding
shares of such underlying stock (any such event in clauses (i) through (vi), a “reorganization event”), the method
of determining whether an early redemption has occurred and the amount payable upon an early redemption date or at maturity for
each security will be as follows:
· zUpon any redemption determination date following the effective date of a reorganization event and prior to the final observation
date: If the exchange property value (as defined below) is greater than or equal to its call threshold level, and the determination
closing price (or exchange property value, if applicable) of each other underlying stock is also greater than or equal to its
call threshold level, the securities will be automatically redeemed for an early redemption payment.
· Upon the final observation date, if the securities have not previously been automatically
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 3, 2024, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of McDonald’s Corporation, the Common Stock of AT&T Inc. and the Common Stock of Johnson & Johnson
Principal at Risk Securities
|
redeemed: You will receive for each security that
you hold a payment at maturity equal to:
Ø
If the exchange property value on the final observation date is greater than or equal to the respective downside threshold
level, and the final share price of each other underlying stock (or exchange property value, as applicable) is also greater than
its respective downside threshold level: (i) the stated principal amount plus (ii) the contingent quarterly coupon with respect
to the final observation date.
Ø
If the exchange property value on the final observation date is less than the respective downside threshold level, or if
the final share price (or exchange property value, if applicable) of any other underlying stock is less than its respective downside
threshold level:
Ø
If the worst performing underlying stock has not undergone a reorganization event as described in paragraph 5 above: (i)
the stated principal amount multiplied by (ii) the share performance factor of the worst performing underlying stock.
Ø
If the worst performing underlying stock has undergone a reorganization event as described in paragraph 5 above: (i)
the stated principal amount multiplied by (ii) the share performance factor of the worst performing underlying stock. For purposes
of calculating the share performance factor, the “final share price” of the worst performing underlying stock will
be deemed to equal the cash value, determined as of the final observation date, of the securities, cash or any other assets distributed
to holders of the worst performing underlying stock in or as a result of any such reorganization event, including (A) in the case
of the issuance of tracking stock, the reclassified share of such worst performing underlying stock, (B) in the case of a spin-off
event, the share of such worst performing underlying stock with respect to which the spun-off security was issued, and (C) in the
case of any other reorganization event where such worst performing underlying stock continues to be held by the holders receiving
such distribution, such worst performing underlying stock (collectively, the “exchange property”), per share of such
worst performing underlying stock times the adjustment factor for such worst performing underlying stock on the final observation
date.
Following the effective date of a reorganization event, the contingent
quarterly coupon will be payable for each observation date on which the exchange property value is greater than or equal to the
downside threshold level and the determination closing price (or exchange property value, as applicable) of each other underlying
stock is also greater than or equal to its downside threshold level.
If exchange property includes a cash component,
investors will not receive any interest accrued on such cash component. In the event exchange property consists of securities,
those securities will, in turn, be subject to the antidilution adjustments set forth in paragraphs 1 through 5.
For purposes of determining whether or not
the exchange property value is less than the initial share price, or less than the downside threshold level, or for determining
the worst performing underlying stock, “exchange property value” means (x) for any cash received in any reorganization
event, the value, as determined by the calculation agent, as of the date of receipt, of such cash received for one share of such
underlying stock, as adjusted by the adjustment factor at the time of such reorganization event, (y) for any property other than
cash or securities received in any such reorganization event, the market value, as determined by the calculation agent in its sole
discretion, as of the date of receipt, of such exchange property received for one share of such underlying stock, as adjusted by
the adjustment factor at the time of such reorganization event and (z) for any security received in any such reorganization event,
an amount equal to the determination closing price, as of the day on which the exchange property value is determined, per share
of such security multiplied by the quantity of such security received for each share of such underlying stock, as adjusted by the
adjustment factor at the time of such reorganization event.
For purposes of paragraph 5 above, in the case
of a consummated tender or exchange offer or going-private transaction involving consideration of particular types, exchange property
shall be deemed to include the amount of cash or other property delivered by the offeror in the tender or exchange offer (in an
amount determined on the basis of the rate of exchange in such tender or exchange offer or going-private transaction). In the event
of a tender or exchange offer or a going-private transaction with respect to exchange property in which an
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 3, 2024, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of McDonald’s Corporation, the Common Stock of AT&T Inc. and the Common Stock of Johnson & Johnson
Principal at Risk Securities
|
offeree may elect to receive cash or other
property, exchange property shall be deemed to include the kind and amount of cash and other property received by offerees who
elect to receive cash.
Following the occurrence of any reorganization
event referred to in paragraph 5 above, all references in this offering document and in the related product supplement with respect
to the securities to such “underlying stock” shall be deemed to refer to the exchange property and references to a
“share” or “shares” of such underlying stock shall be deemed to refer to the applicable unit or units of
such exchange property, unless the context otherwise requires.
No adjustment to the adjustment factor will
be required unless such adjustment would require a change of at least 0.1% in the adjustment factor then in effect. The adjustment
factor resulting from any of the adjustments specified above will be rounded to the nearest one hundred-thousandth, with five one-millionths
rounded upward. Adjustments to the adjustment factor will be made up to the close of business on the final observation date.
No adjustments to the adjustment factor or
method of calculating the adjustment factor will be required other than those specified above. The adjustments specified above
do not cover all events that could affect the determination closing price or the final share price of such underlying stock, including,
without limitation, a partial tender or exchange offer for such underlying stock.
The calculation agent shall be solely responsible
for the determination and calculation of any adjustments to the adjustment factor or method of calculating the adjustment factor
and of any related determinations and calculations with respect to any distributions of stock, other securities or other property
or assets (including cash) in connection with any corporate event described in paragraphs 1 through 5 above, and its determinations
and calculations with respect thereto shall be conclusive in the absence of manifest error.
The calculation agent will provide information as to any adjustments
to the adjustment factor or to the method of calculating the amount payable at maturity of the securities made pursuant to paragraph
5 above upon written request by any investor in the securities.
|
Trustee:
|
The Bank of New York Mellon
|
Calculation agent:
|
MS & Co.
|
Issuer notice to registered security holders, the trustee and the depositary:
|
In the event that the maturity date is postponed due to postponement
of the final observation date, the issuer shall give notice of such postponement and, once it has been determined, of the date
to which the maturity date has been rescheduled (i) to each registered holder of the securities by mailing notice of such postponement
by first class mail, postage prepaid, to such registered holder’s last address as it shall appear upon the registry books,
(ii) to the trustee by facsimile, confirmed by mailing such notice to the trustee by first class mail, postage prepaid, at its
New York office and (iii) to The Depository Trust Company (the “depositary”) by telephone or facsimile confirmed by
mailing such notice to the depositary by first class mail, postage prepaid. Any notice that is mailed to a registered holder of
the securities in the manner herein provided shall be conclusively presumed to have been duly given to such registered holder,
whether or not such registered holder receives the notice. The issuer shall give such notice as promptly as possible, and in no
case later than (i) with respect to notice of postponement of the maturity date, the business day immediately preceding the scheduled
maturity date and (ii) with respect to notice of the date to which the maturity date has been rescheduled, the business day immediately
following the final observation date as postponed.
In the event that the securities are subject to early redemption,
the issuer shall, (i) on the business day following the applicable redemption determination date, give notice of the early redemption
and the early redemption payment, including specifying the payment date of the amount due upon the early redemption, (x) to each
registered holder of the securities by mailing notice of such early redemption by first class mail, postage prepaid, to such registered
holder’s last address as it shall appear upon the registry books, (y) to the trustee by facsimile confirmed by mailing such
notice to the trustee by first class mail, postage prepaid, at its New York office and (z) to the depositary by telephone or facsimile
confirmed by mailing such notice to the depositary by first class mail, postage prepaid, and (ii) on or prior to the early redemption
date, deliver the aggregate cash amount due with respect to the securities to the trustee for delivery to the depositary, as holder
of the securities. Any notice that is mailed to a registered holder of the securities in the manner herein provided shall be conclusively
presumed to have been duly given to such registered holder, whether or not such registered 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
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Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 3, 2024, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of McDonald’s Corporation, the Common Stock of AT&T Inc. and the Common Stock of Johnson & Johnson
Principal at Risk Securities
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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 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, as holder of the securities, on the maturity date.
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 3, 2024, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Common Stock of McDonald’s Corporation, the Common Stock of AT&T Inc. and the Common Stock of Johnson & Johnson
Principal at Risk Securities