CALCULATION
OF REGISTRATION FEE
Title
of Each Class of Securities Offered
|
|
Maximum
Aggregate Offering Price
|
|
Amount
of Registration Fee
|
Contingent Coupon Securities due 2023
|
|
$3,500,000
|
|
$424.20
|
September
2019
Pricing
Supplement No. 2,513
Registration
Statement Nos. 333-221595; 333-221595-01
Dated
September 6, 2019
Filed
pursuant to Rule 424(b)(2)
Morgan
Stanley Finance LLC
Structured Investments
Opportunities in U.S. Equities
Contingent Coupon Securities with One-Time Automatic
Redemption Feature Linked to the S&P 500® Index due September 11, 2023
Fully and Unconditionally
Guaranteed by Morgan Stanley
Principal at Risk Securities
Unlike ordinary debt securities, the Contingent
Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due September
11, 2023, which we refer to as the securities, do not guarantee the repayment of any principal and do not provide for the
regular payment of interest. Instead, the securities offer the opportunity for investors to earn a contingent monthly coupon
but only if and for as long as the index closing value of the S&P 500® Index (the “underlying
index”) has remained greater than or equal to 85% of the initial index value, which we refer to as knock-in level 3, on each
day during the term of the securities. If the index closing value of the underlying index is less than knock-in level 3
on any day during any monthly monitoring period during the term of the securities, you will not receive any
contingent monthly coupon payment for the corresponding monthly period or for any subsequent monthly period for the
remainder of the term of the securities, even if the underlying index subsequently appreciates. Therefore, investors in the
securities will permanently forfeit their ability to receive subsequent contingent monthly coupon payments if the index
closing value declines below knock-in level 3 on any day during any monthly monitoring period during the term
of the securities. As a result, investors must be willing to accept the risk of not receiving any contingent monthly coupon
payments during the entire term of the securities. Moreover, if the index closing value of the underlying index is less than
95% of the initial index value (“knock-in level 1”) or 90% of the initial index value (“knock-in level
2”) on any day during the term of the securities, any future contingent monthly coupons for the remainder of the
term of the securities will be reduced by either one-third or two-thirds of the 9.36% per annum rate, respectively, even if
the underlying index subsequently appreciates. In addition, if a knock-in event does not occur on any day from
but excluding the pricing date to and including September 8, 2020, meaning that the index closing value of the underlying
index is never less than knock-in level 1 on any day during any monthly monitoring period during the first year
of the term of the securities, the securities will be automatically redeemed at the end of the first year of the term of the
securities, and investors will receive the early redemption payment equal to the stated principal amount of the securities
and the contingent monthly coupon with respect to the related coupon payment date but will not participate in any performance
of the underlying index. If a knock-in event does occur on any day from but excluding the pricing date to and
including September 8, 2020, the securities will not be redeemed prior to maturity. Instead, investors will receive a return
at maturity based on the performance of the underlying index over the term of the securities, determined as set forth below.
If a knock-in event does occur, you will receive reduced contingent monthly coupon payments, or no contingent
monthly coupon payments at all, for the remainder of the term of the securities, and you may lose some or all of your
investment at maturity if the underlying index declines over the term of the securities. The securities are for investors who
seek an opportunity to earn interest at a potentially above-market rate during the first year of the term of the securities
but only if the index closing value of the underlying index has remained greater than or equal to knock-in level 1 on each
day during the first year of the term of the securities. If a knock-in event does not occur on any day during the first year of the term of the securities, the securities will be
redeemed and so your opportunity to receive an above-market coupon is limited to the first year only. This opportunity is in exchange for the risk of receiving reduced contingent monthly
coupon payments, or no contingent monthly coupon payments at all, and the risk of losing principal if a knock-in event occurs
during the first year of the term of the securities. The securities are unsecured obligations of Morgan Stanley Finance LLC
(“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley. The securities are 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
index:
|
S&P 500® Index
|
Aggregate principal amount:
|
$3,500,000
|
Stated
principal amount:
|
$1,000 per security
|
Issue
price:
|
$1,000 per security
|
Pricing
date:
|
September 6, 2019
|
Original
issue date:
|
September 11, 2019 (3 business days after the pricing date)
|
Maturity
date:
|
September 11, 2023
|
Early
redemption:
|
If a knock-in event has not occurred on any day from but excluding the pricing date to and including September 8, 2020, the securities will be automatically redeemed on the early redemption date for the early redemption payment equal to the stated principal amount plus the contingent monthly coupon with respect to the related coupon payment date. No further payments will be made on the securities once they have been redeemed, and investors will not participate in any appreciation of the underlying index.
|
Early
redemption date:
|
September 11, 2020
|
Contingent
monthly coupon:
|
We will pay a contingent monthly coupon, if any, until
early redemption or maturity, at a rate determined as follows:
(i) If
the index closing value of the underlying index has been greater than or equal to knock-in level 1 on each day during
every monthly monitoring period up to and including the monitoring period end-date for the applicable monthly period, the
contingent monthly coupon for the applicable monthly period will be paid at a rate of 9.36% per annum. Note, however, that if no knock-in event occurs during the first year of the term of the securities, the securities will be
automatically redeemed at that point and so the maximum opportunity to receive this coupon is during the first year of the
term of the securities.
(ii) If
the index closing value of the underlying index has been less than knock-in level 1 on any day during any
monthly monitoring period up to and including the monitoring period end-date for the applicable monthly period, but the index
closing value of the underlying index has been greater than or equal to knock-in level 2 on each day during every
monthly monitoring period up to and including the monitoring period end-date for the applicable monthly period, the contingent
monthly coupon for the applicable monthly period will be paid at a rate of 6.24% per annum.
(iii) If
the index closing value of the underlying index has been less than knock-in level 2 on any day during any
monthly monitoring period up to and including the monitoring period end-date for the applicable monthly period, but the index
closing value of the underlying index has been greater than or equal to knock-in level 3 on each day during every
monthly monitoring period up to and including the monitoring period end-date for the applicable monthly period, the contingent
monthly coupon for the applicable monthly period will be paid at a rate of 3.12% per annum.
(iv) If
the index closing value of the underlying index has been less than knock-in level 3 on any day during any
monthly monitoring period up to and including the monitoring period end-date for the applicable monthly period, no contingent
monthly coupon will be payable for the applicable monthly period or for any subsequent monthly period.
For each knock-in level that the underlying index closes
below on any day during the term of the securities, the coupon rate of 9.36% will be reduced by one-third for the remainder
of the term of the securities, even if the underlying index subsequently appreciates. If the index closing value of the underlying
index has declined below knock-in level 3 on any day during any monthly monitoring period during the term
of the securities, no further contingent monthly coupon payments will be payable over the remaining term of the securities, regardless
of the subsequent performance of the underlying index. See also “Payment at maturity” below.
Additionally, if a knock-in event does not
occur on any day from but excluding the pricing date to and including September 8, 2020, the securities will be automatically
redeemed at the end of the first year of the term of the securities. Investors will not participate in any appreciation of the
underlying index, and no further payments will be made on the securities once they have been redeemed.
|
|
Terms continued on following page:
|
Estimated
value on the pricing date:
|
$1,015.70 per security. See “Investment Summary” beginning on page 4.
|
Commissions and issue
price:
|
Price to public
|
Agent’s commissions(1)
|
Proceeds to us(2)
|
Per
security
|
$1,000
|
$0
|
$1,000
|
Total
|
$3,500,000
|
$0
|
$3,500,000
|
|
|
|
|
|
(1)
|
MS
& Co. will act as the agent for this offering and will not receive a sales commission
in connection with sales of the securities. See “Supplemental information regarding
plan of distribution; conflicts of interest.” For additional information, see “Plan
of Distribution (Conflicts of Interest)” in the accompanying prospectus supplement.
|
|
(2)
|
See
“Use of proceeds and hedging” on page 29.
|
The securities involve risks not associated with an investment
in ordinary debt securities. See “Risk Factors” beginning on page 14.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these securities, or determined if this pricing supplement or the accompanying prospectus
supplement, index supplement and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The securities are not deposits or savings accounts and are
not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they obligations
of, or guaranteed by, a bank.
You should read this pricing supplement together with the
related prospectus supplement, index supplement and prospectus, each of which can be accessed via the hyperlinks below. Please
also see “Additional Terms of the Securities” and “Additional Information About the Securities” at the
end of this pricing supplement.
References to “we,” “us” and “our”
refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Prospectus Supplement dated November 16, 2017 Index Supplement dated November 16, 2017 Prospectus dated November 16, 2017
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due September 11, 2023
Principal at Risk Securities
Terms continued from previous page:
|
Knock-in
event:
|
A knock-in event occurs if, on any day during any monthly monitoring period during the term of the securities, the index closing value of the underlying index is less than any knock-in level. Because there are three knock-in levels, up to three knock-in events can occur over the term of the securities.
|
Monitoring
periods:
|
There are 48 monthly monitoring periods. The first monitoring period will consist of each index business day on which no market disruption event occurs from but excluding the pricing date to and including the first monitoring period end-date. Each subsequent monitoring period will consist of each index business day on which no market disruption event occurs from but excluding the prior monitoring period end-date to and including the following monitoring period end-date.
|
Knock-in
levels:
|
Knock-in level 1: 2,829.775, which is approximately
95% of the initial index value
Knock-in level 2: 2,680.839, which is 90% of the initial
index value
Knock-in level 3: 2,531.904, which is approximately
85% of the initial index value
|
Payment
at maturity:
|
At maturity, if the securities have not previously been redeemed,
at least one knock-in event will have necessarily occurred. Under these circumstances, investors will receive at maturity, in addition
to the final contingent monthly coupon payment, if payable, an amount determined as follows:
o If
the index closing value of the underlying index has been less than knock-in level 1 on any day during any
monthly monitoring period during the term of the securities but has remained greater than or equal to knock-in level 2
on each day during every monthly monitoring period during the term of the securities:
$1,000 × [2/3 + (1/3 × (1 + 105.26% ×
(index performance factor – 95%)))]
Under these circumstances, you may lose some of
your investment if the underlying index depreciates over the term of the securities.
o If
the index closing value of the underlying index has been less than knock-in level 2 on any day during any
monthly monitoring period during the term of the securities but has remained greater than or equal to knock-in level 3
on each day during every monthly monitoring period during the term of the securities:
$1,000 × [1/3 + (1/3 × (1 + 105.26%
× (index performance factor – 95%)))
+ (1/3 × (1 + 111.11% × (index
performance factor – 90%)))]
Under these circumstances, you may lose
some of your investment if the underlying index depreciates over the term of the securities.
o If
the index closing value of the underlying index is less than knock-in level 3 on any day during any monthly
monitoring period during the term of the securities:
$1,000 × [(1/3 × (1 + 105.26%
× (index performance factor – 95%)))
+ (1/3 × (1 + 111.11% × (index
performance factor – 90%)))
+ (1/3 × (1 + 117.65% × (index
performance factor – 85%)))]
Under these circumstances, you may lose
some or all of your investment if the underlying index depreciates over the term of the securities.
If a knock-in event has occurred on any day
during any monthly monitoring period during the term of the securities, you may lose some or all of your investment.
|
Index
performance factor:
|
Final index value / initial index value
|
Initial
index value:
|
2,978.71, which is the index closing value of the underlying index on the pricing date
|
Final
index value:
|
The index closing value of the underlying index on the final valuation date
|
Monitoring
period end-dates:
|
Monthly, as set forth under “Monitoring Period End-Dates and Coupon Payment Dates” below, subject to postponement for non-index business days and certain market disruption events. We also refer to September 6, 2023 as the final monitoring period end-date.
|
Coupon
payment dates:
|
Monthly, as set forth under “Monitoring Period End-Dates and Coupon Payment Dates” below. If any coupon payment date is not a business day, that coupon payment, if any, 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; provided that the contingent coupon, if any, with respect to the final valuation date will be paid on the maturity date.
|
CUSIP
/ ISIN:
|
61769HUU7 / US61769HUU75
|
Listing:
|
The securities will not be listed on any securities exchange.
|
Monitoring Period End-Dates
and Coupon Payment Dates*
Monitoring Period End-Dates
|
Coupon Payment Dates
|
October 7, 2019
|
October 10, 2019
|
November 6, 2019
|
November 12, 2019
|
December 6, 2019
|
December 11, 2019
|
January 6, 2020
|
January 9, 2020
|
February 6, 2020
|
February 11, 2020
|
March 6, 2020
|
March 11, 2020
|
April 6, 2020
|
April 9, 2020
|
May 6, 2020
|
May 11, 2020
|
June 8, 2020
|
June 11, 2020
|
July 6, 2020
|
July 9, 2020
|
August 6, 2020
|
August 11, 2020
|
September 8, 2020
|
September 11, 2020
|
October 6, 2020
|
October 9, 2020
|
November 6, 2020
|
November 12, 2020
|
December 7, 2020
|
December 10, 2020
|
January 6, 2021
|
January 11, 2021
|
February 8, 2021
|
February 11, 2021
|
March 8, 2021
|
March 11, 2021
|
April 6, 2021
|
April 9, 2021
|
May 6, 2021
|
May 11, 2021
|
June 7, 2021
|
June 10, 2021
|
July 6, 2021
|
July 9, 2021
|
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due September 11, 2023
Principal at Risk Securities
Monitoring Period End-Dates
|
Coupon Payment Dates
|
August 6, 2021
|
August 11, 2021
|
September 7, 2021
|
September 10, 2021
|
October 6, 2021
|
October 12, 2021
|
November 8, 2021
|
November 12, 2021
|
December 6, 2021
|
December 9, 2021
|
January 6, 2022
|
January 11, 2022
|
February 7, 2022
|
February 10, 2022
|
March 7, 2022
|
March 10, 2022
|
April 6, 2022
|
April 11, 2022
|
May 6, 2022
|
May 11, 2022
|
June 6, 2022
|
June 9, 2022
|
July 6, 2022
|
July 11, 2022
|
August 8, 2022
|
August 11, 2022
|
September 6, 2022
|
September 9, 2022
|
October 6, 2022
|
October 12, 2022
|
November 7, 2022
|
November 10, 2022
|
December 6, 2022
|
December 9, 2022
|
January 6, 2023
|
January 11, 2023
|
February 6, 2023
|
February 9, 2023
|
March 6, 2023
|
March 9, 2023
|
April 6, 2023
|
April 12, 2023
|
May 8, 2023
|
May 11, 2023
|
June 6, 2023
|
June 9, 2023
|
July 6, 2023
|
July 11, 2023
|
August 7, 2023
|
August 10, 2023
|
September 6, 2023 (final valuation date)
|
September 11, 2023 (maturity date)
|
* If the securities are redeemed on the
early redemption date, no further contingent monthly coupon payments will be made.
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due September 11, 2023
Principal at Risk Securities
Investment
Summary
Contingent Coupon Securities
Principal at Risk Securities
The Contingent Coupon Securities with One-Time Automatic Redemption
Feature Linked to the S&P 500® Index due September 11, 2023, which we refer to as the securities, provide an
opportunity for investors to earn a contingent monthly coupon but only if and for as long as the index closing value of the S&P
500® Index (the “underlying index”) has remained greater than or equal to 85% of the initial index value,
which we refer to as knock-in level 3, on each day during the term of the securities. If the index closing value of the
underlying index is less than knock-in level 3 on any day during any monthly monitoring period during the term of the securities,
you will not receive any contingent monthly coupon payment for the corresponding monthly period or for any subsequent monthly
period for the remainder of the term of the securities, even if the underlying index subsequently appreciates. Therefore, investors
in the securities will permanently forfeit their ability to receive subsequent contingent monthly coupon payments if the index
closing value declines below knock-in level 3 on any day during any monthly monitoring period during the term of
the securities. As a result, investors must be willing to accept the risk of not receiving any contingent monthly coupon payments
during the entire term of the securities. Moreover, if the index closing value of the underlying index is less than 95% of the
initial index value (“knock-in level 1”) or 90% of the initial index value (“knock-in level 2”) on any
day during the term of the securities, any future contingent monthly coupons for the remainder of the term of the securities
will be reduced by either one-third or two-thirds of the 9.36% per annum rate, respectively, even if the underlying index subsequently
appreciates.
In addition, if a knock-in event does not occur on any
day from but excluding the pricing date to and including September 8, 2020, meaning that the index closing value of the
underlying index is never less than knock-in level 1 on any day during any monthly monitoring period during the
first year of the term of the securities, the securities will be automatically redeemed at the end of the first year of the
term of the securities, and investors will receive the early redemption payment equal to the stated principal amount of the
securities and the contingent monthly coupon payment with respect to the related coupon payment date but will not participate
in any performance of the underlying index. If a knock-in event does occur on any day from but excluding the
pricing date to and including September 8, 2020, the securities will not be redeemed prior to maturity. Instead, investors
will receive a return at maturity based on the performance of the underlying index over the term of the securities. If a
knock-in event does occur, you will receive reduced contingent monthly coupon payments, or no contingent monthly
coupon payments at all, for the remainder of the term of the securities, even if the underlying index subsequently
appreciates, and you may lose some or all of your investment at maturity if the underlying index depreciates over the term of
the securities. The securities are for investors who seek an opportunity to earn interest at a potentially above-market rate
during the first year of the term of the securities but only if the index closing value of the underlying index has remained
greater than or equal to knock-in level 1 on each day during the first year of the term of the securities. If a
knock-in event does not occur on any day during the first year of the term of the securities, the securities will be redeemed
and so your opportunity to receive an above-market coupon is limited to the first year only. This opportunity is in exchange
for the risk of receiving reduced contingent monthly coupon payments, or no contingent monthly coupon payments at all, and
the risk of losing principal if a knock-in event occurs during the first year of the term of the securities.
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due September 11, 2023
Principal at Risk Securities
The original issue price of each security is $1,000. This price
includes costs associated with issuing, selling, structuring and hedging the securities, which are borne by you. We estimate that
the value of each security on the pricing date is $1,015.70.
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 index. The estimated
value of the securities is determined using our own pricing and valuation models, market inputs and assumptions relating to the
underlying index, instruments based on the underlying index, volatility and other factors including current and expected interest
rates, as well as an interest rate related to our secondary market credit spread, which is the implied interest rate at which our
conventional fixed rate debt trades in the secondary market.
What determines the economic terms of the securities?
In determining the economic terms of the securities, including
the contingent monthly coupon rate and the knock-in levels, we use an internal funding rate, which is likely to be lower than our
secondary market credit spreads and therefore advantageous to us. If the issuing, selling, structuring and hedging costs borne
by you were lower or if the internal funding rate were higher, one or more of the economic terms of the securities would be more
favorable to you.
What is the relationship between the estimated value on the
pricing date and the secondary market price of the securities?
The price at which MS & Co. purchases the securities in the
secondary market, absent changes in market conditions, including those related to the underlying index, 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 index, and to our secondary
market credit spreads, it may 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 Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due September 11, 2023
Principal at Risk Securities
Key Investment Rationale
The securities do not guarantee repayment of any principal at
maturity and offer investors an opportunity to earn a contingent monthly coupon but only if and for as long as the index
closing value of the underlying index has remained greater than or equal to 85% of the initial index value, which we refer to as
knock-in level 3, on each day during the term of the securities. Moreover, if the index closing value of the underlying
index is less than 95% of the initial index value (“knock-in level 1”) or 90% of the initial index value (“knock-in
level 2”) on any day during the term of the securities, any future contingent monthly coupons for the remainder of
the term of the securities will be reduced by either one-third or two-thirds of the 9.36% per annum rate, respectively, even if
the underlying index subsequently appreciates. In addition, if a knock-in event occurs, the investor may be exposed to the downside
performance of the underlying index and may lose some or all of the stated principal amount at maturity if the underlying index
depreciates over the term of the securities. All payments on the securities will vary depending on whether or not a knock-in event
occurs, as follows:
Scenario
1: A knock-in event does not occur on any day from but excluding the pricing date to and including September 8, 2020, and
so the securities are automatically redeemed after one year.
|
This scenario assumes that the underlying index closes at or above knock-in level 1 on every day during the first year of the term of the securities. Therefore, a knock-in event has not occurred and investors will receive the contingent monthly coupon on each coupon payment date from but excluding the pricing date to and including September 8, 2020. In addition, the securities will be redeemed at the end of the first year of the term of the securities, and investors will receive the stated principal amount plus the contingent monthly coupon payment with respect to the related coupon payment date. No further payments will be made on the securities once they have been redeemed, and investors will not participate in any appreciation of the underlying index.
|
Scenario
2: A knock-in event occurs on any day during any monthly monitoring period during the first year of the term of the securities. Investors
receive reduced contingent monthly coupon payments, or no contingent monthly coupon payments at all, for the remainder of
the term of the securities. At maturity, investors may lose some or all of their investment if the underlying index depreciates
over the term of the securities.
|
This scenario assumes that the underlying index closes below
any knock-in level on any day during any monthly monitoring period during the first year of the term of the
securities. Therefore, a knock-in event has occurred and the securities are not redeemed prior to maturity. In this scenario, investors
will receive contingent monthly coupons but only at a reduced rate after a knock-in event has occurred and only if and for as long
as the index closing value of the underlying index has remained greater than or equal to 85% of the initial index value, which
we refer to as knock-in level 3. If the index closing value of the underlying index is less than knock-in level 3 on any day
during any monthly monitoring period during the term of the securities, investors will not receive any contingent monthly
coupon payment for the corresponding monthly period or for any subsequent monthly period for the remainder of the term of
the securities, even if the underlying index subsequently appreciates.
At maturity, if the securities have not previously been redeemed,
at least one knock-in event will have necessarily occurred. Under these circumstances, investors will receive at maturity, in addition
to the final contingent monthly coupon payment, if payable, an amount determined as follows:
o If
the index closing value of the underlying index has been less than knock-in level 1 on any day during any
monthly monitoring period during the term of the securities but has remained greater than or equal to knock-in level 2
on each day during every monthly monitoring period during the term of the securities:
$1,000 × [2/3 + (1/3 × (1 + 105.26% ×
(index performance factor – 95%)))]
Under these circumstances, you may lose some of
your investment if the underlying index depreciates over the term of the securities.
o If
the index closing value of the underlying index has been less than knock-in level 2 on any day during any
monthly monitoring period during the term of the securities but has remained greater than or equal to knock-in level 3
on each day during every monthly monitoring period during the term of the securities:
$1,000 × [1/3 + (1/3 × (1 + 105.26%
× (index performance factor –
|
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due September 11, 2023
Principal at Risk Securities
|
95%)))
+ (1/3 × (1 + 111.11% × (index performance
factor – 90%)))]
Under these circumstances, you may lose some of
your investment if the underlying index depreciates over the term of the securities.
o If
the index closing value of the underlying index is less than knock-in level 3 on any day during any monthly
monitoring period during the term of the securities:
$1,000 × [(1/3 × (1 + 105.26%
× (index performance factor – 95%)))
+ (1/3 × (1 + 111.11% × (index
performance factor – 90%)))
+ (1/3 × (1 + 117.65% × (index performance
factor – 85%)))]
Under these circumstances, you may lose some or
all of your investment if the underlying index depreciates over the term of the securities.
If a knock-in event has occurred on any day
during any monthly monitoring period during the term of the securities, you may lose some or all of your investment.
|
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due September 11, 2023
Principal at Risk Securities
Hypothetical Examples
The following hypothetical examples are for illustrative purposes
only. The actual initial index value and knock-in levels are set forth on the cover of this document. Any payment on the securities
is subject to our credit risk. The numbers in the hypothetical examples may be rounded for ease of analysis. The below examples
are based on the following terms:
Stated principal amount:
|
$1,000 per security
|
Hypothetical initial index value:
|
2,800
|
Contingent monthly coupon:
|
We will pay a contingent monthly coupon, if
any, until early redemption or maturity, at a rate determined as follows:
(i) If
the index closing value of the underlying index has been greater than or equal to knock-in level 1 on each day
during every monthly monitoring period up to and including the monitoring period end-date for the applicable monthly
period, the contingent monthly coupon for the applicable monthly period will be paid at a rate of 9.36% per annum. Note,
however, that if no knock-in event occurs during the first year of the term of the securities, the securities will
be automatically redeemed at that point and so the maximum opportunity to receive this coupon is during the first year of
the term of the securities.
(ii) If
the index closing value of the underlying index has been less than knock-in level 1 on any day during any
monthly monitoring period up to and including the monitoring period end-date for the applicable monthly period, but the index
closing value of the underlying index has been greater than or equal to knock-in level 2 on each day during every
monthly monitoring period up to and including the monitoring period end-date for the applicable monthly period, the contingent
monthly coupon for the applicable monthly period will be paid at a rate of 6.24% per annum.
(iii) If
the index closing value of the underlying index has been less than knock-in level 2 on any day during any
monthly monitoring period up to and including the monitoring period end-date for the applicable monthly period, but the index
closing value of the underlying index has been greater than or equal to knock-in level 3 on each day during every
monthly monitoring period up to and including the monitoring period end-date for the applicable monthly period, the contingent
monthly coupon for the applicable monthly period will be paid at a rate of 3.12% per annum.
(iv) If
the index closing value of the underlying index has been less than knock-in level 3 on any day during any
monthly monitoring period up to and including the monitoring period end-date for the applicable monthly period, no contingent
monthly coupon will be payable for the applicable monthly period or for any subsequent monthly period.
For each knock-in level that the underlying index closes
below on any day during the term of the securities, the coupon rate of 9.36% will be reduced by one-third for the remainder
of the term of the securities, even if the underlying index subsequently appreciates. If the index closing value of the underlying
index has declined below knock-in level 3 on any day during the term of the securities, no further contingent monthly
coupon payments will be payable over the remaining term of the securities, regardless of the subsequent performance of the underlying
index. See also “Payment at maturity” below.
Additionally, if a knock-in event does not
occur on any day from but excluding the pricing date to and including September 8, 2020, the securities will be automatically
redeemed at the end of the first year of the term of the securities. Investors will not participate in any appreciation of the
underlying index, and no further payments will be made on the securities once they have been redeemed.
|
Total number of monthly periods:
|
48
|
Early redemption:
|
If a knock-in event has not occurred on any day from but excluding the pricing date to and including September 8, 2020, the securities will be automatically redeemed on the early redemption date for the early redemption payment equal to the stated principal amount plus the contingent monthly coupon with respect to the related payment date. No further payments will be made on the securities once they have been redeemed, and investors will not participate in any appreciation of the underlying index.
|
Knock-in event:
|
A knock-in event occurs if, on any day during any monthly monitoring period during the term of the securities, the index closing value of the underlying index is less than any knock-in level. Because there are three knock-in levels, up to three knock-in events can occur over the term of the securities.
|
Hypothetical knock-in levels:
|
Hypothetical knock-in level 1: 2,660, which is 95% of
the hypothetical initial index value
Hypothetical knock-in level 2: 2,520, which is 90% of
the hypothetical initial index value
Hypothetical knock-in level 3: 2,380, which is 85% of
the hypothetical initial index value
If the index closing value of the underlying index is
less than 95% of the initial index value
|
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due September 11, 2023
Principal at Risk Securities
|
(“knock-in level 1”) or 90% of the initial index value (“knock-in level 2”) on any day during the term of the securities, any future contingent monthly coupons for the remainder of the term of the securities will be reduced by either one-third or two-thirds of the 9.36% per annum rate, respectively, even if the underlying index subsequently appreciates. If the index closing value of the underlying index is less than 85% of the initial index value (“knock-in level 3”) on any day during the term of the securities, investors will not receive any contingent monthly coupon payments for the remainder of the term of the securities, even if the underlying index subsequently appreciates.
|
How to determine whether a contingent monthly
coupon is payable with respect to a monitoring period end-date:
Monitoring Period End-Date
|
Lowest Index Closing Value During Monthly Period
|
Lowest Index Closing Value As a Percentage of Initial Index Value
|
Has a Knock-In Event Occurred (How Many Knock-In Levels Have Been Breached?)
|
Coupon Payment Per-Annum Rate
|
1
|
2,856
|
102%
|
No
|
9.36% per annum
|
2
|
3,080
|
110%
|
No
|
9.36% per annum
|
7
|
2,800
|
100%
|
No
|
9.36% per annum
|
8
|
2,716
|
97%
|
No
|
9.36% per annum
|
9
|
2,604
|
93%
|
Yes (first breach of knock-in level 1)
|
6.24% per annum
|
10
|
3,080
|
110%
|
Yes (1)
|
6.24% per annum
|
19
|
2,800
|
100%
|
Yes (1)
|
6.24% per annum
|
20
|
2,492
|
89%
|
Yes (first breach of knock-in level 2)
|
3.12% per annum
|
30
|
2,436
|
87%
|
Yes (2)
|
3.12% per annum
|
40
|
2,408
|
86%
|
Yes (2)
|
3.12% per annum
|
41
|
2,296
|
82%
|
Yes (first breach of knock-in level 3)
|
0.00% per annum
|
43
|
2,856
|
102%
|
Yes (3)
|
0.00% per annum
|
48
|
2,576
|
92%
|
Yes (3)
|
0.00% per annum
|
A knock-in event HAS NOT occurred as of
the eighth monitoring period end-date.
Because a knock-in event has not occurred during
the first eight monthly monitoring periods, investors receive contingent monthly coupons at a rate of 9.36% per annum (corresponding
to approximately $7.80 per month per security) for each such period.
The index closing value of the underlying
index on any day during the ninth monitoring period end-date is less than knock-in level 1. Therefore, a knock-in event HAS occurred
as of the ninth monitoring period end-date.
Because the index closing value of the underlying
index has been less than knock-in level 1 on any day during the ninth monitoring period, a knock-in event has occurred, and the
coupon payments payable on the securities are reduced permanently by one-third of the 9.36% rate, even if the underlying index
subsequently appreciates. In this case, one knock-in level has been breached. Each knock-in level, if breached, has the effect
of reducing the coupon rate by one-third for all remaining coupon periods. In this scenario, investors receive a contingent monthly
coupon at a rate of 6.24% per annum (corresponding to approximately $5.20 per month per security) beginning with the ninth monitoring
period (until another knock-in level has been breached).
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due September 11, 2023
Principal at Risk Securities
The index closing value of the underlying
index on any day during the twentieth monthly monitoring period is less than knock-in level 2. Therefore, a second knock-in event
HAS occurred as of the twentieth monitoring period end-date.
Because the index closing value of the underlying
index has been less than knock-in level 2 on any day during the twentieth monitoring period, a second knock-in event has occurred,
and the coupon payments payable on the securities are reduced permanently by two-thirds, even if the underlying index subsequently
appreciates. In this case, two knock-in levels have been breached. In this scenario, investors receive a contingent monthly coupon
at a rate of 3.12% per annum (corresponding to approximately $2.60 per month per security) beginning with the twentieth monitoring
period (until another knock-in level has been breached).
The index closing value of the underlying
index on any day during the forty-first monthly monitoring period is less than knock-in level 3. Therefore, a third knock-in event
HAS occurred as of the forty-first monitoring period end-date.
Because the index closing value of the underlying
index has been less than knock-in level 3 on any day during the forty-first monitoring period, no contingent monthly coupon will
be payable for the applicable monthly period or for any subsequent monthly period, even if the underlying index subsequently appreciates.
If a knock-in event occurs, you will receive
reduced contingent monthly coupon payments, or no contingent monthly coupon payments at all, for the remainder of the term of the
securities, and you may lose some or all of your investment at maturity if the index closing value of the underlying index depreciates
over the term of the securities.
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due September 11, 2023
Principal at Risk Securities
How to calculate the payment at maturity (if the securities
have not been automatically redeemed early):
At maturity, if the securities have not previously
been redeemed, at least one knock-in event will have necessarily occurred. Under these circumstances, investors will receive at
maturity, in addition to the final contingent monthly coupon payment, if payable, an amount determined as follows:
At maturity, if the securities have not previously been redeemed,
at least one knock-in event will have necessarily occurred. Under these circumstances, investors will receive at maturity, in addition
to the final contingent monthly coupon payment, if payable, an amount determined as follows:
o If
the index closing value of the underlying index has been less than knock-in level 1 on any day during any
monthly monitoring period during the term of the securities but has remained greater than or equal to knock-in level 2
on each day during every monthly monitoring period during the term of the securities:
$1,000 × [2/3 + (1/3 × (1 + 105.26% ×
(index performance factor – 95%)))]
Under these circumstances, you may lose some of
your investment if the underlying index depreciates over the term of the securities.
o If
the index closing value of the underlying index has been less than knock-in level 2 on any day during any
monthly monitoring period during the term of the securities but has remained greater than or equal to knock-in level 3
on each day during every monthly monitoring period during the term of the securities:
$1,000 × [1/3 + (1/3 × (1 + 105.26%
× (index performance factor – 95%)))
+ (1/3 × (1 + 111.11% × (index performance
factor – 90%)))]
Under these circumstances, you may lose some of
your investment if the underlying index depreciates over the term of the securities.
o If
the index closing value of the underlying index is less than knock-in level 3 on any day during any monthly
monitoring period during the term of the securities:
$1,000 × [(1/3 × (1 + 105.26%
× (index performance factor – 95%)))
+ (1/3 × (1 + 111.11% × (index
performance factor – 90%)))
+ (1/3 × (1 + 117.65% × (index performance
factor – 85%)))]
Under these circumstances, you may lose some or
all of your investment if the underlying index depreciates over the term of the securities.
If a knock-in event has occurred
on any day during any monthly monitoring period during the term of the securities, you may lose some or all of your
investment.
|
Hypothetical Examples of the Payment at
Maturity
Example 1: A knock-in event HAS occurred
and the index closing value of the underlying index is less than knock-in level 1 on any day during the term of the securities
but has remained greater than or equal to knock-in level 2 on every day during the term of the securities.
If the index closing value of the underlying
index has been less than knock-in level 1 on any day during any monthly monitoring period during the term of the securities
but has remained greater than or equal to knock-in level 2 on each day during every monthly monitoring period during the
term of the securities, the payment at maturity will be calculated as follows:
$1,000 × [2/3 + (1/3
× (1 + 105.26% × (index performance factor – 95%)))]
In this case, the payment at maturity will
depend on the final index value and the index performance factor. If the index performance factor is less than 95%, you will lose
some of your investment.
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due September 11, 2023
Principal at Risk Securities
Lowest Index Closing Value During the Term of the Securities
|
Lowest Index Closing Value As a Percentage of Initial Index Value*
|
Final Index Value
|
Index Performance Factor
|
Payment at Maturity per $1,000 Security (aside from any coupon payable at maturity)
|
2,632
|
94.00%
|
3,360
|
120.00%
|
$1,087.71
|
2,604
|
93.00%
|
2,940
|
105.00%
|
$1,035.08
|
2,618
|
93.50%
|
2,744
|
98.00%
|
$1,010.52
|
2,548
|
91.00%
|
2,660
|
95.00%
|
$1,000.00
|
2,576
|
92.00%
|
2,576
|
92.00%
|
$989.47
|
2,520
|
90.00%
|
2,520
|
90.00%
|
$982.46
|
*Cannot be less than 90% in this example
Example 2: A knock-in event HAS occurred
and the index closing value of the underlying index is less than knock-in level 2 on any day during the term of the securties but
has remained greater than or equal to knock-in level 3 during the term of the securities.
If the index closing value of the underlying
index has been less than knock-in level 2 on any day during any monthly monitoring period during the term of the securities
but has remained greater than or equal to knock-in level 3 on each day during every monthly monitoring period during the
term of the securities, the payment at maturity will be calculated as follows:
$1,000 × [1/3 +
(1/3 × (1 + 105.26% × (index performance factor – 95%)))
+ (1/3 × (1 + 111.11%
× (index performance factor – 90%)))]
In this case, the payment at maturity will
depend on the final index value and the index performance factor. If the index performance factor is less than 92.43%, you will
lose some of your investment.
Lowest Index Closing Value During the Term of the Securities
|
Lowest Index Closing Value As a Percentage of Initial Index Value*
|
Final Index Value
|
Index Performance Factor
|
Payment at Maturity per $1,000 Security (aside from any coupon payable at maturity)
|
2,492
|
89.00%
|
3,360
|
120.00%
|
$1,198.82
|
2,450
|
87.50%
|
2,940
|
105.00%
|
$1,090.64
|
2,436
|
87.00%
|
2,660
|
95.00%
|
$1,018.51
|
2,408
|
86.00%
|
2,588.04
|
92.43%
|
$1,000.00
|
2,408
|
86.00%
|
2,520
|
90.00%
|
$982.45
|
2,380
|
85.00%
|
2,436
|
87.00%
|
$960.82
|
*Cannot be less than 85% in this example
Example 3: A knock-in event HAS occurred
and the index closing value of the underlying index is less than knock-in level 3 on any day during the term of the securities.
If the index closing value of the underlying
index has been less than knock-in level 3 on any day during any monthly monitoring period during the term of the securities,
the payment at maturity will be calculated as follows:
$1,000 × [(1/3 ×
(1 + 105.26% × (index performance factor – 95%)))
+ (1/3 × (1 + 111.11%
× (index performance factor – 90%)))
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Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due September 11, 2023
Principal at Risk Securities
+ (1/3 × (1 + 117.65%
× (index performance factor – 85%)))]
In this case, the payment at maturity will
depend on the final index value and the index performance factor. If the index performance factor is less than 89.81%, you will
lose some or all of your investment.
Lowest Index Closing Value During the Term of the Securities
|
Lowest Index Closing Value As a Percentage of Initial Index Value
|
Final Index Value
|
Index Performance Factor
|
Payment at Maturity per $1,000 Security (aside from any coupon payable at maturity)
|
2,240
|
80.00%
|
3,360
|
120.00%
|
$1,336.08
|
1,960
|
70.00%
|
2,940
|
105.00%
|
$1,169.08
|
2,016
|
72.00%
|
2,514.68
|
89.81%
|
$1,000.00
|
1,680
|
60.00%
|
2,464
|
88.00%
|
$979.79
|
1,120
|
40.00%
|
2,240
|
80.00%
|
$890.72
|
840
|
30.00%
|
1,680
|
60.00%
|
$668.04
|
560
|
20.00%
|
840
|
30.00%
|
$334.02
|
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due September 11, 2023
Principal at Risk Securities
Risk Factors
The following is a non-exhaustive list of certain key risk
factors for investors in the securities. For further discussion of these and other risks, you should read the section entitled
“Risk Factors” in the accompanying index supplement and prospectus. You should also consult 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 the securities do not guarantee the repayment of any principal. If a knock-in event does
occur on any day from but excluding the pricing date to and including September 8, 2020, the securities will not be redeemed
prior to maturity. Instead, investors will receive a return at maturity based on the performance of the underlying index over the
term of the securities. If a knock-in event does occur, you will receive reduced coupon payments, or no coupon payments at all,
for the remainder of the term of the securities, and you may lose some or all of your investment at maturity if the underlying
index depreciates over the term of the securities. See “Hypothetical Examples” above.
|
|
§
|
For purposes of determining whether or not a knock-in event has occurred, the index closing value will be monitored on every
day during the term of the securities. Therefore, it is more likely that a knock-in event will occur on any day during the
term of the securities than if the index closing value were monitored less frequently. If a knock-in event does occur, you
will receive reduced coupon payments, or no coupon payments at all, for the remainder of the term of the securities, and you may
lose some or all of your investment at maturity if the underlying index depreciates over the term of the securities.
|
|
§
|
If a knock-in event occurs on any day during any monthly monitoring period, the contingent monthly coupon payment for that
monitoring period and all future monitoring periods will be reduced permanently and will depend on the number of knock-in levels
that have been breached. The contingent monthly coupon payment will be based on the index closing value of the underlying index
as measured on each day during every monthly monitoring period during the term of the securities. Because there are
three knock-in levels, up to three knock-in events can occur over the term of the securities. If the index closing value of the
underlying index has been less than knock-in level 1 on any day during any monthly monitoring period up to
and including the monitoring period end-date for the applicable monthly period, but the index closing value of the underlying index
has been greater than or equal to knock-in level 2 on each day during every monthly monitoring period up to
and including the monitoring period end-date for the applicable monthly period, the contingent monthly coupon for the applicable
monthly period will be paid at a reduced rate of 6.24% per annum, even if the underlying index subsequently appreciates.
If the index closing value of the underlying index has been less than knock-in level 2 on any day during any
monthly monitoring period up to and including the monitoring period end-date for the applicable monthly period, but the index closing
value of the underlying index has been greater than or equal to knock-in level 3 on each day during every
monthly monitoring period monitoring period up to and including the monitoring period end-date for the applicable monthly period,
the contingent monthly coupon for the applicable monthly period will be paid at a reduced rate of 3.12% per annum, even if the
underlying index subsequently appreciates. If the index closing value of the underlying index has been less than knock-in
level 3 on any day during any monthly monitoring period up to and including the monitoring period end-date for the
applicable monthly period, no contingent monthly coupon will be payable for the applicable monthly period or for any subsequent
monthly period even if the underlying index subsequently appreciates.
|
|
§
|
The securities do not guarantee the payment of any interest, and the ability to receive subsequent contingent monthly coupon
payments will be permanently forfeited if the index closing value declines below knock-in level 3 on any day during any monthly
monitoring period during the term of the securities. The securities do not guarantee the payment of any interest. If a knock-in
event does occur, you will receive reduced contingent monthly coupon payments, or no contingent monthly coupon payments
at all, for the remainder of the term of the securities, and you may lose some or all of your investment at maturity. A knock-in
event pursuant to which the index closing value of the underlying index is less than knock-in level 3 could occur as early as during
the first monitoring period, in which case you will receive no contingent monthly coupon payments over the entire term of the securities.
If you do not earn sufficient contingent monthly coupons over the term of the securities, the overall return on the securities
may be less than the amount that would be paid on a conventional debt security of ours of comparable maturity. Additionally, if
a knock-in event occurs, meaning that the index
|
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due September 11, 2023
Principal at Risk Securities
closing value is less than any
knock-in level on any day during any monthly monitoring period, investors may lose some or all of their investment
at maturity if the underlying index depreciates over the term of the securities.
|
§
|
If a knock-in event does not occur on any day during the first year
of the term of the securities, the securities will be automatically redeemed at the end of the first year of the term of the securities,
and the appreciation potential of the securities will be limited to the contingent monthly coupon payments that will be paid during
the first year of the term of the securities. If a knock-in event does not occur on any
day from but excluding the pricing date to and including September 8, 2020, the securities
will be automatically redeemed after the first year of the term of the securities and you will not participate in the performance
of the underlying index. No further payments will be made on the securities once they have been redeemed. Accordingly, your opportunity to receive the highest coupon rate is necessarily limited to the first year of the term of the
securities due to this one-time redemption feature. Under these circumstances,
the return on the securities will be limited to the contingent monthly coupon payments made during the first year of the term of
the securities, regardless of any appreciation in the level of the underlying index, which may be significant. If you receive all
available contingent monthly coupon payments at the maximum rate during the first year of the term of the securities because a
knock-in event does not occur, you will receive only the principal amount of your securities (plus the contingent monthly
coupon payment with respect to the related coupon payment date) upon early redemption. You will not benefit from any appreciation
of the underlying index and you will not receive any further payments on the securities once they have been redeemed.
|
|
§
|
The market price will be influenced by many unpredictable factors.
Several factors, many of which are beyond our control, will influence the value of the securities
in the secondary market and the price at which MS & Co. may be willing to purchase or sell the securities in the secondary
market. We expect that generally the level of interest rates available in the market and the value of the underlying
index on any
day, including in relation to the knock-in 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 volatility (frequency and magnitude of changes in value) of the S&P 500® Index,
|
|
o
|
whether a knock-in event has occurred on any day during any monthly monitoring period during the term of the securities
|
|
o
|
geopolitical conditions and economic, financial, political, regulatory or judicial events that affect the component stocks
of the underlying index or securities markets generally and which may affect the value of the underlying index,
|
|
o
|
dividend rates on the securities underlying the S&P 500® Index,
|
|
o
|
the time remaining until the securities mature,
|
|
o
|
interest and yield rates in the market,
|
|
o
|
the availability of comparable instruments,
|
|
o
|
the composition of the S&P 500® Index and changes in the constituent stocks of such index, and
|
|
o
|
any actual or anticipated changes in our credit ratings or credit spreads.
|
Some
or all of these factors will influence the price that you will receive if you sell your securities prior to maturity. For example,
you may have to sell your securities at a substantial discount from the stated principal amount of $1,000 per security if the value
of the S&P 500® Index at the time of sale is near or below the knock-in levels or if market interest rates rise.
You cannot predict the future performance
of the S&P 500® Index based on its historical performance. The index closing value of the underlying index may
decrease and be below knock-in level 3 on any day during any monthly monitoring period during the term of the securities
so that you will forfeit all future contingent monthly coupon payments, or it may depreciate sufficiently so that you will lose
some or all of your initial investment in the securities. See “S&P 500® Index Overview” below.
|
§
|
The securities are subject to our credit risk, and any actual or anticipated changes to our credit ratings or credit spreads
may adversely affect the market value of the securities. You are dependent on our ability to pay all amounts due on the securities
on any coupon payment date and at maturity, and therefore you are subject to our credit risk. 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.
|
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due September 11, 2023
Principal at Risk Securities
|
§
|
As a finance subsidiary, MSFL has no independent operations and
will have no independent assets. As a finance subsidiary, MSFL has no independent operations
beyond the issuance and administration of its securities and will have no independent assets available for distributions to holders
of MSFL securities if they make claims in respect of such securities in a bankruptcy, resolution or similar proceeding. Accordingly,
any recoveries by such holders will be limited to those available under the related guarantee by Morgan Stanley and that guarantee
will rank pari passu with all other unsecured, unsubordinated obligations of Morgan Stanley. Holders will have recourse
only to a single claim against Morgan Stanley and its assets under the guarantee. Holders of securities issued by MSFL should accordingly
assume that in any such proceedings they would not have any priority over and should be treated pari passu with the claims
of other unsecured, unsubordinated creditors of Morgan Stanley, including holders of Morgan Stanley-issued securities.
|
|
§
|
Not equivalent to investing in the underlying index. Investing
in the securities is not equivalent to investing in the underlying index or its component stocks. Investors in the securities will
not have voting rights or rights to receive dividends or other distributions or any other rights with respect to stocks that constitute
the underlying index.
|
|
§
|
If a knock-in event occurs, the amount payable at maturity is not linked to the value of the underlying index at any time
other than the final valuation date. The final index value will be based on the index closing value on the final valuation
date, subject to postponement for non-index business days and certain market disruption events. If a knock-in event occurs, even
if the value of the underlying index appreciates prior to the final valuation date but then drops by the final valuation date,
the payment at maturity will be less than it would have been had the payment at maturity been linked to the value of the underlying
index prior to such drop. Although the actual value of the underlying index on the stated maturity date or at other times during
the term of the securities may be higher than the index closing value on the final valuation date, if a knock-in event occurs,
the payment at maturity will be based solely on the index closing value on the final valuation date.
|
|
§
|
The securities will not be listed on any securities exchange and secondary trading may be limited.
Accordingly, you should be willing to hold your securities for the entire 4-year term of the securities.
The securities will not be listed on any securities exchange. Therefore, there may be little or no secondary market for the securities.
MS & Co. may, but is not obligated to, make a market in the securities and, if it once chooses to make a market, may cease
doing so at any time. When it does make a market, it will generally do so for transactions of routine secondary market size at
prices based on its estimate of the current value of the securities, taking into account its bid/offer spread, our credit spreads,
market volatility, the notional size of the proposed sale, the cost of unwinding any related hedging positions, the time remaining
to maturity and the likelihood that it will be able to resell the securities. Even if there is a secondary market, it may not provide
enough liquidity to allow you to trade or sell the securities easily. Since other broker-dealers may not participate significantly
in the secondary market for the securities, the price at which you may be able to trade your securities is likely to depend on
the price, if any, at which MS & Co. is willing to transact. If, at any time, MS & Co. were to cease making a market in
the securities, it is likely that there would be no secondary market for the securities. Accordingly, you should be willing to
hold your securities to maturity.
|
|
§
|
The rate we are willing to pay for securities of this type, maturity and issuance size is likely to be lower than the rate
implied by our secondary market credit spreads and advantageous to us. Both the lower rate and the inclusion of costs associated
with issuing, selling, structuring and hedging the securities in the original issue price reduce the economic terms of the securities
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 index,
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due September 11, 2023
Principal at Risk Securities
and to our secondary market credit
spreads, it may 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 index or its component stocks), including trading in the stocks that constitute
the underlying index as well as in other instruments related to the underlying index. 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 valuation date approaches. Some of our affiliates also trade the stocks that constitute
the underlying index and other financial instruments related to the underlying index on a regular basis as part of their general
broker-dealer and other businesses. Any of these hedging or trading activities on or prior to the pricing date could have increased
the initial index value and, therefore, could have increased the knock-in levels, the values at or above which the underlying index
must close on each day during the term of the securities so that you receive a contingent monthly coupon on the securities and
the value at or above which the underlying index must close on the final valuation date so that you are not exposed to the negative
performance of the underlying index at maturity. Additionally, such hedging or trading activities during the term of the securities
could potentially affect the value of the underlying index during the term of the securities and accordingly, the payout to you
at maturity and whether we pay a contingent monthly coupon on the securities.
|
|
§
|
The calculation agent, which is a subsidiary of Morgan Stanley and an affiliate of MSFL, will make determinations with respect
to the securities. As calculation agent, MS & Co. has determined the initial index value and the knock-in levels, and will
determine the daily index closing value, including the final index value, whether the contingent monthly coupon will be paid on
each coupon payment date, whether a market disruption event has occurred and the payment that you will receive at maturity. Moreover,
certain determinations made by MS & Co., in its capacity as calculation agent, may require it to exercise discretion and make
subjective judgments, such as with respect to the occurrence or non-occurrence of market disruption events and the selection of
a successor index or calculation of the index closing value in the event of a market disruption event or discontinuance of the
underlying index. These potentially subjective determinations may affect the payout to you at maturity. For further information
regarding these types of determinations, see “Additional Information About the Securities—Additional Provisions—Calculation
agent,” “—Market disruption event,” “—Postponement of the final valuation date,” “—Discontinuance
of the underlying index; alteration of method of calculation” and “—Alternate exchange calculation in case of
an event of default,” below. In addition, MS & Co. has determined the estimated value of the securities on the pricing
date.
|
|
§
|
Adjustments to the underlying index could adversely affect the value of the securities. The publisher of the underlying
index may add, delete or substitute the component stocks of the underlying index or make other methodological changes that could
change the value of the underlying index. Any of these actions could adversely affect the value of the securities. The publisher
of the underlying index may also discontinue or suspend calculation or publication of the underlying index at any time. In these
circumstances, MS & Co., as the calculation agent, will have the sole discretion to substitute a successor index that is comparable
to the discontinued index. MS & Co. could have an economic interest that is different than that of investors in the securities
insofar as, for example, MS & Co. is permitted to consider indices that are calculated and published by MS & Co. or any
of its affiliates. If MS & Co. determines that there is no appropriate successor index, the determination of whether the contingent
monthly coupon will be payable on the securities and the determination of the payment at maturity will be based on the value of
the underlying index, based on the closing prices of the stocks
|
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due September 11, 2023
Principal at Risk Securities
constituting the underlying index
at the time of such discontinuance, without rebalancing or substitution, computed by MS & Co. as calculation agent in accordance
with the formula for calculating the underlying index last in effect prior to such discontinuance.
|
§
|
The U.S. federal income tax consequences of an investment in the securities are uncertain. There is no direct legal
authority as to the proper treatment of the securities for U.S. federal income tax purposes, and, therefore, significant aspects
of the tax treatment of the securities are uncertain.
|
Please read the discussion under
“Additional Information—Tax considerations” in this document concerning the U.S. federal income tax consequences
of an investment in the securities. We intend to treat a security for U.S. federal income tax purposes as a single financial contract
that provides for a coupon that will be treated as gross income to you at the time received or accrued, in accordance with your
regular method of tax accounting. Under this treatment, the ordinary income treatment of the coupon payments, in conjunction with
the capital loss treatment of any loss recognized upon the sale, exchange or settlement of the securities, could result in adverse
tax consequences to holders of the securities because the deductibility of capital losses is subject to limitations. We do not
plan to request a ruling from the Internal Revenue Service (the “IRS”) regarding the tax treatment of the securities,
and the IRS or a court may not agree with the tax treatment described herein. If the IRS were successful in asserting an alternative
treatment for the securities, the timing and character of income or loss on the securities might differ significantly from the
tax treatment described herein. For example, under one possible treatment, the IRS could seek to recharacterize the securities
as debt instruments. In that event, U.S. Holders (as defined below) would be required to accrue into income original issue discount
on the securities every year at a “comparable yield” determined at the time of issuance (as adjusted based on the difference,
if any, between the actual and the projected amount of any contingent payments on the securities) and recognize all income and
gain in respect of the securities as ordinary income. The risk that financial instruments providing for buffers, triggers or similar
downside protection features, such as the securities, would be recharacterized as debt is greater than the risk of recharacterization
for comparable financial instruments that do not have such features.
Non-U.S. Holders (as defined
below) should note that we currently intend to withhold on any coupon paid to Non-U.S. Holders generally at a rate of 30%, or at
a reduced rate specified by an applicable income tax treaty under an “other income” or similar provision, and will
not be required to pay any additional amounts with respect to amounts withheld.
In 2007, the U.S. Treasury Department
and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts”
and similar instruments. While it is not clear whether the securities would be viewed as similar to the prepaid forward contracts
described in the notice, it is possible that any Treasury regulations or other guidance promulgated after consideration of these
issues could materially and adversely affect the tax consequences of an investment in the securities, possibly with retroactive
effect. The notice focuses on a number of issues, the most relevant of which for holders of the securities are the character and
timing of income or loss and the degree, if any, to which income realized by non-U.S. investors should be subject to withholding
tax. Both U.S. and Non-U.S. Holders should consult their tax advisers regarding the U.S. federal income tax consequences of an
investment in 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 Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due September 11, 2023
Principal at Risk Securities
S&P 500® Index Overview
The S&P 500® Index, which is calculated,
maintained and published by S&P Dow Jones Indices LLC (“S&P”), consists of stocks of 500 component companies
selected to provide a performance benchmark for the U.S. equity markets. The calculation of the S&P 500® Index
is based on the relative value of the float adjusted aggregate market capitalization of the 500 component companies as of a particular
time as compared to the aggregate average market capitalization of 500 similar companies during the base period of the years 1941
through 1943. For additional information about the S&P 500® Index, see the information set forth under
“S&P 500® Index” in the accompanying index supplement.
Information as of market close on September 6, 2019:
Bloomberg Ticker Symbol:
|
SPX
|
Current Index Value:
|
2,978.71
|
52 Weeks Ago:
|
2,878.05
|
52 Week High (on 7/26/2019):
|
3,025.86
|
52 Week Low (on 12/24/2018):
|
2,351.10
|
The following graph sets
forth the daily closing values of the underlying index for the period from January 1, 2014 through September 6, 2019. The related
table sets forth the published high and low closing values, as well as end-of-quarter closing values, of the underlying index for
each quarter in the same period. The closing value of the underlying index on September 6, 2019 was 2,978.71. We obtained the information
in the table below from Bloomberg Financial Markets, without independent verification. The historical values of the underlying
index should not be taken as an indication of future performance, and no assurance can be given as to the closing value of the
underlying index on any day during any monthly
monitoring period during the term of the securities, including on the final valuation date.
Underlying
Index Daily Closing Values
January 1,
2014 to September 6, 2019
|
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due September 11, 2023
Principal at Risk Securities
S&P 500® Index
|
High
|
Low
|
Period End
|
2014
|
|
|
|
First Quarter
|
1,878.04
|
1,741.89
|
1,872.34
|
Second Quarter
|
1,962.87
|
1,815.69
|
1,960.23
|
Third Quarter
|
2,011.36
|
1,909.57
|
1,972.29
|
Fourth Quarter
|
2,090.57
|
1,862.49
|
2,058.90
|
2015
|
|
|
|
First Quarter
|
2,117.39
|
1,992.67
|
2,067.89
|
Second Quarter
|
2,130.82
|
2,057.64
|
2,063.11
|
Third Quarter
|
2,128.28
|
1,867.61
|
1,920.03
|
Fourth Quarter
|
2,109.79
|
1,923.82
|
2,043.94
|
2016
|
|
|
|
First Quarter
|
2,063.95
|
1,829.08
|
2,059.74
|
Second Quarter
|
2,119.12
|
2,000.54
|
2,098.86
|
Third Quarter
|
2,190.15
|
2,088.55
|
2,168.27
|
Fourth Quarter
|
2,271.72
|
2,085.18
|
2,238.83
|
2017
|
|
|
|
First Quarter
|
2,395.96
|
2,257.83
|
2,362.72
|
Second Quarter
|
2,453.46
|
2,328.95
|
2,423.41
|
Third Quarter
|
2,519.36
|
2,409.75
|
2,519.36
|
Fourth Quarter
|
2,690.16
|
2,529.12
|
2,673.61
|
2018
|
|
|
|
First Quarter
|
2,872.87
|
2,581.00
|
2,640.87
|
Second Quarter
|
2,786.85
|
2,581.88
|
2,718.37
|
Third Quarter
|
2,930.75
|
2,713.22
|
2,913.98
|
Fourth Quarter
|
2,925.51
|
2,351.10
|
2,506.85
|
2019
|
|
|
|
First Quarter
|
2,854.88
|
2,447.89
|
2,834.40
|
Second Quarter
|
2,954.18
|
2,744.45
|
2,941.76
|
Third Quarter (through September 6, 2019)
|
3,025.86
|
2,840.60
|
2,978.71
|
“Standard & Poor’s®,” “S&P®,”
“S&P 500®,” “Standard & Poor’s 500” and “500” are trademarks of
Standard and Poor’s Financial Services LLC. For more information, see “S&P 500® Index” in
the accompanying index supplement.
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due September 11, 2023
Principal at Risk Securities
Additional Terms of the Securities
Additional
Terms:
|
|
If the terms described herein are inconsistent with those described in the accompanying prospectus supplement, index supplement or prospectus, the terms described herein shall control.
|
Interest
period:
|
The monthly period from and including the original issue date (in the case of the first interest period) or the previously scheduled contingent coupon payment date, as applicable, to but excluding the following scheduled contingent coupon payment date, with no adjustment for any postponement thereof.
|
Day
count convention:
|
Interest will be computed on the basis of a 360-day year of twelve 30-day months.
|
Underlying
index publisher:
|
S&P Dow Jones Indices LLC or any successor thereof
|
Denominations:
|
$1,000 per security and integral multiples thereof
|
Senior
security or subordinated security:
|
Senior
|
Specified
currency:
|
U.S. dollars
|
Record
date:
|
One business day prior to the related scheduled coupon payment date; provided that any contingent monthly coupon payable at maturity shall be payable to the person to whom the payment at maturity shall be payable.
|
Trustee:
|
The Bank of New York Mellon, a New York banking corporation
|
Calculation
agent:
|
The calculation agent for the securities will be MS & Co.
All determinations made by the calculation agent will be at the sole discretion of the calculation agent and will, in the absence
of manifest error, be conclusive for all purposes and binding on you, the trustee and us.
All calculations with respect to the contingent monthly coupon,
the redemption payment and the payment at maturity, if any, shall be made by the calculation agent and shall be rounded to the
nearest one hundred-thousandth, with five one-millionths rounded upward (e.g., .876545 would be rounded to .87655); all dollar
amounts related to determination of the amount of cash payable per stated principal amount, if any, shall be rounded to the nearest
ten-thousandth, with five one hundred-thousandths rounded upward (e.g., .76545 would be rounded up to .7655); and all dollar amounts
paid on the aggregate principal amount of the securities shall be rounded to the nearest cent, with one-half cent rounded upward.
Because the calculation agent is our affiliate, the
economic interests of the calculation agent and its affiliates may be adverse to your interests as an investor in the securities,
including with respect to certain determinations and judgments that the calculation agent must make in determining the payment
that you will receive, if any, on each coupon payment date, upon early redemption or at maturity or whether a market disruption
event has occurred. See “Market disruption event” and “Discontinuance of the underlying index; alteration of
method of calculation” below. MS & Co. is obligated to carry out its duties and functions as calculation agent in good
faith and using its reasonable judgment.
|
Business
day:
|
Any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in The City of New York.
|
Index
business day:
|
A day, as determined by the calculation agent, on which trading is generally conducted on each of the relevant exchange(s) for the underlying index, other than a day on which trading on such exchange(s) is scheduled to close prior to the time of the posting of its regular final weekday closing price.
|
Index
closing value:
|
The official closing value of the underlying index, or any successor index as defined under “Discontinuance of the underlying index; alteration of method of calculation” below), published at the regular official weekday close of trading on such index business day by the underlying index publisher, as determined by the calculation agent. In certain circumstances, the index closing value will be based on the alternate calculation of the underlying index described under “Discontinuance of the underlying index; alteration of method of calculation” below.
|
Market
disruption event:
|
Market disruption event means:
(i) the
occurrence or existence of any of:
(a) a suspension, absence or material
limitation of trading of securities then constituting 20 percent or more of the value of the underlying index (or the successor
index) on the relevant exchange(s) for such securities for more than two hours of trading or during the one-half hour period preceding
the close of the principal trading session on such relevant exchange(s), or
(b) a breakdown or failure
in the price and trade reporting systems of any relevant exchange as a result of which the reported trading prices for securities
then constituting 20 percent or more of the value of the underlying index (or the successor index) during the last one-half hour
preceding
|
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due September 11, 2023
Principal at Risk Securities
|
the close of the principal trading
session on such relevant exchange(s) are materially inaccurate, or
(c) the suspension, material limitation
or absence of trading on any major U.S. securities market for trading in futures or options contracts or exchange-traded funds
related to the underlying index (or the successor index) for more than two hours of trading or during the one-half hour period
preceding the close of the principal trading session on such market,
in each case as determined by the
calculation agent in its sole discretion; and
(ii) a
determination by the calculation agent in its sole discretion that any event described in clause (i) above materially interfered
with our ability or the ability of any of our affiliates to unwind or adjust all or a material portion of the hedge position with
respect to the securities.
For the purpose of determining whether a market disruption event
exists at any time, if trading in a security included in the underlying index is materially suspended or materially limited at
that time, then the relevant percentage contribution of that security to the value of the underlying index shall be based on a
comparison of (x) the portion of the value of the underlying index attributable to that security relative to (y) the overall value
of the underlying index, in each case immediately before that suspension or limitation.
For the purpose of determining whether a market disruption
event exists at any time: (1) a limitation on the hours or number of days of trading will not constitute a market disruption event
if it results from an announced change in the regular business hours of the relevant exchange or market, (2) a decision to permanently
discontinue trading in the relevant futures or options contract or exchange-traded fund will not constitute a market disruption
event, (3) a suspension of trading in futures or options contracts or exchange-traded funds on the underlying index by the primary
securities market trading in such contracts or funds by reason of (a) a price change exceeding limits set by such securities exchange
or market, (b) an imbalance of orders relating to such contracts or funds or (c) a disparity in bid and ask quotes relating to
such contracts or funds will constitute a suspension, absence or material limitation of trading in futures or options contracts
or exchange-traded funds related to the underlying index and (4) a “suspension, absence or material limitation of trading”
on any relevant exchange or on the primary market on which futures or options contracts or exchange-traded funds related to the
underlying index are traded will not include any time when such securities market is itself closed for trading under ordinary
circumstances.
|
Relevant
exchange:
|
With respect to the underlying index or its successor index, the primary exchange(s) or market(s) of trading for (i) any security then included in such index and (ii) any futures or options contracts related to such index or to any security then included in such index.
|
Postponement of the final valuation
date:
|
The final valuation date is subject to postponement due to non-index
business days or certain market disruption events, as described in the following paragraph.
If the scheduled final valuation date is not an index
business day or if there is a market disruption event on such day, the final valuation date shall be the next succeeding index
business day on which there is no market disruption event; provided that if a market disruption event has occurred on each
of the five index business days immediately succeeding the scheduled final valuation date, then (i) such fifth succeeding index
business day shall be deemed to be the final valuation date, notwithstanding the occurrence of a market disruption event on such
day and (ii) with respect to such fifth index business day on which a market disruption event occurs, the calculation agent shall
determine the index closing value on such fifth index business day in accordance with the formula for and method of calculating
the underlying index last in effect prior to the commencement of the market disruption event, using the closing price (or, if
trading in the relevant securities has been materially suspended or materially limited, its good faith estimate of the closing
price that would have prevailed but for such suspension or limitation) at the close of the principal trading session of the relevant
exchange on such index business day of each security most recently constituting the underlying index without any rebalancing or
substitution of such securities following the commencement of the market disruption event.
|
Postponement
of contingent coupon payment dates (including the early redemption date, if applicable):
|
If any scheduled contingent coupon payment date (including the early redemption date, if applicable) is not a business day, that contingent monthly coupon (or early redemption payment, if applicable), if any, shall be paid on the next succeeding business day; provided that the contingent monthly coupon, if any, with respect to the final valuation date shall be paid on the maturity date. No adjustment shall be made to any payment made on a postponed date.
|
Discontinuance of the underlying
index; alteration of method of calculation:
|
If the underlying index publisher discontinues publication of the underlying index and the underlying index publisher or another entity (including MS & Co.) publishes a successor or substitute index that the calculation agent determines, in its sole discretion, to be comparable to the discontinued index (such index being referred to herein as the “successor index”), then any subsequent index closing value will be determined by reference to the published value of such successor index at the regular weekday close of trading on any index business day that the index closing value is to be determined, and, to the extent the index closing value of the
|
Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due September 11, 2023
Principal at Risk Securities
|
successor index differs from the index closing value of the underlying
index at the time of such substitution, proportionate adjustments will be made by the calculation agent to the initial index value
and the knock-in levels.
Upon any selection by the calculation agent of the successor
index, the calculation agent will cause written notice thereof to be furnished to the trustee, to us and to the depositary, as
holder of the securities, within three business days of such selection. We expect that such notice will be made available to you,
as a beneficial owner of the securities, in accordance with the standard rules and procedures of the depositary and its direct
and indirect participants.
If the underlying index publisher discontinues publication of
the underlying index or the successor index prior to, and such discontinuance is continuing on, any day on which an index closing
value must be determined and the calculation agent determines, in its sole discretion, that no successor index is available at
such time, then the calculation agent will determine the index closing value for such date. The index closing value of the underlying
index or the successor index will be computed by the calculation agent in accordance with the formula for and method of calculating
such index last in effect prior to such discontinuance, using the closing price (or, if trading in the relevant securities has
been materially suspended or materially limited, its good faith estimate of the closing price that would have prevailed but for
such suspension or limitation) at the close of the principal trading session of the relevant exchange on such date of each security
most recently constituting such index without any rebalancing or substitution of such securities following such discontinuance.
Notwithstanding these alternative arrangements, discontinuance of the publication of the underlying index may adversely affect
the value of the securities.
If at any time, the method of calculating the underlying
index or the successor index, or the value thereof, is changed in a material respect, or if the underlying index or the successor
index is in any other way modified so that such index does not, in the opinion of the calculation agent, fairly represent the
value of such index had such changes or modifications not been made, then, from and after such time, the calculation agent will,
at the close of business in New York City on each date on which the index closing value is to be determined, make such calculations
and adjustments as, in the good faith judgment of the calculation agent, may be necessary in order to arrive at a value of a stock
index comparable to the underlying index or the successor index, as the case may be, as if such changes or modifications had not
been made, and the calculation agent will calculate the index closing value with reference to the underlying index or the successor
index, as adjusted. Accordingly, if the method of calculating the underlying index or the successor index is modified so that
the value of such index is a fraction of what it would have been if it had not been modified (e.g., due to a split in the underlying
index), then the calculation agent will adjust such index in order to arrive at a value of the underlying index or the successor
index as if it had not been modified (e.g., as if such split had not occurred).
|
Alternate exchange calculation
in case of an event of default:
|
If an event of default with respect to the securities shall have
occurred and be continuing, the amount declared due and payable upon any acceleration of the securities (the “Acceleration
Amount”) will be an amount, determined by the calculation agent in its sole discretion, that is equal to the cost of having
a qualified financial institution, of the kind and selected as described below, expressly assume all our payment and other obligations
with respect to the securities as of that day and as if no default or acceleration had occurred, or to undertake other obligations
providing substantially equivalent economic value to you with respect to the securities. That cost will equal:
· the
lowest amount that a qualified financial institution would charge to effect this assumption or undertaking, plus
· the
reasonable expenses, including reasonable attorneys’ fees, incurred by the holders of the securities in preparing any documentation
necessary for this assumption or undertaking.
During the default quotation period for the securities, which
we describe below, the holders of the securities and/or we may request a qualified financial institution to provide a quotation
of the amount it would charge to effect this assumption or undertaking. If either party obtains a quotation, it must notify the
other party in writing of the quotation. The amount referred to in the first bullet point above will equal the lowest—or,
if there is only one, the only—quotation obtained, and as to which notice is so given, during the default quotation period.
With respect to any quotation, however, the party not obtaining the quotation may object, on reasonable and significant grounds,
to the assumption or undertaking by the qualified financial institution providing the quotation and notify the other party in writing
of those grounds within two business days after the last day of the default quotation period, in which case that quotation will
be disregarded in determining the Acceleration Amount.
Notwithstanding the foregoing, if a voluntary or involuntary
liquidation, bankruptcy or insolvency of, or any analogous proceeding is filed with respect to Morgan Stanley, then depending
on applicable bankruptcy law,
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Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due September 11, 2023
Principal at Risk Securities
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your claim may be limited to an amount that could be less than
the Acceleration Amount.
If the maturity of the securities is accelerated because of an
event of default as described above, we shall, or shall cause the calculation agent to, provide written notice to the trustee at
its New York office, on which notice the trustee may conclusively rely, and to the depositary of the Acceleration Amount and the
aggregate cash amount due, if any, with respect to the securities as promptly as possible and in no event later than two business
days after the date of such acceleration.
Default quotation period
The default quotation period is the period beginning on the day
the Acceleration Amount first becomes due and ending on the third business day after that day, unless:
· no
quotation of the kind referred to above is obtained, or
· every
quotation of that kind obtained is objected to within five business days after the due date as described above.
If either of these two events occurs, the default quotation period
will continue until the third business day after the first business day on which prompt notice of a quotation is given as described
above. If that quotation is objected to as described above within five business days after that first business day, however, the
default quotation period will continue as described in the prior sentence and this sentence.
In any event, if the default quotation period and the subsequent
two business day objection period have not ended before the final valuation date, then the Acceleration Amount will equal the principal
amount of the securities.
Qualified financial institutions
For the purpose of determining the Acceleration Amount at any
time, a qualified financial institution must be a financial institution organized under the laws of any jurisdiction in the United
States or Europe, which at that time has outstanding debt obligations with a stated maturity of one year or less from the date
of issue and rated either:
· A-2
or higher by Standard & Poor’s Ratings Services or any successor, or any other comparable rating then used by that rating
agency, or
· P-2
or higher by Moody’s Investors Service or any successor, or any other comparable rating then used by that rating agency.
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Issuer notices to registered security holders, the trustee and the depositary:
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In the event that the maturity date is postponed due to postponement
of the final valuation 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 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
valuation date as postponed.
The issuer shall, or shall cause the calculation agent to, (i)
provide written notice to the trustee, on which notice the trustee may conclusively rely, and to the depositary of the amount of
cash to be delivered as contingent monthly coupon, if any, with respect to the securities on or prior to 10:30 a.m. (New York City
time) on the business day preceding each contingent coupon payment date, and (ii) deliver the aggregate cash amount due with respect
to the applicable interest to the trustee for delivery to the depositary, as holder of the securities, on the applicable contingent
coupon payment date.
The issuer shall, or shall cause the calculation agent
to, (i) provide written notice to the trustee, on which notice the trustee may conclusively rely, and to the depositary of the
amount of cash, if any, to be delivered with respect to the securities, on or prior to 10:30 a.m. (New York City time) on the
business day preceding the redemption date or the business day preceding the maturity date, as applicable, and (ii) deliver the
aggregate cash amount due with respect to the securities, if any, to the trustee for delivery to the depositary, as holder of
the securities, on the redemption date or maturity date, as applicable.
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Morgan Stanley Finance LLC
Contingent Coupon Securities with One-Time Automatic Redemption Feature Linked to the S&P 500® Index due September 11, 2023
Principal at Risk Securities