CALCULATION
OF REGISTRATION FEE
Title
of Each Class of Securities Offered
|
|
Maximum
Aggregate Offering Price
|
|
Amount
of Registration Fee
|
Trigger Performance Leveraged Upside Security
due 2021
|
|
$2,714,000
|
|
$352.28
|
September 2019
Pricing Supplement No. 2,568
Registration Statement Nos. 333-221595; 333-221595-01
Dated September 27, 2019
Filed pursuant to Rule 424(b)(2)
Morgan Stanley Finance LLC
STRUCTURED INVESTMENTS
Opportunities in Commodities and Treasury Bonds
Trigger PLUS Based on the Value of the Worst
Performing of the iShares® Silver Trust and the iShares® 20+ Year Treasury Bond ETF due September
30, 2021
Trigger Performance Leveraged Upside SecuritiesSM
Fully and Unconditionally Guaranteed by Morgan
Stanley
Principal at
Risk Securities
The Trigger PLUS are unsecured obligations of Morgan Stanley
Finance LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley. The Trigger PLUS will pay no interest,
do not guarantee any return of principal at maturity and have the terms described in the accompanying prospectus supplement and
prospectus, as supplemented or modified by this document. The payment at maturity on the Trigger PLUS will be based on the value
of the worst performing of the iShares® Silver Trust and the iShares® 20+ Year Treasury Bond ETF,
which we refer to as the underlying shares. At maturity, if the final share price of each of the underlying shares is greater
than its respective initial share price, investors will receive the stated principal amount of their investment plus leveraged
upside performance of the worst performing underlying shares, subject to the maximum payment at maturity. If the final share price
of either of the underlying shares is less than or equal to its respective initial share price but the final share
price of each of the underlying shares is greater than or equal to its respective trigger level, investors will receive
the stated principal amount of their investment. However, if the final share price of either of the underlying shares is
less than its respective trigger level, investors will be negatively exposed to the full decline in the worst performing
underlying shares and will lose 1% of the stated principal amount for every 1% of decline in the worst performing underlying shares,
without any buffer. Because the payment at maturity of the Trigger PLUS is based on the worst performing of the underlying shares,
a decline in either of the underlying shares beyond its respective trigger level will result in a significant loss of your
investment even if the other underlying shares have appreciated or have not declined as much. The Trigger PLUS are for investors
who seek a return based on the worst performing of the underlying shares and who are willing to risk their principal, risk exposure
to the worst performing of two underlying shares and forgo current income and upside above the maximum payment at maturity in exchange
for the leverage feature that applies to a limited range of performance of the worst performing underlying shares. The Trigger
PLUS are notes issued as part of MSFL’s Series A Global Medium-Term Notes program.
All payments are subject to our credit risk. If we default
on our obligations, you could lose some or all of your investment. These Trigger PLUS 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
|
Maturity date:
|
September 30, 2021
|
Underlying shares:
|
iShares® Silver Trust (the “SLV Shares”) and iShares® 20+ Year Treasury Bond ETF (the “TLT Shares”)
|
Aggregate principal amount:
|
$2,714,000
|
Payment at maturity:
|
If the final share price of each of the underlying shares is greater than its respective initial share price,
|
|
$1,000 + ($1,000 × leverage factor
× share percent change of the worst performing underlying shares)
In no event will the payment at maturity
exceed the maximum payment at maturity.
|
|
If the final share price of either of the underlying shares is less than or equal to its respective initial share price but the final share price of each of the underlying shares is greater than or equal to its respective trigger level,
|
|
$1,000
|
|
If the final share price of either of the underlying shares is less than its respective trigger level,
|
|
$1,000 × share performance factor of the worst performing underlying shares
|
|
Under these circumstances, the payment at maturity will be less than the stated principal amount of $1,000, and will represent a loss of at least 30%, and possibly all, of your investment.
|
Share percent change:
|
With respect to each of the underlying shares, (final share price – initial share price) / initial share price
|
Worst performing underlying shares:
|
The underlying shares with the lesser share percent change
|
Share performance factor:
|
With respect to each of the underlying shares, final share price / initial share price
|
Initial share price:
|
With respect to the SLV Shares, $16.36, which is the
closing price of such underlying shares on the pricing date
With respect to the TLT Shares, $142.73, which is the
closing price of such underlying shares on the pricing date
|
Final share price:
|
With respect to each of the underlying shares, the closing price of such underlying shares on the valuation date times the adjustment factor of such underlying shares on such date
|
Adjustment factor:
|
With respect to each of the underlying shares, 1.0, subject to adjustment in the event of certain events affecting such underlying shares
|
Valuation date:
|
September 27, 2021, subject to adjustment for non-trading days and certain market disruption events
|
Leverage factor:
|
300%
|
Maximum payment at maturity:
|
$1,540 per Trigger PLUS (154% of the stated principal amount)
|
Trigger level:
|
With respect to the SLV Shares, $11.452, which is 70%
of its initial share price
With respect to the TLT Shares, $99.911, which is 70%
of its initial share price
|
Stated principal amount:
|
$1,000 per Trigger PLUS
|
Issue price:
|
$1,000 per Trigger PLUS
|
Pricing date:
|
September 27, 2019
|
Original issue date:
|
October 2, 2019 (3 business days after the pricing date)
|
CUSIP / ISIN:
|
61769HWB7 / US61769HWB76
|
Listing:
|
The Trigger PLUS will not be listed on any securities exchange.
|
Agent:
|
Morgan Stanley & Co. LLC (“MS & Co.”), a wholly owned subsidiary of Morgan Stanley and an affiliate of MSFL. See “Supplemental information regarding plan of distribution; conflicts of interest.”
|
Estimated value on the pricing date:
|
$956.30 per Trigger PLUS. See “Investment Summary” on page 2.
|
Commissions and issue price:
|
Price to public
|
Agent’s commissions(1)
|
Proceeds to us(2)
|
Per Trigger PLUS
|
$1,000
|
$8
|
$992
|
Total
|
$2,714,000
|
$21,712
|
$2,692,288
|
|
(1)
|
Selected dealers and their
financial advisors will collectively receive from the agent, MS & Co., a fixed sales
commission of $8 for each Trigger PLUS they sell. See “Supplemental information
regarding plan of distribution; conflicts of interest.” For additional information,
see “Plan of Distribution (Conflicts of Interest)” in the accompanying prospectus
supplement.
|
|
(2)
|
See “Use of proceeds
and hedging” on page 33.
|
The Trigger PLUS involve risks not associated with an investment
in ordinary debt securities. See “Risk Factors” beginning on page 7.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these securities, or determined if this document or the accompanying prospectus supplement
and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The Trigger PLUS are not deposits or savings accounts and
are not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they
obligations of, or guaranteed by, a bank.
You should read this document together with the related
prospectus supplement and prospectus, each of which can be accessed via the hyperlinks below. Please also see “Additional
Terms of the Trigger PLUS” and “Additional Information About the Trigger PLUS” at the end of this document.
References to “we,” “us” and “our”
refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Prospectus Supplement dated November 16, 2017 Prospectus dated November 16, 2017
Morgan Stanley Finance LLC
Trigger PLUS
Based on the Value of Worst Performing of the iShares® Silver Trust and the iShares® 20+ Year Treasury
Bond ETF due September 30, 2021
Trigger Performance Leveraged Upside SecuritiesSM
Principal at
Risk Securities
Investment Summary
Trigger Performance Leveraged Upside Securities
Principal at Risk Securities
The Trigger PLUS Based on the Value of the Worst Performing of
the iShares® Silver Trust and the iShares® 20+ Year Treasury Bond ETF due September 30, 2021 (the
“Trigger PLUS”) can be used:
|
§
|
To gain exposure to the worst performing of the iShares® Silver Trust and the
iShares® 20+ Year Treasury Bond ETF
|
|
§
|
To potentially outperform the worst performing of the iShares® Silver Trust and
the iShares® 20+ Year Treasury Bond ETF, subject to the maximum payment at maturity, by taking advantage of the
leverage factor
|
If the final share price of either of the underlying shares
is less than its respective trigger level, investors will be negatively exposed to the full amount of the percent decline
in the worst performing underlying shares and will lose 1% of the stated principal amount for every 1% of decline in the worst
performing underlying shares, without any buffer.
Maturity:
|
Approximately 2 years
|
Leverage factor:
|
300%
|
Maximum payment at maturity:
|
$1,540 per Trigger PLUS (154% of the stated principal amount)
|
Minimum payment at maturity:
|
None. Investors may lose all their entire initial investment in the Trigger PLUS.
|
Trigger level:
|
With respect to each of the underlying shares, 70% of its initial share price
|
Coupon:
|
None
|
Listing:
|
The Trigger PLUS will not be listed on any securities exchange
|
The original issue price of each Trigger PLUS is $1,000. This
price includes costs associated with issuing, selling, structuring and hedging the Trigger PLUS, which are borne by you, and, consequently,
the estimated value of the Trigger PLUS on the pricing date is less than $1,000. We estimate that the value of each Trigger PLUS
on the pricing date is $956.30.
What goes into the estimated value on the pricing date?
In valuing the Trigger PLUS on the pricing date, we take into
account that the Trigger PLUS comprise both a debt component and a performance-based component linked to the underlying shares.
The estimated value of the Trigger PLUS is determined using our own pricing and valuation models, market inputs and assumptions
relating to the underlying shares, instruments based on the underlying shares, 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 Trigger PLUS?
In determining the economic terms of the Trigger PLUS, including
the leverage factor, the trigger levels and the maximum payment at maturity, 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 Trigger PLUS
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 Trigger PLUS?
The price at which MS & Co. purchases the Trigger PLUS in
the secondary market, absent changes in market conditions, including those related to the underlying shares, 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 Trigger PLUS 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 Trigger PLUS in the secondary market, absent changes in market conditions, including those related to the underlying shares,
and to our secondary market credit spreads, it would do so based on values higher than the estimated value. We expect that those
higher values will also be reflected in your brokerage account statements.
MS & Co. may, but is not obligated to, make a market in the
Trigger PLUS, and, if it once chooses to make a market, may cease doing so at any time.
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of Worst Performing of the iShares® Silver Trust and the iShares® 20+ Year Treasury Bond ETF due September 30, 2021
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
Key Investment Rationale
The Trigger PLUS offer exposure to the worst performing underlying
shares. At maturity, if the final share price of each of the underlying shares is greater than its respective initial
share price, investors will receive the stated principal amount of their investment plus leveraged upside performance of
the worst performing underlying shares, subject to the maximum payment at maturity. If the final share price of either of
the underlying shares is less than or equal to its respective initial share price but the final share price of each of
the underlying shares is greater than or equal to its respective trigger level, investors will receive the stated principal
amount of their investment. However, if the final share price of either of the underlying shares is less than its
respective trigger level, investors will be negatively exposed to the full decline in the worst performing underlying shares and
will lose 1% of the stated principal amount for every 1% of decline in the worst performing underlying shares, without any buffer.
Investors may lose their entire initial investment in the Trigger PLUS. All payments on the Trigger PLUS are subject to our
credit risk.
Leveraged Performance Up to a Cap
|
The Trigger PLUS offer investors an opportunity to receive 300% of the positive return of the worst performing of the underlying shares, subject to the maximum payment at maturity, if both underlying shares have appreciated in value.
|
Upside Scenario
|
Both underlying shares increase in value, and, at maturity, the Trigger PLUS redeem for the stated principal amount of $1,000 plus 300% of the share percent change of the worst performing underlying shares, subject to the maximum payment at maturity of $1,540 per Trigger PLUS (154% of the stated principal amount).
|
Par Scenario
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The final share price of either of the underlying shares is less than or equal to its respective initial share price but the final share price of each of the underlying shares is greater than or equal to its respective trigger level. In this case, the payment at maturity will be $1,000 per Trigger PLUS.
|
Downside Scenario
|
The final share price of either of the underlying shares
is less than its respective trigger level.
In this case, the Trigger PLUS redeem for at least 30%
less than the stated principal amount, and this decrease will be by an amount proportionate to the full decline in the value of
the worst performing underlying shares over the term of the Trigger PLUS. Under these circumstances, the payment at maturity will
be less than 70% of the stated principal amount per Trigger PLUS. For example, if the final share price of the worst performing
underlying shares is 70% less than its initial share price, the Trigger PLUS will be redeemed at maturity for a loss of 70% of
principal at $300.00, or 30% of the stated principal amount. There is no minimum payment at maturity on the Trigger PLUS, and
you could lose your entire investment.
|
Because the payment at maturity of the Trigger PLUS is based
on the worst performing of the underlying shares, a decline in either of the underlying shares beyond its respective trigger
level will result in a significant loss of your investment even if the other underlying shares have appreciated or have not declined
as much.
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of Worst Performing of the iShares® Silver Trust and the iShares® 20+ Year Treasury Bond ETF due September 30, 2021
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
Hypothetical Examples
The following hypothetical examples illustrate how to calculate
the payment at maturity on the Trigger PLUS. The following examples are for illustrative purposes only. The actual initial share
price and trigger level for each of the underlying shares are set forth on the cover page of this document. Any payment at maturity
on the Trigger PLUS is subject to our credit risk. The below examples are based on the following terms:
Stated principal amount:
|
$1,000 per Trigger PLUS
|
Leverage factor:
|
300%
|
Hypothetical initial share price:
|
With respect to the SLV Shares: $20
With respect to the TLT Shares: $140
|
Hypothetical trigger level:
|
With respect to the SLV Shares: $14
With respect to the TLT Shares: $98
|
Maximum payment at maturity:
|
$1,540 per Trigger PLUS (154% of the stated principal amount)
|
EXAMPLE 1: The final share price of each of the underlying
shares is greater than its respective initial share price.
Final share price
|
|
SLV Shares: $22
|
|
|
|
TLT Shares: $196
|
Share percent change
|
|
SLV Shares: ($22 – $20) / $20 = 10%
TLT Shares: ($196 – $140) / $140 = 40%
|
Payment at maturity
|
=
|
$1,000 + ($1,000 × leverage factor × share percent change of the worst performing underlying shares), subject to the maximum payment at maturity
|
|
=
|
$1,000 + ($1,000 × 300% × 10%), subject to the maximum payment at maturity
|
|
=
|
$1,300
|
In example 1, the final share prices of both the SLV Shares and
the TLT Shares are greater than their initial share prices. The SLV Shares have appreciated by 10% while the TLT Shares have appreciated
by 40%. Therefore, investors receive at maturity the stated principal amount plus 300% of the appreciation of the worst
performing underlying shares, which are the SLV Shares in this example. Investors receive $1,300 per Trigger PLUS at maturity.
EXAMPLE 2: Both underlying shares appreciate significantly
above their respective initial share prices, and so investors receive only the maximum payment at maturity.
Final share price
|
|
SLV Shares: $40
|
|
|
|
TLT Shares: $266
|
Share percent change
|
|
SLV Shares: ($40 – $20) / $20 = 100%
TLT Shares: ($266 – $140) / $140 = 90%
|
Payment at maturity
|
=
|
$1,000 + ($1,000 × leverage factor × share percent change of the worst performing underlying shares), subject to the maximum payment at maturity
|
|
=
|
$1,000 + ($1,000 × 300% × 90%), subject to the maximum payment at maturity
|
|
=
|
maximum payment at maturity of $1,540 per Trigger PLUS
|
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of Worst Performing of the iShares® Silver Trust and the iShares® 20+ Year Treasury Bond ETF due September 30, 2021
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
In example 2, the final share prices of both the SLV Shares and
the TLT Shares are greater than their initial share prices. The SLV Shares have appreciated by 100% while the TLT Shares have appreciated
by 90%. Therefore, investors receive at maturity the stated principal amount plus 300% of the appreciation of the worst
performing underlying shares, subject to the maximum payment at maturity of $1,540 per Trigger PLUS. Under the terms of the Trigger
PLUS, investors will realize the maximum payment at maturity at a final share price of the worst performing underlying shares of
118% of its respective initial share price. Therefore, in this example, investors receive only the maximum payment at maturity
of $1,540 per stated principal amount, even though both underlying shares have appreciated significantly.
EXAMPLE 3: The final share price of one of the underlying
shares is greater than its respective initial share price, while the final share price of the other underlying shares is less than
its respective initial share price, but neither of the underlying shares declines below the respective trigger level, and investors
receive the stated principal amount.
Final share price
|
|
SLV Shares: $23
|
|
|
|
TLT Shares: $119
|
Share percent change
|
|
SLV Shares: ($23 – $20) / $20 = 15%
TLT Shares: ($119 – $140) / $140 = -15%
|
Payment at maturity
|
=
|
$1,000
|
In example 3, the final share price of the SLV Shares is greater
than its respective initial share price, while the final share price of the TLT Shares is less than its respective initial share
price but greater than or equal to its respective trigger level. The SLV Shares have appreciated by 15% while the TLT Shares have
declined by 15%. Investors receive at maturity the stated principal amount of $1,000 because neither of the underlying shares has
declined below its trigger level.
EXAMPLE 4: The final share price of one of the underlying
shares is greater than its respective initial share price while the final share price of the other underlying shares is less than
its respective initial share price and trigger level.
Final share price
|
|
SLV Shares: $22
|
|
|
|
TLT Shares: $70
|
Share percent change
|
|
SLV Shares: ($22 – $20) / $20 = 10%
TLT Shares: ($70 – $140) / $140 = -50%
|
Share performance factor
|
|
SLV Shares: $22 / $20 = 110%
TLT Shares: $70 / $140 = 50%
|
Payment at maturity
|
=
|
$1,000 × share performance factor of the worst performing underlying shares
|
|
=
|
$1,000 × 50%
|
|
=
|
$500
|
In example 4, the final share price of the SLV Shares is greater
than its respective initial share price, while the final share price of the TLT Shares is less than its respective initial share
price and trigger level. While the SLV Shares have appreciated by 10%, the TLT Shares have declined by 50%. Therefore, investors
are exposed to the negative performance of the TLT Shares, which are the worst performing underlying shares in this example, and
receive a payment at maturity of $500. In this example, investors are exposed to the negative performance of the worst performing
underlying shares even though the other underlying shares have appreciated in value by 10%, because the final share price of each
of the underlying shares is not greater than or equal to its respective trigger level.
EXAMPLE 5: The final share price of each of the underlying
shares is less than its respective trigger level.
Final share price
|
|
SLV Shares: $6
|
|
|
|
TLT Shares: $56
|
Share percent change
|
|
SLV Shares: ($6 – $20) / $20 = -70%
TLT Shares: ($56 – $140) / $140 = -60%
|
Share performance factor
|
|
SLV Shares: $6 / $20 = 30%
TLT Shares: $56 / $140 = 40%
|
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of Worst Performing of the iShares® Silver Trust and the iShares® 20+ Year Treasury Bond ETF due September 30, 2021
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
Payment at maturity
|
=
|
$1,000 × (share performance factor of the worst performing underlying shares)
|
|
=
|
$1,000 × 30%
|
|
=
|
$300
|
In example 5, the final share prices of both the SLV Shares and
the TLT Shares are less than their respective trigger levels. The SLV Shares have declined by 70% while the TLT Shares have declined
by 60%. Therefore, investors are exposed to the negative performance of the SLV Shares, which are the worst performing underlying
shares in this example, and receive a payment at maturity of $300.
Because the payment at maturity of the Trigger PLUS is based
on the worst performing of the underlying shares, a decline in either of the underlying shares beyond its respective trigger level
will result in a significant loss of your investment even if the other underlying shares have appreciated or have not declined
as much.
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of Worst Performing of the iShares® Silver Trust and the iShares® 20+ Year Treasury Bond ETF due September 30, 2021
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
Risk Factors
The following is a non-exhaustive list of certain key risk
factors for investors in the Trigger PLUS. For further discussion of these and other risks, you should read the section entitled
“Risk Factors” in the accompanying prospectus supplement and prospectus. We also urge you to consult your investment,
legal, tax, accounting and other advisers in connection with your investment in the Trigger PLUS.
|
§
|
The Trigger PLUS do not pay interest or guarantee the return of any principal. The terms
of the Trigger PLUS differ from those of ordinary debt securities in that the Trigger PLUS do not pay interest or guarantee the
payment of any principal amount at maturity. If the final share price of either of the underlying shares is less than
its respective trigger level, the payment at maturity will be an amount in cash that is at least 30% less than the $1,000 stated
principal amount of each Trigger PLUS, and this decrease will be by an amount proportionate to the full amount of the decline in
the value of the worst performing underlying shares over the term of the Trigger PLUS, without any buffer. There is no minimum
payment at maturity on the Trigger PLUS, and, accordingly, you could lose your entire initial investment in the Trigger PLUS.
|
|
§
|
The appreciation potential of the Trigger PLUS is limited by the
maximum payment at maturity. The appreciation potential of the Trigger PLUS is limited by the maximum payment at maturity
of $1,540 per Trigger PLUS, or 154% of the stated principal amount. Although the leverage factor provides 300% exposure to any
increase in the final share price of the worst performing underlying shares over its initial share price, because the payment at
maturity will be limited to 154% of the stated principal amount for the Trigger PLUS, any increase in the final share price of
the worst performing underlying shares over its initial share price by more than 18% of its initial share price will not further
increase the return on the Trigger PLUS.
|
|
§
|
You are exposed to the price risk of both underlying shares. Your return on the Trigger
PLUS it not linked to a basket consisting of both underlying shares. Rather, it will be based upon the independent performance
of each of the underlying shares. Unlike an instrument with a return linked to a basket of underlying assets in which risk is mitigated
and diversified among all the components of the basket, you will be exposed to the risks related to both underlying shares. Poor
performance by either of the underlying shares over the term of the Trigger PLUS will negatively affect your return and will not
be offset or mitigated by any positive performance by the other underlying shares. If either of the underlying shares declines
to below its respective trigger level as of the valuation date, you will be exposed to the negative performance of the worst performing
underlying shares at maturity, and you will lose a significant portion or all of your investment, even if the other underlying
shares have appreciated or have not declined as much. Accordingly, your investment is subject to the price risk of both underlying
shares.
|
|
§
|
Single commodity prices tend to be more volatile than, and may not correlate with, the prices
of commodities generally. The iShares® Silver Trust is linked exclusively to the price of silver and not to
a diverse basket of commodities or a broad-based commodity index. The price of silver may not correlate with, and may diverge significantly
from, the prices of commodities generally. Because the Trigger PLUS are linked to the SLV Shares, which reflect the performance
of the price of a single commodity, they carry greater risk and may be more volatile than a security linked to the prices of multiple
commodities or a broad-based commodity index. The price of silver may be, and has recently been, highly volatile, and we can give
you no assurance that such volatility will lessen.
|
|
§
|
The Trigger PLUS are subject to risks associated with silver. The iShares® Silver
Trust seeks to reflect generally the performance of the price of silver, less the iShares® Silver Trust’s
expenses and liabilities. The price of silver is primarily affected by global demand for and supply of silver. Silver prices can
fluctuate widely and may be affected by numerous factors. These include general economic trends, technical developments, substitution
issues and regulation, as well as specific factors including industrial and jewelry demand, expectations with respect to the rate
of inflation, the relative strength of the U.S. dollar (as the currency in which the price of silver is generally quoted) and other
currencies, interest rates, central bank sales, forward sales by producers, global or regional political or economic events and
production costs and disruptions in major silver-producing countries, such as Mexico, China and Peru. The demand for and supply
of silver affect silver prices, but not necessarily in the same manner as supply and demand affect the prices of other commodities.
The supply of silver consists of a combination of new mine production and existing stocks of bullion and fabricated silver held
by governments, public and private financial institutions, industrial organizations and private individuals. In addition, the price
of silver has on occasion been subject to very rapid short-term changes due to speculative activities. From time to time, above-ground
|
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of Worst Performing of the iShares® Silver Trust and the iShares® 20+ Year Treasury Bond ETF due September 30, 2021
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
inventories
of silver may also influence the market. The major end-uses for silver include industrial applications, jewelry and silverware.
It is not possible to predict the aggregate effect of any or all of these factors.
|
§
|
There are risks relating to trading of commodities on the London Bullion Market Association.
The investment objective of the iShares® Silver Trust seeks to reflect generally the performance of the price of
silver, less the iShares® Silver Trust’s expenses and liabilities. The price of silver is determined by the
LBMA or an independent service-provider appointed by the LBMA. The LBMA is a self-regulatory association of bullion market participants.
Although all market-making members of the LBMA are supervised by the Bank of England and are required to satisfy a capital adequacy
test, the LBMA itself is not a regulated entity. If the LBMA should cease operations, or if bullion trading should become subject
to a value added tax or other tax or any other form of regulation not currently in place, the role of LBMA prices as a global benchmark
for the value of silver may be adversely affected. The LBMA is a principals’ market that operates in a manner more closely
analogous to an over-the-counter physical commodity market than a regulated futures markets, and certain features of U.S. futures
contracts are not present in the context of LBMA trading. For example, there are no daily price limits on the LBMA that would otherwise
restrict fluctuations in the prices of LBMA contracts. In a declining market, it is possible that prices would continue to decline
without limitation within a trading day or over a period of trading days. The LBMA may alter, discontinue or suspend calculation
or dissemination of the LBMA silver price, which could adversely affect the value of the Trigger PLUS. The LBMA, or an independent
service-provider appointed by the LBMA, will have no obligation to consider your interests in calculating or revising LBMA prices.
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Suspensions or disruptions of market trading in commodity and related futures markets could
adversely affect the price of the Trigger PLUS. The commodity markets are subject to temporary distortions or other disruptions
due to various factors, including the lack of liquidity in the markets, the participation of speculators and government regulation
and intervention. In addition, U.S. futures exchanges and some foreign exchanges have regulations that limit the amount of fluctuation
in futures contract prices which may occur during a single business day. These limits are generally referred to as “daily
price fluctuation limits” and the maximum or minimum price of a contract on any given day as a result of these limits is
referred to as a “limit price.” Once the limit price has been reached in a particular contract, no trades may be made
at a different price. Limit prices have the effect of precluding trading in a particular contract or forcing the liquidation of
contracts at disadvantageous times or prices. These circumstances could adversely affect the value of the commodity that constitutes
the SLV Shares, and, therefore, the value of the Trigger PLUS.
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The iShares® 20+ Year Treasury Bond ETF is subject to significant risks, including
interest rate-related risks and credit-related risks. The iShares® 20+ Year Treasury Bond ETF invests in
U.S. dollar-denominated fixed-income securities. However, the performance of the iShares® 20+ Year Treasury Bond
ETF to which the Trigger PLUS are linked will reflect only changes in the market prices of the bonds held by the iShares®
20+ Year Treasury Bond ETF and will not reflect interest payments on these bonds. As a result, the performance of the iShares®
20+ Year Treasury Bond ETF will be less, and perhaps significantly less, than the return that would be realized by a direct investment
in the iShares® 20+ Year Treasury Bond ETF. The market prices of the bonds held by the iShares® 20+
Year Treasury Bond ETF are volatile and will be significantly influenced by a number of factors, particularly the yields on these
bonds as compared to current market interest rates and the actual or perceived credit quality of the issuers of these bonds.
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In general, the value of bonds is significantly affected
by changes in current market interest rates. As interest rates rise, the prices of bonds, including those held by the iShares®
20+ Year Treasury Bond ETF, are likely to decrease. Securities with longer durations tend to be more sensitive to interest rate
changes, usually making them more volatile than securities with shorter durations. The iShares® 20+ Year Treasury
Bond ETF holds U.S. Treasury securities with a remaining maturity of greater than 20 years and as a result will be particularly
sensitive to interest rate changes. As a result, rising interest rates will likely cause the value of the bonds held by the iShares®
20+ Year Treasury Bond ETF and the value of the Trigger PLUS to decline, possibly significantly.
Interest rates are subject to volatility due to a
variety of factors, including:
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sentiment regarding the U.S. and global economies;
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expectations regarding the level of price inflation;
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sentiment regarding credit quality in the U.S. and global credit markets;
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Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of Worst Performing of the iShares® Silver Trust and the iShares® 20+ Year Treasury Bond ETF due September 30, 2021
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
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central bank policy regarding interest rates; and
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performance of capital markets.
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In addition, the prices of the bonds held by the iShares®
20+ Year Treasury Bond ETF are significantly influenced by the creditworthiness of the issuers of those bonds. The issuers of the
bonds held by bond ETFs may have their credit ratings downgraded or their credit spreads may widen significantly. Following a ratings
downgrade by any credit rating agency or the widening of credit spreads, some or all of the bonds held by the iShares®
20+ Year Treasury Bond ETF may suffer significant and rapid price declines.
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The market price will be influenced by many unpredictable factors. Several factors will
influence the value of the Trigger PLUS in the secondary market and the price at which MS & Co. may be willing to purchase
or sell the Trigger PLUS in the secondary market, including the value and volatility of the underlying shares, interest and yield
rates, time remaining to maturity, geopolitical conditions and economic, financial, political and regulatory or judicial events
and any actual or anticipated changes in our credit ratings or credit spreads. The levels of the underlying shares may be, and
have recently been, extremely volatile, and we can give you no assurance that the volatility will lessen. See “iShares®
Silver Trust Overview” and “iShares® 20+ Year Treasury Bond ETF Overview” below. You may receive
less, and possibly significantly less, than the stated principal amount per Trigger PLUS if you try to sell your Trigger PLUS prior
to maturity.
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The Trigger PLUS 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 Trigger PLUS. You are dependent on our ability
to pay all amounts due on the Trigger PLUS at maturity and therefore you are subject to our credit risk. If we default on its obligations
under the Trigger PLUS, your investment would be at risk and you could lose some or all of your investment. As a result, the market
value of the Trigger PLUS 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 Trigger PLUS.
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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.
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The antidilution adjustments the calculation agent is required to make do not cover every
event that could affect the underlying shares. MS & Co., as calculation agent, will adjust the adjustment factors
for certain events affecting the underlying shares. However, the calculation agent will not make an adjustment for every event
that can affect the underlying shares. If an event occurs that does not require the calculation agent to adjust an adjustment factor,
the market price of the Trigger PLUS may be materially and adversely affected.
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The amount payable on the Trigger PLUS is not linked to the values of the underlying shares
at any time other than the valuation date. The final share price of each of the underlying shares will be based on the closing
price of such underlying shares on the valuation date, subject to adjustment for non-trading days and certain market disruption
events. Even if both underlying shares appreciate prior to the valuation date but the value of either of the underlying
shares drops by the valuation date to below its respective trigger level, the payment at maturity will be significantly less than
it would have been had the payment at maturity been linked to the values of the underlying shares prior to such drop. Although
the actual values of the underlying shares on the stated maturity date or at other times during the term of the Trigger PLUS may
be higher than their respective trigger levels, the payment at maturity will be based solely on the closing prices on the valuation
date.
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Investing in the Trigger PLUS is not equivalent to investing in the underlying shares, in
the commodity composing the SLV Shares or the securities composing the ICE U.S. Treasury 20+ Year Bond Index or the TLT Shares.
Investing in the Trigger PLUS is not equivalent to investing in the underlying shares, in the commodity that constitutes the SLV
Shares,
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Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of Worst Performing of the iShares® Silver Trust and the iShares® 20+ Year Treasury Bond ETF due September 30, 2021
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
in
the ICE U.S. Treasury 20+ Year Bond Index (the “ICE 20+ Year Index,”
or the “share underlying index”) or in the securities that consitute the share underlying index. Investors in the
Trigger PLUS will not have voting rights or rights to receive dividends or other distributions or any other rights with respect
to the underlying shares, in the commodity that constitutes the SLV Shares, in the share
underlying index or the securities that consitute the share underlying index.
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Adjustments to the TLT Shares or the index tracked by the TLT Shares could adversely affect
the value of the Trigger PLUS. The investment adviser to the iShares® 20+ Year Treasury Bond ETF, BlackRock
Fund Advisors (the “Investment Adviser”), seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the ICE 20+ Year Index). Pursuant to its investment strategies or otherwise, the Investment
Adviser may add, delete or substitute the securities composing the iShares® 20+ Year Treasury Bond ETF. Any of these
actions could adversely affect the price of the TLT Shares and, consequently, the value of the Trigger PLUS. Intercontinental Exchange
(“ICE”) is responsible for calculating and maintaining the ICE 20+ Year Index. ICE may add, delete or substitute the
securities constituting the ICE 20+ Year Index or make other methodological changes that could change the level of the the ICE
20+ Year Index. ICE may discontinue or suspend calculation or publication of the ICE 20+ Year Index at any time. In these circumstances,
the calculation agent will have the sole discretion to substitute a successor index that is comparable to the discontinued ICE
20+ Year Index and is permitted to consider indices that are calculated and published by the calculation agent or any of its affiliates.
Any of these actions could adversely affect the price of the TLT Shares and, consequently, the value of the Trigger PLUS.
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The performance and market price of the SLV Shares and the TLT Shares, particularly during
periods of market volatility, may not correlate with the performance of its underlying commodity, with respect to the SLV Shares,
or the share underlying index or the component securities of the share underlying index, with respect to the TLT Shares, or the
net asset value per share of the respective underlying shares. The SLV Shares do not fully replicate their underlying commodity
and the TLT Shares do not fully replicate the share underlying index and may hold securities that are different than those included
in the share underlying index.
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With respect to the SLV Shares,
the underlying shares do not fully replicate the performance of their underlying commodity due to the fees and expenses charged
by the underlying shares or by restrictions on access to the underlying commodity due to other circumstances. The SLV Shares do
not generate any income, and as the SLV Shares regularly sell their underlying commodity to pay for ongoing expenses, the amount
of its underlying commodity represented by each share gradually declines over time. The SLV Shares sell its underlying commodity
to pay expenses on an ongoing basis irrespective of whether the trading price of the shares rises or falls in response to changes
in the price of its underlying commodity. The sale by the SLV Shares of its underlying commodity to pay expenses at a time of relatively
low prices for its underlying commodity could adversely affect the value of the Trigger PLUS. Additionally, there is a risk that
part or all of the holdings of the SLV Shares in its underlying commodity could be lost, damaged or stolen due to war, terrorism,
theft, natural disaster or otherwise.
With respect to the TLT Shares,
the performance of the underlying shares will reflect additional transaction costs and fees that are not included in the calculation
of the share underlying index. All of these factors may lead to a lack of correlation between the performance of the TLT Shares
and the share underlying index. In addition, corporate actions (such as mergers and spin-offs) with respect to the securities underlying
the TLT Shares may impact the variance between the performances of the TLT Shares and the share underlying index.
Additionally,
because the shares of each of the underlying shares are traded on an exchange and are subject to market supply and investor demand,
the market price of one share of each of the underlying shares may differ from the net asset value per share of such underlying
shares.
In
particular, during periods of market volatility, or unusual trading activity, trading in the components underlying each of the
underlying shares may be disrupted or limited, or such components may be unavailable in the secondary market. Under these
circumstances, the liquidity of each underlying shares may be adversely affected, market participants may be unable to calculate
accurately the net asset value per share of each of the underlying shares, and their ability to create and redeem shares of each
of the underlying shares may be disrupted. Under these circumstances, the market price of shares of each of the underlying shares
may vary substantially from the net asset value per share of each underlying share, the performance of its underlying commodty,
with respect to the SLV Shares, or the level of the ICE 20+ Year Index, with respect to the TLT Shares.
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of Worst Performing of the iShares® Silver Trust and the iShares® 20+ Year Treasury Bond ETF due September 30, 2021
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
For all of the foregoing reasons,
the performance of the SLV Shares may not correlate with the performance of its underlying commodity and the performance of the
TLT Shares may not correlate with the performance of the share underlying index or the component securities of the share underlying
index, and the performance of each of the underlying shares may not correlate with the performance of the net asset value per share
of such underlying shares. Any of these events could materially and adversely affect the prices of each of the underlying
shares and, therefore, the value of the Trigger PLUS. Additionally, if market volatility or these events were to occur on the valuation
date, the calculation agent would maintain discretion to determine whether such market volatility or events have caused a market
disruption event to occur, and such determination would affect the payment at maturity of the Trigger PLUS. If the calculation
agent determines that no market disruption event has taken place, the payment at maturity would be based solely on the published
closing price per share of each of the underlying shares on the valuation date, even if the SLV Shares are underperforming its
underlying commodity, the TLT Shares are underperforming the share underlying index or the component securities of the share underlying
index and/or any of the underlying shares is trading below the net asset value per share of such underlying shares.
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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 Trigger PLUS in the original issue price reduce
the economic terms of the Trigger PLUS, cause the estimated value of the Trigger PLUS to be less than the original issue price
and will adversely affect secondary market prices. Assuming no change in market conditions or any other relevant factors,
the prices, if any, at which dealers, including MS & Co., may be willing to purchase the Trigger PLUS 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.
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The inclusion of the costs of issuing,
selling, structuring and hedging the Trigger PLUS in the original issue price and the lower rate we are willing to pay as issuer
make the economic terms of the Trigger PLUS less favorable to you than they otherwise would be.
However, because the costs associated
with issuing, selling, structuring and hedging the Trigger PLUS 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 Trigger PLUS in the secondary market, absent changes
in market conditions, including those related to the underlying shares, and to our secondary market credit spreads, it would do
so based on values higher than the estimated value, and we expect that those higher values will also be reflected in your brokerage
account statements.
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The estimated value of the Trigger PLUS 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 Trigger PLUS than those generated by others, including other dealers in the
market, if they attempted to value the Trigger PLUS. 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 Trigger PLUS in the secondary
market (if any exists) at any time. The value of your Trigger PLUS 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.
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The Trigger PLUS will not be listed on any securities exchange and secondary trading may be
limited. The Trigger PLUS will not be listed on any securities exchange. Therefore, there may be little or no secondary market
for the Trigger PLUS. MS & Co. may, but is not obligated to, make a market in the Trigger PLUS 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 Trigger PLUS, 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 Trigger PLUS. Even if there is a secondary
market, it may not provide enough liquidity to allow you to trade or sell the Trigger PLUS easily. Since other broker-dealers may
not participate significantly in the secondary market for the Trigger PLUS, the price at which you may be
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Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of Worst Performing of the iShares® Silver Trust and the iShares® 20+ Year Treasury Bond ETF due September 30, 2021
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
able
to trade your Trigger PLUS 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 Trigger PLUS, it is likely that there would be no secondary market for
the Trigger PLUS. Accordingly, you should be willing to hold your Trigger PLUS to maturity.
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Hedging and trading activity by our affiliates could potentially adversely affect the value
of the Trigger PLUS. 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 Trigger PLUS (and possibly to other instruments linked to the underlying shares, the underlying
commodity with respect to the SLV Shares or the share underlying index with respect to the TLT Shares), including trading in the
securities that constitute the share underlying index. As a result, these entities may be unwinding or adjusting hedge positions
during the term of the Trigger PLUS, and the hedging strategy may involve greater and more frequent dynamic adjustments to the
hedge as the valuation date approaches. Some of our affiliates also trade the underlying shares and other financial instruments
related to the underlying shares, the underlying commodity and the share underlying index on a regular basis as part of their general
broker-dealer and other businesses. Any of these hedging or trading activities on or prior to the pricing date could have increased
the initial share price of either of the underlying shares, and, therefore, could have increased the value at or above which such
underlying shares must close on the valuation date so that investors do not suffer a significant loss on their initial investment
in the Trigger PLUS (depending also on the performance of the other underlying shares). Additionally, such hedging or trading activities
during the term of the Trigger PLUS, including on the valuation date, could adversely affect the value of either of the underlying
shares on the valuation date, and, accordingly, the amount of cash an investor will receive at maturity, if any (depending also
on the performance of the other underlying shares).
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The calculation agent, which is a subsidiary of Morgan Stanley and an affiliate of MSFL, will
make determinations with respect to the Trigger PLUS. As calculation agent, MS & Co. has determined the initial share prices
and the trigger levels, will determine the final share prices, including whether either of the underlying shares have decreased
to below the respective trigger level, whether a market disruption event has occurred and whether to make any adjustments to the
adjustment factors and will calculate the amount of cash you receive at maturity, if any. Moreover, certain determinations made
by MS & Co., in its capacity as calculation agent, may require it to exercise discretion and make subjective judgments, such
as with respect to the occurrence or non-occurrence of market disruption events or calculation of the final share price in the
event of a market disruption event. These potentially subjective determinations may adversely affect the payout to you at maturity,
if any. For further information regarding these types of determinations, see “Additional Terms of the Securities—Additional
Terms—Calculation agent,” “—Closing price,” “—Market disruption event,” “—Postponement
of the valuation date,” “—Discontinuance of the SLV Shares; alteration of method of calculation” “—Discontinuance
of the TLT Shares and/or the share underlying index; alteration of method of calculation,” “—Antidilution adjustments”
and “—Alternate exchange calculation in case of an event of default” below. In addition, MS & Co. has determined
the estimated value of the Trigger PLUS on the pricing date.
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The U.S. federal income tax consequences of an investment in the Trigger PLUS are uncertain.
Please note that the discussions in this document concerning the U.S. federal income tax consequences of an investment in the
Trigger PLUS supersede the discussions contained in the accompanying prospectus supplement.
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Subject to the discussion under
“United States Federal Taxation” in this document, although there is uncertainty regarding the U.S. federal income
tax consequences of an investment in the Trigger PLUS due to the lack of governing authority, in the opinion of our counsel, Davis
Polk & Wardwell LLP (“our counsel”), under current law, and based on current market conditions, each Trigger PLUS
should be treated as a single financial contract that is an “open transaction” for U.S. federal income tax purposes.
Because the Trigger PLUS are linked
to shares of exchange-traded funds, although the matter is not clear, there is a substantial risk that an investment in the Trigger
PLUS will be treated as a “constructive ownership transaction.” If this treatment applies, all or a portion of any
long-term capital gain of a U.S. Holder (as defined below) in respect of the Trigger PLUS could be recharacterized as ordinary
income (in which case an interest charge would be imposed). U.S. Holders should read the section entitled “United States
Federal Taxation — Tax Consequences to U.S. Holders — Tax Treatment of the Trigger PLUS — Potential Application
of the Constructive Ownership Rule” in this document.
If the Internal Revenue Service
(the “IRS”) were successful in asserting an alternative treatment for the Trigger PLUS, the timing and character of
income on the Trigger PLUS might differ significantly from the tax treatment described herein. For
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of Worst Performing of the iShares® Silver Trust and the iShares® 20+ Year Treasury Bond ETF due September 30, 2021
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
example, under one possible treatment,
the IRS could seek to recharacterize the Trigger PLUS as debt instruments. In that event, U.S. Holders would be required to accrue
into income original issue discount on the Trigger PLUS every year at a “comparable yield” determined at the time of
issuance and recognize all income and gain in respect of the Trigger PLUS as ordinary income. The risk that financial instruments
providing for buffers, triggers or similar downside protection features, such as the Trigger PLUS, would be recharacterized as
debt is greater than the risk of recharacterization for comparable financial instruments that do not have such features. We do
not plan to request a ruling from the IRS regarding the tax treatment of the Trigger PLUS, and the IRS or a court may not agree
with the tax treatment described herein.
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. The notice focuses in particular on whether to require holders of these instruments to accrue income over
the term of their investment. It also asks for comments on a number of related topics, including the character of income or loss
with respect to these instruments; whether short-term instruments should be subject to any such accrual regime; the relevance of
factors such as the exchange-traded status of the instruments and the nature of the underlying property to which the instruments
are linked; the degree, if any, to which income (including any mandated accruals) realized by Non-U.S. Holders (as defined below)
should be subject to withholding tax; and whether these instruments are or should be subject to the “constructive ownership”
rule, as discussed above. While the notice requests comments on appropriate transition rules and effective dates, 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 Trigger PLUS, possibly with retroactive effect.
Both U.S. and Non-U.S. Holders
should read carefully the discussion under “United States Federal Taxation” in this document and consult their tax
advisers regarding all aspects of the U.S. federal tax consequences of an investment in the Trigger PLUS as well as any tax consequences
arising under the laws of any state, local or non-U.S. taxing jurisdiction.
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of Worst Performing of the iShares® Silver Trust and the iShares® 20+ Year Treasury Bond ETF due September 30, 2021
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
iShares® Silver Trust Overview
The iShares® Silver Trust (the “Silver
Trust”) is an investment trust sponsored by iShares® Delaware Trust Sponsor LLC , which seeks to provide
investment results that reflect the performance of the price of silver, less the iShares® Silver Trust’s
expenses and liabilities. The assets of the iShares® Silver Trust consists primarily of silver held by a custodian
on behalf of the iShares® Silver Trust. Information provided to or filed with the Securities and Exchange Commission
(the “Commission”) by the iShares® Silver Trust pursuant to the Securities Act of 1933 can be located
by reference to Commission file number 333-61001 through the Commission’s website at www.sec.gov. In addition, information
may be obtained from other publicly available sources. Neither the issuer nor the agent makes any representation that any
such publicly available information regarding the iShares® Silver Trust is accurate or complete.
All information contained in this document regarding the iShares® Silver
Trust (the “Silver Trust”), has been derived from publicly available information, without independent verification.
This information reflects the policies of, and is subject to change by, iShares® Delaware Trust Sponsor LLC,
a subsidiary of BlackRock, Inc., the sponsor of the Silver Trust. The Bank of New York Mellon is the trustee of the Silver Trust,
and JPMorgan Chase Bank, N.A. is the custodian of the Silver Trust. Shares of the Silver Trust trades under the ticker symbol “SLV”
on NYSE Arca, Inc.
The Silver Trust seeks to reflect generally the performance of
the price of silver, less the Silver Trust’s expenses and liabilities. The assets of the Silver Trust consist primarily of
silver held by a custodian on behalf of the Silver Trust. The Silver Trust issues shares in exchange for deposits of silver and
distributes silver in connection with the redemption of shares. The shares of the Silver Trust are intended to constitute a simple
and cost-effective means of making an investment similar to an investment in silver.
The Silver Trust does not engage in any activity designed to
derive a profit from changes in the price of silver. The Silver Trust’s only ordinary recurring expense is expected to be
the sponsor’s fee, which accrues daily at an annualized rate equal to 0.50% of the net asset value of the Silver Trust and
is payable monthly in arrears. The trustee of the Silver Trust will, when directed by the sponsor of the Silver Trust, and, in
the absence of such direction, may in its discretion, sell silver in such quantity and at such times as may be necessary to permit
payment of the Silver Trust sponsor’s fee and of Silver Trust expenses or liabilities not assumed by the sponsor. As a result
of the recurring sales of silver necessary to pay the Silver Trust sponsor’s fee and the Silver Trust expenses or liabilities
not assumed by the Silver Trust sponsor, the net asset value of the Silver Trust will decrease over time.
Information as of market close on September 27, 2019:
Bloomberg Ticker Symbol:
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SLV
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Current Share Price:
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$16.36
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52 Weeks Ago:
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$13.41
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52 Week High (on 9/4/2019):
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$18.34
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52 Week Low (on 11/13/2018):
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$13.15
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The following table sets forth the published high and low closing
prices, as well as the end-of-quarter closing prices, of the SLV Shares for each quarter from January 1, 2014 through September
27, 2019. The closing price of the SLV Shares on September 27, 2019 was $16.36. We obtained the information in the table and graph
below from Bloomberg Financial Markets, without independent verification. The SLV Shares have at times experienced periods of high
volatility, and you should not take the historical values of the SLV Shares as an indication of future performance.
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of Worst Performing of the iShares® Silver Trust and the iShares® 20+ Year Treasury Bond ETF due September 30, 2021
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
iShares® Silver Trust (CUSIP: 46428Q109)
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High ($)
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Low ($)
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Period End ($)
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2014
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First Quarter
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21.18
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18.45
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19.04
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Second Quarter
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20.25
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18.02
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20.25
|
Third Quarter
|
20.57
|
16.35
|
16.35
|
Fourth Quarter
|
16.81
|
14.66
|
15.06
|
2015
|
|
|
|
First Quarter
|
17.61
|
14.84
|
15.93
|
Second Quarter
|
16.89
|
15.03
|
15.03
|
Third Quarter
|
14.99
|
13.56
|
13.87
|
Fourth Quarter
|
15.42
|
13.06
|
13.19
|
2016
|
|
|
|
First Quarter
|
15.16
|
13.17
|
14.68
|
Second Quarter
|
17.87
|
14.20
|
17.87
|
Third Quarter
|
19.60
|
17.62
|
18.20
|
Fourth Quarter
|
17.87
|
14.91
|
15.11
|
2017
|
|
|
|
First Quarter
|
17.44
|
15.44
|
17.25
|
Second Quarter
|
17.53
|
15.30
|
15.71
|
Third Quarter
|
17.10
|
14.73
|
15.74
|
Fourth Quarter
|
16.41
|
14.85
|
15.99
|
2018
|
|
|
|
First Quarter
|
16.56
|
15.28
|
15.41
|
Second Quarter
|
16.26
|
15.07
|
15.15
|
Third Quarter
|
15.17
|
13.23
|
13.73
|
Fourth Quarter
|
14.52
|
13.15
|
14.52
|
2019
|
|
|
|
First Quarter
|
15.07
|
14.07
|
14.18
|
Second Quarter
|
14.46
|
13.46
|
14.33
|
Third Quarter (through September 27, 2019)
|
18.34
|
14.05
|
16.36
|
SLV Shares Daily Closing Prices
January 1, 2014 to September 27, 2019
|
|
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of Worst Performing of the iShares® Silver Trust and the iShares® 20+ Year Treasury Bond ETF due September 30, 2021
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
This document relates only to the Trigger PLUS referenced
hereby and does not relate to the SLV Shares. We have derived all disclosures contained in this document regarding the
Silver Trust from the publicly available documents described above. In connection with the offering of the Trigger PLUS,
neither we nor the agent has participated in the preparation of such documents or made any due diligence inquiry with respect to
the Silver Trust. Neither we nor the agent makes any representation that such publicly available documents or any other
publicly available information regarding the Silver Trust is accurate or complete. Furthermore, we cannot give any assurance
that all events occurring prior to the date hereof (including events that would affect the accuracy or completeness of the publicly
available documents described above) that would affect the trading price of the SLV Shares (and therefore the price of the SLV
Shares at the time we priced the Trigger PLUS) have been publicly disclosed. Subsequent disclosure of any such events
or the disclosure of or failure to disclose material future events concerning the Silver Trust could affect the value received
with respect to the Trigger PLUS and therefore the value of the Trigger PLUS.
Neither we nor any of our affiliates makes any representation
to you as to the performance of the SLV Shares.
We and/or our affiliates may presently or from time to time engage
in business with the Silver Trust. In the course of such business, we and/or our affiliates may acquire non-public information
with respect to the Silver Trust, and neither we nor any of our affiliates undertakes to disclose any such information to you. In
addition, one or more of our affiliates may publish research reports with respect to the SLV Shares. The statements
in the preceding two sentences are not intended to affect the rights of investors in the Trigger PLUS under the securities laws. As
a purchaser of the Trigger PLUS, you should undertake an independent investigation of the Silver Trust as in your judgment is appropriate
to make an informed decision with respect to an investment linked to the SLV Shares.
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of Worst Performing of the iShares® Silver Trust and the iShares® 20+ Year Treasury Bond ETF due September 30, 2021
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
iShares® 20+ Year Treasury Bond
ETF Overview
The iShares®
20+ Year Treasury Bond ETF is an exchange-traded fund that seeks to provide investment results that correspond generally, before
fees and expenses, to an index composed of U.S. Treasury bonds with remaining maturities of twenty years or more. On March 31,
2016, the iShares® 20+ Year Treasury Bond ETF ceased tracking the Barclays U.S. Treasury Bond Index and began tracking
the ICE U.S. Treasury 20+ Year Bond Index (the “ICE 20+ Year Index”). The ICE 20+ Year Bond Index measures the performance
of the U.S. dollar-denominated, fixed-rate U.S. Treasury market that has a remaining maturity of greater than or equal to 20 years.
The iShares®
20+ Year Treasury Bond ETF is managed by iShares Trust (“iShares”), a registered investment company that consists of
numerous separate investment portfolios, including the iShares® 20+ Year Treasury Bond ETF. Information provided
to or filed with the Commission by iShares pursuant to the Securities Act of 1933 and the Investment Company Act of 1940 can be
located by reference to Commission file numbers 333-92935 and 811-09729, respectively,
through the Commission’s website at www.sec.gov. In addition, information may be obtained from other publicly
available sources. Neither the issuer nor the agent makes any representation that such publicly available documents
or any other publicly available information regarding the iShares® 20+ Year Treasury Bond ETF is accurate or complete.
Information as of market close on September 27, 2019:
Bloomberg Ticker Symbol:
|
TLT
|
Current Share Price:
|
$142.73
|
52 Weeks Ago:
|
$117.60
|
52 Week High (on 8/28/2019):
|
$147.80
|
52 Week Low (on 11/2/2018):
|
$112.02
|
The following table sets forth the published high and low closing
prices, as well as the end-of-quarter closing prices, of the TLT Shares for each quarter from January 1, 2014 through September
27, 2019. The closing price of the TLT Shares on September 27, 2019 was $142.73. We obtained the information in the table and graph
below from Bloomberg Financial Markets, without independent verification. The TLT Shares have at times experienced periods of high
volatility, and you should not take the historical values of the TLT Shares as an indication of future performance.
iShares® 20+ Year Treasury Bond ETF (CUSIP: 464287432)
|
High ($)
|
Low ($)
|
Period End ($)
|
2014
|
|
|
|
First Quarter
|
109.99
|
102.17
|
109.10
|
Second Quarter
|
114.76
|
107.27
|
113.52
|
Third Quarter
|
119.05
|
110.68
|
116.27
|
Fourth Quarter
|
127.60
|
117.20
|
125.92
|
2015
|
|
|
|
First Quarter
|
138.28
|
123.50
|
130.69
|
Second Quarter
|
132.13
|
115.23
|
117.46
|
Third Quarter
|
126.40
|
115.62
|
123.54
|
Fourth Quarter
|
124.56
|
118.33
|
120.58
|
2016
|
|
|
|
First Quarter
|
133.72
|
120.96
|
130.61
|
Second Quarter
|
139.46
|
127.25
|
138.90
|
Third Quarter
|
143.60
|
133.67
|
137.51
|
Fourth Quarter
|
136.81
|
116.82
|
119.13
|
2017
|
|
|
|
First Quarter
|
122.58
|
116.51
|
120.71
|
Second Quarter
|
128.26
|
120.48
|
125.12
|
Third Quarter
|
129.28
|
122.72
|
124.76
|
Fourth Quarter
|
128.35
|
122.43
|
126.86
|
2018
|
|
|
|
First Quarter
|
126.09
|
116.74
|
121.90
|
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of Worst Performing of the iShares® Silver Trust and the iShares® 20+ Year Treasury Bond ETF due September 30, 2021
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
iShares® 20+ Year Treasury Bond ETF (CUSIP: 464287432)
|
High ($)
|
Low ($)
|
Period End ($)
|
Second Quarter
|
122.24
|
116.21
|
121.72
|
Third Quarter
|
122.75
|
116.61
|
117.27
|
Fourth Quarter
|
121.51
|
112.00
|
121.51
|
2019
|
|
|
|
First Quarter
|
126.56
|
118.66
|
126.44
|
Second Quarter
|
132.90
|
122.21
|
132.81
|
Third Quarter (through September 27, 2019)
|
147.80
|
130.10
|
142.74
|
TLT Shares Daily Closing Prices
January 1, 2014 to September 27, 2019
|
|
This document relates only to the Trigger PLUS referenced
hereby and does not relate to the TLT Shares. We have derived all disclosures contained in this document regarding iShares from
the publicly available documents described above. In connection with the offering of the Trigger PLUS, neither we nor the agent
has participated in the preparation of such documents or made any due diligence inquiry with respect to iShares. Neither we nor
the agent makes any representation that such publicly available documents or any other publicly available information regarding
iShares is accurate or complete. Furthermore, we cannot give any assurance that all events occurring prior to the date hereof (including
events that would affect the accuracy or completeness of the publicly available documents described above) that would affect the
trading price of the TLT Shares (and therefore the price of the TLT Shares at the time we priced the Trigger PLUS) have been publicly
disclosed. Subsequent disclosure of any such events or the disclosure of or failure to disclose material future events concerning
iShares could affect the value received at maturity with respect to the Trigger PLUS and therefore the value of the Trigger PLUS.
Neither we nor any of our affiliates makes any representation
to you as to the performance of the TLT Shares.
We and/or our affiliates may presently or from time to time engage
in business with iShares. In the course of such business, we and/or our affiliates may acquire non-public information with respect
to iShares, and neither we nor any of our affiliates undertakes to disclose any such information to you. In addition, one or more
of our affiliates may publish research reports with respect to the TLT Shares. The statements in the preceding two sentences are
not intended to affect the rights of investors in the Trigger PLUS under the securities laws. As a purchaser of the Trigger PLUS,
you should undertake an independent investigation of iShares as in your judgment is appropriate to make an informed decision with
respect to an investment linked to the TLT Shares.
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of Worst Performing of the iShares® Silver Trust and the iShares® 20+ Year Treasury Bond ETF due September 30, 2021
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
“iShares®” is a registered mark
of BlackRock Institutional Trust Company, N.A. (“BTC”). The Trigger PLUS are not sponsored, endorsed, sold, or promoted
by BTC. BTC makes no representations or warranties to the owners of the Trigger PLUS or any member of the public regarding the
advisability of investing in the Trigger PLUS. BTC has no obligation or liability in connection with the operation, marketing,
trading or sale of the Trigger PLUS.
The ICE U.S. Treasury 20+ Year
Bond Index. The ICE U.S. Treasury 20+ Year Bond Index is a market value
weighted index calculated, published and disseminated daily by Intercontinental Exchange (“ICE”). The index is designed
to measure the U.S. Treasury market and includes U.S. dollar-denominated, fixed rate securities with terms to maturity greater
than or equal to twenty years.
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of Worst Performing of the iShares® Silver Trust and the iShares® 20+ Year Treasury Bond ETF due September 30, 2021
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
Additional Terms of the Trigger PLUS
Please read this information in conjunction with the summary
terms on the front cover of this document.
Additional Terms:
|
|
If the terms described herein are inconsistent with those described in the accompanying prospectus supplement or prospectus, the terms described herein shall control.
|
Underlying commodity (with respect to the SLV Shares):
|
Silver
|
Share underlying index (with respect to the TLT Shares):
|
The ICE U.S. Treasury 20+ Year Bond Index (the “ICE 20+ Year Index”)
|
Share underlying index publisher (with respect to the TLT Shares):
|
Intercontinental Exchange (“ICE”) or any successor thereof
|
Denominations:
|
$1,000 per Trigger PLUS and integral multiples thereof
|
Postponement of maturity date:
|
If the scheduled valuation date is not a trading day with respect to either of the underlying shares or if a market disruption event occurs with respect to either of the underlying shares on that day so that the valuation date is postponed and falls less than two business days prior to the scheduled maturity date, the maturity date of the Trigger PLUS will be postponed to the second business day following the latest valuation date as postponed with respect to either of the underlying shares.
|
Postponement of valuation date:
|
If a market disruption event occurs on the scheduled valuation date with respect to either of the underlying shares or if the scheduled valuation date is a non-trading day with respect to either of the underlying shares, the closing price for such underlying shares for the valuation date will be the closing price on the next trading day on which no market disruption event occurs; provided that the closing price for such underlying shares for the valuation date will not be determined on a date later than the fifth scheduled trading day following the valuation date and if such date is not a trading day with respect to such underlying shares or if there is a market disruption event with respect to such underlying shares on such date, the calculation agent will determine the closing price for such underlying shares for the valuation date as the arithmetic mean of the bid prices for such underlying shares for such date obtained from as many recognized dealers in such underlying shares, but not exceeding three, as will make such bid prices available to the calculation agent. Bids of MS & Co. or any of its affiliates may be included in the calculation of such mean, but only to the extent that any such bid is the highest of the bids obtained. If no bid prices are provided from any third-party dealers, the closing price will be determined by the calculation agent in its sole and absolute discretion (acting in good faith) taking into account any information that it deems relevant.
|
Relevant exchange:
|
With respect to the share 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.
|
Closing price:
|
With respect to each of the underlying shares, the closing price
on any trading day means:
(i) if
the underlying shares (or any such other security) are listed on a national securities exchange (other than the Nasdaq), the last
reported sale price, regular way, of the principal trading session on such day on
|
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of Worst Performing of the iShares® Silver Trust and the iShares® 20+ Year Treasury Bond ETF due September 30, 2021
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
|
the
principal national securities exchange registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
on which the underlying commodity ETF shares (or any such other security) are listed,
(ii) if
the underlying shares (or any such other security) are securities of Nasdaq, the official closing price published by Nasdaq on
such day, or
(iii) if
the underlying shares (or any such other security) are not listed on any national securities exchange but are included in the OTC
Bulletin Board Service (the “OTC Bulletin Board”) operated by the Financial Industry Regulatory Authority, Inc. (“FINRA”),
the last reported sale price of the principal trading session on the OTC Bulletin Board on such day.
If the underlying shares (or any such other security)
are listed on any national securities exchange but the last reported sale price or the official closing price published by Nasdaq,
as applicable, is not available pursuant to the preceding sentence, then the closing price for one underlying commodity share
(or one unit of any such other security) on any trading day will mean the last reported sale price of the principal trading session
on the over-the-counter market as reported on Nasdaq or the OTC Bulletin Board on such day. If a market disruption event (as defined
below) occurs with respect to the underlying shares (or any such other security) or the last reported sale price or the official
closing price published by Nasdaq, as applicable, for the underlying shares (or any such other security) is not available pursuant
to either of the two preceding sentences, then the closing price for any trading day will be the mean, as determined by the calculation
agent, of the bid prices for the underlying shares (or any such other security) for such trading day obtained from as many recognized
dealers in such security, but not exceeding three, as will make such bid prices available to the calculation agent. Bids of MS
& Co. and its successors or any of its affiliates may be included in the calculation of such mean, but only to the extent
that any such bid is the highest of the bids obtained. If no bid prices are provided from any third party dealers, the closing
price will be determined by the calculation agent in its sole and absolute discretion (acting in good faith) taking into account
any information that it deems relevant. The term “OTC Bulletin Board Service” will include any successor service thereto.
See “Discontinuance of either of the underlying shares; alteration of method of calculation” below.
|
Business day:
|
Any day other than a Saturday or Sunday which is neither a legal holiday nor a day on which banking institutions are required or authorized by law or regulation to close in New York, New York or the city and state of our principal place of business or a day on which transactions in U.S. dollars are not conducted.
|
Trading day:
|
Trading day means, in respect of the SLV Shares, a day, as determined
by the calculation agent, on which NYSE Arca (or if NYSE Arca is no longer the principal exchange or trading market for the SLV
Shares, such exchange or principal trading market for the SLV Shares that serves as the price-source for the SLV Shares) is open
for trading during its regular session, notwithstanding such exchange or principal trading market closing prior to its scheduled
closing time.
Trading day means, in respect of the TLT Shares, a day,
as determined by the calculation agent, that is a day on which the relevant exchange for such underlying shares is open for trading
during its regular trading session, notwithstanding any such relevant exchange closing prior to its scheduled closing time.
|
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of Worst Performing of the iShares® Silver Trust and the iShares® 20+ Year Treasury Bond ETF due September 30, 2021
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
Trustee:
|
The Bank of New York Mellon
|
Calculation agent:
|
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 and on us.
All calculations with respect to the payment at maturity,
if any, will be made by the calculation agent and will 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 Trigger PLUS, if any, will 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 number of Trigger PLUS, if any, will be rounded
to the nearest cent, with one-half cent rounded upward.
|
Market disruption event:
|
With respect to the SLV Shares, market disruption event means:
(i) the
occurrence of existence of any of:
a. a suspension,
absence or material limitation of trading of the SLV Shares on the primary market for the SLV Shares for more than two hours of
trading or during the one-half hour period preceding the close of the principal trading session in such market; or a breakdown
or failure in the price and trade reporting systems of the primary market for the SLV Shares as a result of which the reported
trading prices for the SLV Shares during the last one-half hour preceding the close of the principal trading session in such market
are materially inaccurate; or the suspension, absence or material limitation of trading on the primary market for trading in futures
or options contracts related to the SLV Shares, if available, during the one-half hour period preceding the close of the principal
trading session in the applicable market; or
b. a suspension,
material limitation or absence of trading on any major U.S. securities market for trading in futures or options contracts related
to the SLV Shares 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 Trigger PLUS.
For the purpose of determining whether a market disruption
event in respect of the SLV Shares has occurred: (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 market, (2) a decision to
permanently discontinue trading in the SLV Shares or in the relevant futures or options contract
|
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of Worst Performing of the iShares® Silver Trust and the iShares® 20+ Year Treasury Bond ETF due September 30, 2021
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
|
will not constitute a market disruption event, (3) a suspension
of trading in futures or options contracts on the SLV Shares by the primary securities market trading in such contracts 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 (c) a disparity in bid and ask quotes relating to such contracts will constitute a suspension, absence or material limitation
of trading in futures or options contracts related to the SLV Shares and (4) a “suspension, absence or material limitation
of trading” on the primary market on which futures or options contracts related to the SLV Shares are traded will not include
any time when such securities market is itself closed for trading under ordinary circumstances.
With respect to the TLT Shares, market disruption event means:
(i) the occurrence or existence of any of:
(a) a suspension, absence or material limitation
of trading of the TLT Shares on the primary market for the TLT Shares for more than two hours of trading or during the one-half
hour period preceding the close of the principal trading session in such market; or a breakdown or failure in the price and trade
reporting systems of the primary market for the TLT Shares as a result of which the reported trading prices for the TLT Shares
during the last one-half hour preceding the close of the principal trading session in such market are materially inaccurate; or
the suspension, absence or material limitation of trading on the primary market for trading in futures or options contracts related
to the TLT Shares, if available, during the one-half hour period preceding the close of the principal trading session in the applicable
market, in each case as determined by the calculation agent in its sole discretion; or
(b) a suspension, absence or material limitation
of trading of securities then constituting 20 percent or more of the value of the share underlying index for the TLT Shares 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), in each case as determined by the calculation agent in its
sole discretion; or
(c) the suspension, material limitation or absence
of trading on any major U.S. securities market for trading in futures or options contracts related to the share underlying index
or the underlying shares 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 Trigger PLUS.
For the purpose of determining whether a market disruption event
exists at any time with respect to the TLT Shares, if trading in a security included in the share underlying index is materially
suspended or materially limited at that time, then the relevant percentage contribution of that security to the level of the share
underlying index will be based on a comparison of (x) the portion of the level of the share underlying index attributable to that
security relative to (y) the overall level of the share underlying index, in each case immediately before that suspension or limitation.
For the purpose of determining whether a market disruption
event has occurred with respect to the TLT Shares: (1) a limitation on the hours or number of days of
|
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of Worst Performing of the iShares® Silver Trust and the iShares® 20+ Year Treasury Bond ETF due September 30, 2021
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
|
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 TLT Shares or in the futures or options contract related to the share underlying index or the TLT Shares will not constitute a market disruption event, (3) a suspension of trading in futures or options contracts on the share underlying index or the TLT Shares by the primary securities market trading in such contracts 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 (c) a disparity in bid and ask quotes relating to such contracts will constitute a suspension, absence or material limitation of trading in futures or options contracts related to the share underlying index or the TLT Shares 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 related to the share underlying index or the TLT Shares are traded will not include any time when such securities market is itself closed for trading under ordinary circumstances. Regarding any permanent discontinuance of trading in the TLT Shares, see “Discontinuance of the TLT Shares and/or the share underlying index; alteration of method of calculation” below.
|
Discontinuance of the SLV Shares; alteration of method of calculation:
|
If trading in the SLV Shares on every applicable national securities exchange is permanently discontinued or the SLV Shares are liquidated or otherwise terminated (an “SLV discontinuance or liquidation event”), the Trigger PLUS will be deemed accelerated to the fifth business day following the date notice of such SLV discontinuance or liquidation event is provided to holders of the SLV Shares under the terms of the SLV Shares (the date of such notice, the “liquidation announcement date” and the fifth business day following the liquidation announcement date, the “acceleration date”), and the payment to you on the acceleration date will be equal to the fair market value of the Trigger PLUS on the trading day immediately following the liquidation announcement date as determined by the calculation agent in its sole discretion based on its internal models, which will take into account the reasonable costs incurred by us or any of our affiliates in unwinding any related hedging arrangements.
|
Discontinuance of the TLT Shares and/or the share underlying index; alteration of method of calculation:
|
If trading in the TLT Shares on every applicable national securities
exchange, on the OTC Bulletin Board and in the over-the-counter market is permanently discontinued or the iShares®
20+ Year Treasury Bond ETF is liquidated or otherwise terminated (a “TLT discontinuance or liquidation event”), the
closing price of the TLT Shares on any trading day following the TLT discontinuance or liquidation event will be determined by
the calculation agent and will be deemed to equal the product of (i) the closing value of the share underlying index for the TLT
Shares (or any successor index, as described below) on such date (taking into account any material changes in the method of calculating
the share underlying index following such TLT discontinuance or liquidation event) and (ii) a fraction, the numerator of which
is the closing price of the TLT Shares and the denominator of which is the closing value of the share underlying index (or any
successor index, as described below), each determined as of the last day prior to the occurrence of the TLT discontinuance or liquidation
event on which a closing price was available.
If, subsequent to a TLT discontinuance or liquidation
event, the share underlying index publisher discontinues publication of the share underlying index and the share 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 the share underlying index (such
|
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of Worst Performing of the iShares® Silver Trust and the iShares® 20+ Year Treasury Bond ETF due September 30, 2021
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
|
index being referred to herein as a “successor index”),
then any subsequent closing price for the TLT Shares on any trading day following a TLT discontinuance or liquidation event will
be determined by reference to the published value of such successor index at the regular weekday close of trading on such trading
day, and, to the extent the value of the successor index differs from the value of the share underlying index at the time of such
substitution, proportionate adjustments shall be made by the calculation agent for purposes of calculating payments on the Trigger
PLUS.
Upon any selection by the calculation agent of a successor index,
the calculation agent will cause written notice thereof to be furnished to the trustee, to us and to the depositary, as holder
of the Trigger PLUS, 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, subsequent to a TLT discontinuance or liquidation
event, the share underlying index publisher discontinues publication of the share underlying index prior to, and such discontinuance
is continuing on, the valuation date, and the calculation agent determines, in its sole discretion, that no successor index is
available at such time, then the calculation agent will determine the closing price for the TLT Shares for such date. Such closing
price will be computed by the calculation agent in accordance with the formula for and method of calculating such share underlying
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 composing the share underlying index without any rebalancing or substitution of such securities following such discontinuance.
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Antidilution adjustments:
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If either of the underlying shares are subject to a share split
or reverse share split, then once such split has become effective, the adjustment factor for such underlying shares will be adjusted
by the calculation agent to equal the product of the prior adjustment factor and the number of shares issued in such share split
or reverse share split with respect to one share of such underlying shares.
No adjustment to an adjustment factor pursuant to the paragraph
above will be required unless such adjustment would require a change of at least 0.1% in the amount being adjusted as then in effect.
Any number so adjusted will be rounded to the nearest one hundred-thousandth with five one-millionths being rounded upward.
The calculation agent will be solely responsible for
the determination and calculation of any adjustments to the adjustment factors or method of calculating the adjustment factors
and of any related determinations, and its determinations and calculations with respect thereto will be conclusive in the absence
of manifest error.
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Alternate exchange calculation in case
of an event of default:
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If an event of default with respect to the Trigger PLUS shall have occurred and be continuing, the amount declared due and payable upon any acceleration of the Trigger PLUS (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 Trigger PLUS as of that day and as if no default or acceleration had occurred, or to undertake other
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Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of Worst Performing of the iShares® Silver Trust and the iShares® 20+ Year Treasury Bond ETF due September 30, 2021
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
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obligations providing substantially equivalent economic value
to you with respect to the Trigger PLUS. 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 Trigger PLUS in preparing any documentation
necessary for this assumption or undertaking.
During the default quotation period for the Trigger PLUS, which
we describe below, the holders of the Trigger PLUS 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 MSFL or Morgan Stanley, then depending
on applicable bankruptcy law, your claim may be limited to an amount that could be less than the Acceleration Amount.
If the maturity of the Trigger PLUS 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 Trigger PLUS 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 valuation date, then the Acceleration
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Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of Worst Performing of the iShares® Silver Trust and the iShares® 20+ Year Treasury Bond ETF due September 30, 2021
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
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Amount will equal the principal amount of the Trigger PLUS.
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 notice 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 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 Trigger PLUS by mailing notice of such postponement
by first class mail, postage prepaid, to such registered holder’s last address as it shall appear upon the registry books,
(ii) to the trustee by facsimile confirmed by mailing such notice to the trustee by first class mail, postage prepaid, at its New
York office and (iii) to The Depository Trust Company (the “depositary”) by telephone or facsimile, confirmed by mailing
such notice to the depositary by first class mail, postage prepaid. Any notice that is mailed to a registered holder of the Trigger
PLUS 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 actual valuation 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 Trigger PLUS, on or prior to 10:30 a.m. (New York City time) on the
business day preceding the maturity date, and (ii) deliver the aggregate cash amount due with respect to the Trigger PLUS, if
any, to the trustee for delivery to the depositary, as holder of the Trigger PLUS, on the maturity date.
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Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of Worst Performing of the iShares® Silver Trust and the iShares® 20+ Year Treasury Bond ETF due September 30, 2021
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities