CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities Offered
|
|
Maximum Aggregate Offering Price
|
|
Amount of Registration Fee
|
Contingent Income Auto-Callable Securities due 2024
|
|
$806,000
|
|
$104.62
|
|
|
|
|
|
October 2019
Pricing Supplement No. 2,684
Registration Statement Nos.
333-221595; 333-221595-01
Dated October 18, 2019
Filed pursuant to Rule 424(b)(2)
Morgan
Stanley Finance LLC
Structured
Investments
Opportunities in U.S. and International Equities
Contingent Income Auto-Callable Securities due
October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst
Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR®
Fund
Fully and Unconditionally Guaranteed by Morgan
Stanley
Principal at Risk Securities
The securities are unsecured obligations of Morgan Stanley Finance
LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley. The securities have the terms
described in the accompanying product supplement, index supplement and prospectus, as supplemented or modified by this document. The
securities do not guarantee the repayment of principal and do not provide for the regular payment of interest. Instead,
the securities will pay a contingent quarterly coupon but only if the closing level of each of the EURO STOXX 50®
Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund is at or above 65%
of its respective initial level, which we refer to as the respective coupon threshold level, on the related observation
date. However, if the closing level of any underlying is less than its coupon threshold level on
any observation date, we will pay no interest for the related quarterly period. In addition, the securities will be
automatically redeemed if the closing level of each underlying is greater than or equal to its respective initial
level on any quarterly redemption determination date, for the early redemption payment equal to the sum of the stated principal
amount plus the related contingent quarterly coupon. No further payments will be made on the securities once they have
been redeemed. At maturity, if the securities have not previously been redeemed and the final level of each underlying
is greater than or equal to 55% of its respective initial level, which we refer to as the respective downside threshold
level, the payment at maturity will be the stated principal amount and, if the final level of each underlying is also greater than
or equal to its respective coupon threshold level, the related contingent quarterly coupon. If, however, the final level of any
underlying is less than its respective downside threshold level, investors will be fully exposed to the decline in the
worst performing underlying on a 1-to-1 basis and will receive a payment at maturity that is less than 55% of the stated
principal amount of the securities and could be zero. Accordingly, investors in the securities must be willing
to accept the risk of losing their entire initial investment and also the risk of not receiving any contingent quarterly coupons
throughout the 5-year term of the securities. Because all payments on the securities are based on the worst performing
of the underlyings, a decline beyond the respective coupon threshold level or respective downside threshold level, as applicable,
of any underlying will result in few or no contingent coupon payments or a significant loss of your investment, even if one or
both of the other underlyings have appreciated or have not declined as much. These long-dated securities are for investors
who are willing to risk their principal based on the worst performing of three underlyings and who seek an opportunity to earn
interest at a potentially above-market rate in exchange for the risk of receiving no quarterly coupons over the entire 5-year term,
with no possibility of being called out of the securities until after the initial 1-year non-call period. Investors
will not participate in any appreciation of any underlying. The securities are notes issued as part of MSFL’s
Series A Global Medium-Term Notes program.
All payments are subject to our credit risk. If
we default on our obligations, you could lose some or all of your investment. These securities are not secured obligations
and you will not have any security interest in, or otherwise have any access to, any underlying reference asset or assets.
FINAL TERMS
|
Issuer:
|
Morgan Stanley Finance LLC
|
Guarantor:
|
Morgan Stanley
|
Underlyings:
|
EURO STOXX 50® Index (the “SX5E Index”), NASDAQ-100 Index® (the “NDX Index”) and Energy Select Sector SPDR® Fund (the “XLE Shares”)
|
Aggregate principal amount:
|
$806,000
|
Stated principal amount:
|
$1,000 per security
|
Issue price:
|
$1,000 per security (see “Commissions and issue price” below)
|
Pricing date:
|
October 18, 2019
|
Original issue date:
|
October 23, 2019 (3 business days after the pricing date)
|
Maturity date:
|
October 23, 2024
|
Contingent quarterly coupon:
|
A contingent coupon will be paid on the securities on
each coupon payment date but only if the closing level of each underlying is at or above its respective coupon
threshold level on the related observation date. If payable, the contingent quarterly coupon will be an amount in
cash per stated principal amount corresponding to a return of 7.20% per annum for each interest payment period for each
applicable observation date.
If, on any observation date, the closing level of any underlying
is less than its respective coupon threshold level, we will pay no coupon for the applicable quarterly period. It is
possible that any underlying will remain below its respective coupon threshold level for extended periods of time or even throughout
the entire 5-year term of the securities so that you will receive few or no contingent quarterly coupons.
|
Payment at maturity:
|
If the securities have not been automatically redeemed prior
to maturity, the payment at maturity will be determined as follows:
If the final level of each underlying is greater than
or equal to its respective downside threshold level, investors will receive the stated principal amount and, if the final level
of each underlying is also greater than or equal to its respective coupon threshold level, the contingent quarterly coupon with
respect to the final observation date.
If the final level of any underlying is less than its
respective downside threshold level, investors will receive (i) the stated principal amount multiplied by (ii) the performance
factor of the worst performing underlying. Under these circumstances, the payment at maturity will be less than 55%
of the stated principal amount of the securities and could be zero.
|
|
Terms continued on the following page
|
Agent:
|
Morgan Stanley & Co. LLC (“MS & Co.”), an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley. See “Supplemental information regarding plan of distribution; conflicts of interest.”
|
Estimated value on the pricing date:
|
$938.70 per security. See “Investment Summary” beginning on page 3.
|
Commissions and issue price:
|
Price to public
|
Agent’s commissions(1)
|
Proceeds to us(2)
|
Per security
|
$1,000
|
$40.25
|
$959.75
|
Total
|
$806,000
|
$32,441.50
|
$773,558.50
|
|
(1)
|
Selected dealers and their financial advisors will
collectively receive from the agent, Morgan Stanley & Co. LLC, a fixed sales commission of $40.25 for each security they sell. See
“Supplemental information regarding plan of distribution; conflicts of interest.” For additional information, see
“Plan of Distribution (Conflicts of Interest)” in the accompanying product supplement for auto-callable securities.
|
|
(2)
|
See “Use of proceeds and hedging” on page
33.
|
The
securities involve risks not associated with an investment in ordinary debt securities. See “Risk Factors”
beginning on page 12.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these securities, or determined if this document or the accompanying product supplement,
index supplement and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The securities are not deposits or savings accounts and are
not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they obligations
of, or guaranteed by, a bank.
You should read this document together with the related product
supplement, index supplement and prospectus, each of which can be accessed via the hyperlinks below. Please also see
“Additional Terms of the Securities” and “Additional Information About the Securities” at the end of this
document.
As used in this document, “we,” “us”
and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
Terms continued from previous page:
|
Early redemption:
|
The securities are not subject to automatic early redemption
until one year after the original issue date. Following this initial 1-year non-call period, if, on any redemption determination
date, beginning on October 19, 2020, the closing level of each underlying is greater than or equal to its respective
initial level, the securities will be automatically redeemed for an early redemption payment on the related early redemption date. No
further payments will be made on the securities once they have been redeemed.
The securities will not be redeemed early on any early redemption
date if the closing level of any underlying is below the respective initial level for such underlying on the related redemption
determination date.
|
Early redemption payment:
|
The early redemption payment will be an amount equal to the stated principal amount for each security you hold plus the contingent quarterly coupon with respect to the related observation date.
|
Redemption determination dates:
|
Quarterly, as set forth under “Observation Dates, Redemption Determination Dates, Coupon Payment Dates and Early Redemption Dates” below, subject to postponement for non-index business days and non-trading days, as applicable, and certain market disruption events.
|
Early redemption dates:
|
Beginning on October 22, 2020, quarterly. See “Observation Dates, Redemption Determination Dates, Coupon Payment Dates and Early Redemption Dates” below. If any such day is not a business day, that early redemption payment will be made on the next succeeding business day and no adjustment will be made to any early redemption payment made on that succeeding business day
|
Downside threshold level:
|
With respect to the SX5E Index: 1,968.676, which is approximately
55% of its initial level
With respect to the NDX Index: 4,327.670, which is approximately
55% of its initial level
With respect to the XLE Shares: $31.367, which is approximately
55% of its initial level
|
Coupon threshold level:
|
With respect to the SX5E Index: 2,326.617, which is
approximately 65% of its initial level
With respect to the NDX Index: 5,114.519, which is approximately
65% of its initial level
With respect to the XLE Shares: $37.070, which is approximately
65% of its initial level
|
Initial level:
|
With respect to the SX5E Index: 3,579.41, which is its closing
level on the pricing date
With respect to the NDX Index: 7,868.491, which is its
closing level on the pricing date
With respect to the XLE Shares: $57.03, which is its closing
level on the pricing date
|
Final level:
|
With respect to each underlying, the respective closing level on the final observation date
|
Closing level:
|
With respect to each of the SX5E Index and the NDX Index,
on any index business day, the respective index closing value on such day
With respect to the XLE Shares, on any trading day, the closing
price of one XLE Share on such day times the adjustment factor on such day
|
Worst performing underlying:
|
The underlying with the largest percentage decrease from the respective initial level to the respective final level
|
Performance factor:
|
Final level divided by the initial level
|
Coupon payment dates:
|
Quarterly, beginning January 24, 2020, as set forth under “Observation Dates, Redemption Determination Dates, Coupon Payment Dates and Early Redemption Dates” below; provided that if any such day is not a business day, that coupon payment will be made on the next succeeding business day and no adjustment will be made to any coupon payment made on that succeeding business day. The contingent quarterly coupon, if any, with respect to the final observation date will be paid on the maturity date.
|
Observation dates:
|
Quarterly, as set forth under “Observation Dates, Redemption Determination Dates, Coupon Payment Dates and Early Redemption Dates” below, subject to postponement for non-index business days and non-trading days, as applicable, and certain market disruption events. We also refer to the observation date immediately prior to the scheduled maturity date as the final observation date.
|
Adjustment factor:
|
With respect to the XLE Shares, 1.0, subject to adjustment in the event of certain events affecting the XLE Shares
|
CUSIP / ISIN:
|
61769HZF5 / US61769HZF53
|
Listing:
|
The securities will not be listed on any securities exchange.
|
|
|
Observation Dates, Redemption
Determination Dates, Coupon Payment Dates and Early Redemption Dates
Observation Dates / Redemption Determination Dates
|
Coupon Payment Dates / Early Redemption Dates
|
January 21, 2020*
|
January 24, 2020*
|
April 20, 2020*
|
April 23, 2020*
|
July 20, 2020*
|
July 23, 2020*
|
October 19, 2020
|
October 22, 2020
|
January 19, 2021
|
January 22, 2021
|
April 19, 2021
|
April 22, 2021
|
July 19, 2021
|
July 22, 2021
|
October 18, 2021
|
October 21, 2021
|
January 18, 2022
|
January 21, 2022
|
April 18, 2022
|
April 21, 2022
|
July 18, 2022
|
July 21, 2022
|
October 18, 2022
|
October 21, 2022
|
January 18, 2023
|
January 23, 2023
|
April 18, 2023
|
April 21, 2023
|
July 18, 2023
|
July 21, 2023
|
October 18, 2023
|
October 23, 2023
|
January 18, 2024
|
January 23, 2024
|
April 18, 2024
|
April 23, 2024
|
July 18, 2024
|
July 23, 2024
|
October 18, 2024 (final observation date)
|
October 23, 2024 (maturity date)
|
* The securities are not subject to automatic early redemption
until the fourth coupon payment date, which is October 22, 2020.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
Investment Summary
Contingent Income Auto-Callable Securities
Principal at Risk Securities
Contingent Income Auto-Callable Securities due October 23, 2024,
with 1-Year Initial Non-Call Period All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50®
Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund (the “securities”)
do not provide for the regular payment of interest. Instead, the securities will pay a contingent quarterly coupon but
only if the closing level of each underlying is at or above its respective coupon threshold level on the
related observation date. However, if the closing level of any underlying is less than its respective coupon threshold
level on any observation date, we will pay no interest for the related quarterly period. If the closing level of
any underlying is less than its respective coupon threshold level on each observation date, you will not receive
any contingent quarterly coupon for the entire 5-year term of the securities. We refer to these coupons as contingent,
because there is no guarantee that you will receive a coupon payment on any coupon payment date. Even if each underlying
were to be at or above its respective coupon threshold level on some quarterly observation dates, they may not all close at or
above their respective coupon threshold levels on other observation dates, in which case you will not receive some contingent quarterly
coupon payments. In addition, if the securities have not been automatically called prior to maturity and the final level
of any underlying is less than its respective downside threshold level, investors will be fully exposed to the decline
in the worst performing underlying on a 1-to-1 basis, and will receive a payment at maturity that is less than 55% of the stated
principal amount of the securities and could be zero. Accordingly, investors in the securities must be willing
to accept the risk of losing their entire initial investment and also the risk of not receiving any contingent quarterly coupons
throughout the entire 5-year term of the securities.
Maturity:
|
5 years
|
Contingent quarterly coupon:
|
A contingent quarterly coupon will be paid on the securities on each coupon payment date but only if the closing level of each underlying is at or above its respective coupon threshold level on the related observation date. If payable, the contingent quarterly coupon will be an amount in cash per stated principal amount corresponding to a return of 7.20% per annum for each interest payment period for each applicable observation date. If, on any observation date, the closing level of any underlying is less than the respective coupon threshold level, we will pay no coupon for the applicable quarterly period.
|
Automatic early redemption beginning after one year:
|
If the closing level of each underlying is greater than or equal to its initial level on any quarterly redemption determination date, beginning on October 19, 2020 (approximately one year after the original issue date), the securities will be automatically redeemed for an early redemption payment equal to the stated principal amount plus the contingent quarterly coupon with respect to the related observation date. No further payments will be made on the securities once they have been redeemed.
|
Payment at maturity:
|
If the securities have not been automatically redeemed prior
to maturity, the payment at maturity will be determined as follows:
If the final level of each underlying is greater than
or equal to its respective downside threshold level, investors will receive the stated principal amount and, if the final level
of each underlying is also greater than or equal to its respective coupon threshold level, the contingent quarterly coupon with
respect to the final observation date.
If the final level of any underlying is less than
its threshold level, investors will receive a payment at maturity equal to the stated principal amount times the performance
factor of the worst performing underlying. Under these circumstances, the payment at maturity will be less than 55%
of the stated principal amount of the securities and could be zero. No quarterly coupon will be payable at maturity. Accordingly,
investors in the securities must be willing to accept the risk of losing their entire initial investment.
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
The original issue price of each security is $1,000. This
price includes costs associated with issuing, selling, structuring and hedging the securities, which are borne by you, and, consequently,
the estimated value of the securities on the pricing date is less than $1,000. We estimate that the value of each security
on the pricing date is $938.70.
What goes into the estimated value on the pricing date?
In valuing the securities on the pricing date, we take into account
that the securities comprise both a debt component and a performance-based component linked to the underlyings. The
estimated value of the securities is determined using our own pricing and valuation models, market inputs and assumptions relating
to the underlyings, instruments based on the underlyings, volatility and other factors including current and expected interest
rates, as well as an interest rate related to our secondary market credit spread, which is the implied interest rate at which our
conventional fixed rate debt trades in the secondary market.
What determines the economic terms of the securities?
In determining the economic terms of the securities, including
the contingent quarterly coupon rate, the coupon threshold levels and the downside threshold levels, we use an internal funding
rate, which is likely to be lower than our secondary market credit spreads and therefore advantageous to us. If the
issuing, selling, structuring and hedging costs borne by you were lower or if the internal funding rate were higher, one or more
of the economic terms of the securities would be more favorable to you.
What is the relationship between the estimated value on the
pricing date and the secondary market price of the securities?
The price at which MS & Co. purchases the securities in the
secondary market, absent changes in market conditions, including those related to the underlyings, may vary from, and be lower
than, the estimated value on the pricing date, because the secondary market price takes into account our secondary market credit
spread as well as the bid-offer spread that MS & Co. would charge in a secondary market transaction of this type and other
factors. However, because the costs associated with issuing, selling, structuring and hedging the securities are not
fully deducted upon issuance, for a period of up to 5 months following the issue date, to the extent that MS & Co. may buy
or sell the securities in the secondary market, absent changes in market conditions, including those related to the underlyings,
and to our secondary market credit spreads, it would do so based on values higher than the estimated value. We expect
that those higher values will also be reflected in your brokerage account statements.
MS & Co. may, but is not obligated to, make a market in the
securities, and, if it once chooses to make a market, may cease doing so at any time.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
Key Investment Rationale
The securities do not provide for the regular payment of interest. Instead,
the securities will pay a contingent quarterly coupon but only if the closing level of each underlying is at or
above its respective coupon threshold level on the related observation date. However, if the closing level of any
underlying is less than its respective coupon threshold level on any observation date, we will pay no interest
for the related quarterly period. The securities have been designed for investors who are willing to forgo market floating
interest rates and accept the risk of receiving no coupon payments for the entire 5-year term of the securities in exchange for
an opportunity to earn interest at a potentially above-market rate if each underlying closes at or above its respective coupon
threshold level on the quarterly observation dates until the securities are redeemed early or reach maturity.
The following scenarios are for illustrative purposes only to
demonstrate how the coupon and the payment at maturity (if the securities have not previously been redeemed) are calculated, and
do not attempt to demonstrate every situation that may occur. Accordingly, the securities may or may not be redeemed,
the contingent quarterly coupon may be payable in none of, or some but not all of, the quarterly periods during the 5-year term
of the securities and the payment at maturity may be less than 55% of the stated principal amount of the securities and may be
zero.
Scenario 1: The securities are redeemed prior to maturity
|
This scenario assumes that, prior to early redemption, each underlying
closes at or above its coupon threshold level on some quarterly observation dates, but one or more underlyings close below
the respective coupon threshold level(s) on the others. Investors receive the contingent quarterly coupon, corresponding
to a return of 7.20% per annum, for the quarterly periods for which each closing level is at or above the respective coupon
threshold level on the related observation date, but not for the quarterly periods for which any closing level is below the respective
coupon threshold level on the related observation date.
When each underlying closes at or above its respective
initial level on a quarterly redemption determination date, the securities will be automatically redeemed for the stated
principal amount plus the contingent quarterly coupon with respect to the related observation date.
|
Scenario 2: The securities are not redeemed prior to maturity, and investors receive principal back at maturity
|
This scenario assumes that each underlying closes at or above
the respective coupon threshold level on some quarterly observation dates, but one or more underlyings close below the respective
coupon threshold level(s) on the others, and each underlying closes below its respective initial level on every quarterly redemption
determination date. Consequently, the securities are not automatically redeemed, and investors receive the contingent
quarterly coupon, corresponding to a return of 7.20% per annum, for the quarterly periods for which each closing level is
at or above the respective coupon threshold level on the related observation date, but not for the quarterly periods for which
any closing level is below the respective coupon threshold level on the related observation date.
On the final observation date, each underlying closes at or above
its downside threshold level. At maturity, investors will receive the stated principal amount and, if the final level
of each underlying is also greater than or equal to its respective coupon threshold level, the contingent quarterly coupon with
respect to the final observation date.
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
Scenario 3: The securities are not redeemed prior to maturity, and investors suffer a substantial loss of principal at maturity
|
This scenario assumes that each underlying closes at or above
its respective coupon threshold level on some quarterly observation dates, but one or more underlyings close below the respective
coupon threshold level(s) on the others, and each underlying closes below its respective initial level on every quarterly redemption
determination date. Consequently, the securities are not automatically redeemed, and investors receive the contingent
quarterly coupon, corresponding to a return of 7.20% per annum, for the quarterly periods for which each closing level is
at or above the respective coupon threshold level on the related observation date, but not for the quarterly periods for which
any closing level is below the respective coupon threshold level on the related observation date.
On the final observation date, one or more underlyings close
below the respective downside threshold level(s). At maturity, investors will receive an amount equal to the stated
principal amount multiplied by the performance factor of the worst performing underlying. Under these circumstances,
the payment at maturity will be less than 55% of the stated principal amount and could be zero. No coupon will be paid
at maturity in this scenario.
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
How the Securities Work
The following diagrams illustrate the potential outcomes for
the securities depending on (1) the closing levels on each quarterly observation date, (2) the closing levels on each quarterly
redemption determination date (starting after one year) and (3) the final levels. Please see “Hypothetical Examples”
beginning on page 9 for illustration of hypothetical payouts on the securities.
Diagram #1: Contingent Quarterly Coupons (Beginning
on the First Coupon Payment Date until Early Redemption or Maturity)
Diagram #2: Automatic Early Redemption (Starting
after one year)
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
Diagram #3: Payment at Maturity
if No Automatic Early Redemption Occurs
For more information about the payout upon an early redemption
or at maturity in different hypothetical scenarios, see “Hypothetical Examples” starting on page 9.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
Hypothetical Examples
The following hypothetical examples illustrate how to determine
whether a contingent quarterly coupon is paid with respect to an observation date and how to calculate the payment at maturity,
if any, if the securities have not been automatically redeemed early. The following examples are for illustrative purposes
only. Whether you receive a contingent quarterly coupon will be determined by reference to the closing level of each
underlying on each quarterly observation date, and the amount you will receive at maturity, if any, will be determined by reference
to the final level of each underlying on the final observation date. The actual initial level, coupon threshold level
and downside threshold level for each underlying are set forth on the cover of this document. All payments on the securities,
if any, are subject to our credit risk. The numbers in the hypothetical examples below may have been rounded for the
ease of analysis. The below examples are based on the following terms:
Contingent Quarterly Coupon:
|
A contingent quarterly coupon will be paid on the securities on each coupon payment date but only if the closing level of each underlying is at or above its respective coupon threshold level on the related observation date. If payable, the contingent quarterly coupon will be an amount in cash per stated principal amount corresponding to a return of 7.20% per annum for each interest payment period for each applicable observation date. These hypothetical examples reflect the contingent quarterly coupon rate of 7.20% per annum (corresponding to approximately $18.00 per quarter per security*).
|
Automatic Early Redemption (starting after one year):
|
If the closing level of each underlying is greater than or equal to its respective initial level on any quarterly redemption determination date, the securities will be automatically redeemed for an early redemption payment equal to the stated principal amount plus the contingent quarterly coupon with respect to the related observation date.
|
Payment at Maturity (if the securities have not been automatically redeemed early):
|
If the final level of each underlying is greater than
or equal to its respective downside threshold level, investors will receive the stated principal amount and, if the final level
of each underlying is also greater than or equal to its respective coupon threshold level, the contingent quarterly coupon with
respect to the final observation date.
If the final level of any underlying is less than
its respective downside threshold level, investors will receive a payment at maturity equal to the stated principal amount multiplied
by the performance factor of the worst performing underlying. Under these circumstances, the payment at maturity
will be less than 55% of the stated principal amount of the securities and could be zero.
|
Stated Principal Amount:
|
$1,000
|
Hypothetical Initial Level:
|
With respect to the SX5E Index: 3,500
With respect to the NDX Index: 7,500
With respect to the XLE Shares: $60
|
Hypothetical Coupon Threshold Level:
|
With respect to the SX5E Index: 2,275, which is 65% of the hypothetical
initial level for such underlying
With respect to the NDX Index: 4,875, which is 65% of the hypothetical
initial level for such underlying
With respect to the XLE Shares: $39, which is 65% of the hypothetical
initial level for such underlying
|
Hypothetical Downside Threshold level:
|
With respect to the SX5E Index: 1,925, which is 55% of the hypothetical
initial level for such underlying
With respect to the NDX Index: 4,125, which is 55% of the hypothetical
initial level for such underlying
With respect to the XLE Shares: $33, which is 55% of the hypothetical
initial level for such
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
* The actual contingent quarterly coupon will be an amount determined
by the calculation agent based on the number of days in the applicable payment period, calculated on a 30/360 basis. The
hypothetical contingent quarterly coupon of $18.00 is used in these examples for ease of analysis.
How to determine whether a contingent quarterly
coupon is payable with respect to an observation date:
|
Closing Level
|
Contingent Quarterly Coupon
|
|
SX5E Index
|
NDX Index
|
XLE Shares
|
Hypothetical Observation Date 1
|
2,500 (at or above the coupon threshold level)
|
5,280 (at or above the coupon threshold level)
|
$65 (at or above the coupon threshold level)
|
$18.00
|
Hypothetical Observation Date 2
|
1,800 (below the coupon threshold level)
|
5,525 (at or above the coupon threshold level)
|
$80 (at or above the coupon threshold level)
|
$0
|
Hypothetical Observation Date 3
|
2,400 (at or above the coupon threshold level)
|
3,950 (below the coupon threshold level)
|
$30 (below the coupon threshold level)
|
$0
|
Hypothetical Observation Date 4
|
2,000 (below the coupon threshold level)
|
4,080 (below the coupon threshold level)
|
$35 (below the coupon threshold level)
|
$0
|
On hypothetical observation date 1, each underlying closes at
or above its respective coupon threshold level. Therefore, a contingent quarterly coupon of $18.00 is paid on the relevant
coupon payment date.
On each of hypothetical observation dates 2 and 3, at least one
underlying closes at or above its respective coupon threshold level, but one or both of the other underlyings close below their
respective coupon threshold levels. Therefore, no contingent quarterly coupon is paid on the relevant coupon payment
date.
On hypothetical observation date 4, each underlying closes below
its respective coupon threshold level, and, accordingly, no contingent quarterly coupon is paid on the relevant coupon payment
date.
If the closing level of any underlying is less than its respective
coupon threshold level on each observation date, you will not receive any contingent quarterly coupons for the entire 5-year term
of the securities.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
How to calculate the payment at maturity (if
the securities have not been automatically redeemed):
Starting after one year, if the closing level of each underlying
is greater than or equal to its initial level on any quarterly redemption determination date, the securities will be automatically
redeemed for an early redemption payment equal to the stated principal amount for each security you hold plus the contingent
quarterly coupon with respect to the related observation date.
The examples below illustrate how to calculate the payment at
maturity if the securities have not been automatically redeemed prior to maturity.
|
Final Level
|
Payment at Maturity
|
|
SX5E Index
|
NDX Index
|
XLE Shares
|
Example 1:
|
1,800 (below the downside threshold level)
|
1,575 (below the downside threshold level)
|
$25 (at or above the downside threshold level)
|
$1,000 x performance factor of the worst performing underlying =
$1,000 x (1,575 / 3,500) = $450
|
Example 2:
|
1,200 (at or above the downside threshold level)
|
5,500 (at or above the downside threshold level)
|
$24 (below the downside threshold level)
|
$1,000 x ($24 / $60) = $400
|
Example 3:
|
1,575 (below the downside threshold level)
|
4,500 (below the downside threshold level)
|
$18 (below the downside threshold level)
|
$1,000 x ($18 / $60) = $300
|
Example 4:
|
1,050 (below the threshold level)
|
4,500 (below the threshold level)
|
$24 (below the downside threshold level)
|
$1,000 x (1,050 / 3,500) = $300
|
Example 5:
|
2,300 (at or above the downside threshold level and coupon threshold level)
|
5,500 (at or above the downside threshold level and coupon threshold level)
|
$75 (at or above the downside threshold level and coupon threshold level)
|
The stated principal amount + the contingent
quarterly coupon with respect to the final observation date.
For more information, please see
above under “How to determine whether a contingent quarterly coupon is payable with respect to an observation date.”
|
In examples 1 and 2, the final level(s) of one or two of the
underlyings are at or above the respective downside threshold level(s), but the final level(s) of one or both of the other underlyings
are below the respective downside threshold level(s). Therefore, investors are exposed to the downside performance of
the worst performing underlying at maturity and receive at maturity an amount equal to the stated principal amount multiplied
by the performance factor of the worst performing underlying. Moreover, investors do not receive any contingent
quarterly coupon for the final quarterly period.
Similarly, in examples 3 and 4, the final level of each underlying
is below its respective downside threshold level, and investors receive at maturity an amount equal to the stated principal amount
times the performance factor of the worst performing underlying. In example 3, the SX5E Index has declined 55%
from its initial level to its final level, the NDX Index has declined 40% from its initial level to its final level and the XLE
Shares have declined 70% from their initial level to their final level. Therefore, the payment at maturity equals the
stated principal amount multiplied by the performance factor of the XLE Shares, which represent the worst performing underlying
in this example. In example 4, the SX5E Index has declined 70% from its initial level to its final level, the NDX Index
has declined 60% from its initial level to its final level and the XLE Shares have declined 60% from their initial level to their
final level. Therefore, the payment at maturity equals the stated principal amount times the performance factor
of the SX5E Index, which is the worst performing underlying in this example. Moreover, investors do not receive the
contingent quarterly coupon for the final quarterly period.
In example 5, the final level of each underlying is at or above
its respective downside threshold level and coupon threshold level. Therefore, investors receive at maturity the stated
principal amount of the securities plus the contingent quarterly coupon with respect to the final observation date. However,
investors do not participate in any appreciation of the underlyings.
If the final level of ANY underlying is below its respective
downside threshold level, you will be exposed to the downside performance of the worst performing underlying at maturity, and your
payment at maturity will be less than $550 per security and could be zero.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
Risk Factors
The following is a list of certain key risk factors for investors
in the securities. For further discussion of these and other risks, you should read the section entitled “Risk
Factors” in the accompanying product supplement, index supplement and prospectus. We also urge you to consult
with your investment, legal, tax, accounting and other advisers in connection with your investment in the securities.
|
§
|
The securities do not guarantee the return of any
principal. The terms of the securities differ from those of ordinary debt securities in that they do not guarantee
the repayment of any principal. If the securities have not been automatically redeemed prior to maturity, and if the
final level of any underlying is less than its threshold level of 55% of its initial level, you will be exposed to the decline
in the final level of the worst performing underlying, as compared to its initial level, on a 1-to-1 basis, and you will receive
for each security that you hold at maturity an amount equal to the stated principal amount multiplied by the performance
factor of the worst performing underlying. In this case, the payment at maturity will be less than 55% of the stated
principal amount and could be zero.
|
|
§
|
The securities do not provide for the regular payment
of interest. The terms of the securities differ from those of ordinary debt securities in that they do not provide
for the regular payment of interest. Instead, the securities will pay a contingent quarterly coupon but only if
the closing level of each underlying is at or above its respective coupon threshold level on the related observation
date. If the closing level of any underlying is lower than its coupon threshold level on the relevant
observation date for any interest period, we will pay no coupon on the applicable coupon payment date. It is possible
that the closing level of any underlying will be less than its respective coupon threshold level for extended periods of
time or even throughout the entire term of the securities so that you will receive few or no contingent quarterly coupons. If
you do not earn sufficient contingent quarterly coupons over the term of the securities, the overall return on the securities may
be less than the amount that would be paid on a conventional debt security of ours of comparable maturity.
|
|
§
|
You are exposed to the price risk of each underlying,
with respect to both the contingent quarterly coupons, if any, and the payment at maturity, if any. Your return
on the securities is not linked to a basket consisting of the underlyings. Rather, it will be contingent upon the independent
performance of each underlying. Unlike an instrument with a return linked to a basket of underlying assets, in which
risk is mitigated and diversified among all the components of the basket, you will be exposed to the risks related to each underlying. Poor
performance by any underlying over the term of the securities will negatively affect your return and will not be offset
or mitigated by any positive performance by the other underlyings. To receive any contingent quarterly coupons,
each underlying must close at or above its respective coupon threshold level on the applicable observation date. In
addition, if the securities have not been automatically redeemed early and any underlying has declined to below its respective
downside threshold level as of the final observation date, you will be fully exposed to the decline in the worst performing
underlying over the term of the securities on a 1-to-1 basis, even if one or both of the other underlyings have appreciated or
have not declined as much. Under this scenario, the value of any such payment will be less than 55% of the stated principal
amount and could be zero. Accordingly, your investment is subject to the price risk of each underlying.
|
|
§
|
Because the securities are linked to the performance
of the worst performing underlying, you are exposed to greater risks of receiving no contingent quarterly coupons and sustaining
a significant loss on your investment than if the securities were linked to just one underlying. The risk that you
will not receive any contingent quarterly coupons, or that you will suffer a significant loss on your investment, is greater if
you invest in the securities as opposed to substantially similar securities that are linked to the performance of just one underlying. With
three underlyings, it is more likely that any underlying will close below its coupon threshold level on any observation date, and
below its downside threshold level on the final observation date, than if the securities were linked to only one underlying. Therefore,
it is more likely that you will not receive any contingent quarterly coupons and that you will suffer a significant loss on your
investment. In addition, because each underlying must close above its initial level on a quarterly redemption determination
date in order for the securities to be called prior to maturity, the securities are less likely to be called on any early redemption
date than if the securities were linked to just one underlying.
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
|
§
|
The contingent quarterly coupon, if any, is based
on the value of each underlying on only the related quarterly observation date at the end of the related interest period. Whether
the contingent quarterly coupon will be paid on any coupon payment date will be determined at the end of the relevant interest
period based on the closing level of each underlying on the relevant quarterly observation date. As a result, you will
not know whether you will receive the contingent quarterly coupon on any coupon payment date until near the end of the relevant
interest period. Moreover, because the contingent quarterly coupon is based solely on the value of each underlying on
quarterly observation dates, if the closing level of any underlying on any observation date is below the coupon threshold level
for such underlying, you will not receive the contingent quarterly coupon for the related interest period, even if the level of
such underlying was at or above its respective coupon threshold level on other days during that interest period, and even if the
closing level(s) of one or both of the other underlyings are at or above their respective coupon threshold level(s).
|
|
§
|
Investors will not participate in any appreciation
in any underlying. Investors will not participate in any appreciation in any underlying from the initial level for
such underlying, and the return on the securities will be limited to the contingent quarterly coupons, if any, that are paid with
respect to each observation date on which the closing level of each underlying is greater than or equal to its respective coupon
threshold level, if any.
|
|
§
|
Investing in the securities exposes investors to
risks associated with investments with a concentration in the energy sector. The stocks included in the Energy Select Sector
Index (the “share underlying index”) and that are generally tracked by the Energy Select Sector SPDR®
Fund are stocks of companies whose primary business is directly associated with the energy sector, including the following sub-sectors:
(i) oil, gas and consumable fuels and (ii) energy equipment and services. Because the value of the securities is linked to the
performance of the underlying shares, an investment in the securities exposes investors to risks associated with investments in
securities with a concentration in the energy sector.
|
Energy companies develop and produce crude oil and
natural gas and/or provide drilling and other energy resources production and distribution related services. Stock prices
for these types of companies are mainly affected by the business, financial and operating condition of the particular company,
as well as changes in prices for oil, gas and other types of fuels, which in turn largely depend on supply and demand for various
energy products and services. Some of the factors that may influence supply and demand for energy products and services
include: general economic conditions and growth rates, weather conditions, the cost of exploring for, producing and
delivering oil and gas, technological advances affecting energy efficiency and energy consumption, the ability of the Organization
of Petroleum Exporting Countries (OPEC) to set and maintain production levels of oil, currency fluctuations, inflation, natural
disasters, civil unrest, acts of sabotage or terrorism and other regional or global events. The profitability of energy
companies may also be adversely affected by existing and future laws, regulations, government actions and other legal requirements
relating to protection of the environment, health and safety matters and others that may increase the costs of conducting their
business or may reduce or delay available business opportunities. Increased supply or weak demand for energy products
and services, as well as various developments leading to higher costs of doing business or missed business opportunities, would
adversely impact the performance of companies in the energy sector. The value of the securities may be subject to greater
volatility and be more adversely affected by a single economic, political or regulatory occurrence affecting the energy sector
or one of the sub-sectors of the energy sector than a different investment linked to securities of a more broadly diversified group
of issuers.
|
§
|
The market price will be influenced by many unpredictable
factors. Several factors, many of which are beyond our control, will influence the value of the securities in the
secondary market and the price at which MS & Co. may be willing to purchase or sell the securities in the secondary market. We
expect that generally the level of interest rates available in the market and the value of each underlying on any day, including
in relation to its respective coupon threshold level, downside threshold level and initial level, will affect the value of the
securities more than any other factors. Other factors that may influence the value of the securities include:
|
|
o
|
the volatility (frequency and magnitude of changes in value) of each underlying and of the stocks composing the SX5E Index,
the NDX Index and the share underlying index,
|
|
o
|
whether the closing level of any underlying has been below its respective coupon threshold level on any observation date,
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
|
o
|
geopolitical conditions and economic, financial, political, regulatory or judicial events that affect the component stocks
of the SX5E Index, the NDX Index and the share underlying index or securities markets generally and which may affect the value
of each underlying,
|
|
o
|
dividend rates on the securities underlying the SX5E Index, the NDX Index and the share underlying index,
|
|
o
|
the time remaining until the securities mature,
|
|
o
|
interest and yield rates in the market,
|
|
o
|
the availability of comparable instruments,
|
|
o
|
the composition of the underlyings and changes in the constituent stocks of the SX5E Index, the NDX Index and the share underlying
index,
|
|
o
|
the occurrence of certain events affecting the XLE Shares that may or may not require an adjustment to the adjustment factor,
and
|
|
o
|
any actual or anticipated changes in our credit ratings or credit spreads.
|
Generally, the longer the time remaining to maturity,
the more the market price of the securities will be affected by the other factors described above. Some or all of these
factors will influence the price that you will receive if you sell your securities prior to maturity. In particular, if any underlying
has closed near or below its coupon threshold level, and especially if any underlying has closed near or below its downside threshold
level, the market value of the securities is expected to decrease substantially, and you may have to sell your securities at a
substantial discount from the stated principal amount of $1,000 per security.
You cannot predict the future performance of any underlying
based on its historical performance. The value of any underlying may decrease and be below the respective coupon threshold
level for such underlying on each observation date so that you will receive no return on your investment, and any or all of the
underlyings may close below the respective downside threshold level(s) on the final observation date so that you will lose more
than 45% or all of your initial investment in the securities. There can be no assurance that the closing level of each
underlying will be at or above the respective coupon threshold level on any observation date so that you will receive a coupon
payment on the securities for the applicable interest period, or that it will be at or above its respective downside threshold
level on the final observation date so that you do not suffer a significant loss on your initial investment in the securities. See
“EURO STOXX 50® Index Overview,” “NASDAQ-100 Index® Overview” and “Energy
Select Sector SPDR® Fund Overview” below.
|
§
|
The antidilution adjustments the calculation agent
is required to make do not cover every event that could affect the XLE Shares. MS & Co., as calculation agent,
will adjust the adjustment factor for certain events affecting the XLE Shares. However, the calculation agent will not
make an adjustment for every event that could affect the XLE Shares. If an event occurs that does not require the calculation
agent to adjust the adjustment factor, the market price of the securites may be materially and adversely affected.
|
|
§
|
Adjustments to the XLE Shares or the share underlying
index could adversely affect the value of the securities. The investment adviser to the XLE Shares, SSgA Funds Management,
Inc. (the “Investment Adviser”), seeks investment results that correspond generally to the price and yield performance,
before fees and expenses, of the share underlying index. Pursuant to its investment strategy or otherwise, the Investment
Advisor may add, delete or substitute the stocks composing the XLE Shares. Any of these actions could adversely affect
the price of the XLE Shares and, consequently, the value of the securities. S&P Dow Jones Indices LLC (“S&P”)
is responsible for calculating and maintaining the share underlying index. S&P can add, delete or substitute the stocks underlying
the share underlying index that could change the value of the share underlying index, and, consequently, the price of the XLE Shares
and the value of the securities.
|
|
§
|
The performance and market price of the XLE Shares,
particularly during periods of market volatility, may not correlate with the performance of the share underlying index, the performance
of the component securities of the share underlying index or the net asset value per share of the XLE Shares. The XLE Shares
do not fully
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
replicate the share underlying index and may hold
securities that are different than those included in the share underlying index. In addition, the performance of the
XLE 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 XLE Shares and the share underlying
index. In addition, corporate actions (such as mergers and spin-offs) with respect to the equity securities underlying
the XLE Shares may impact the variance between the performances of XLE Shares and the share underlying index. Finally,
because the shares of the XLE Shares are traded on an exchange and are subject to market supply and investor demand,
the market price of one share of the XLE Shares may differ from the net asset value per share of the XLE Shares.
In particular, during periods of market volatility,
or unusual trading activity, trading in the securities underlying the XLE Shares may be disrupted or limited, or such securities
may be unavailable in the secondary market. Under these circumstances, the liquidity of the XLE Shares may be adversely
affected, market participants may be unable to calculate accurately the net asset value per share of the XLE Shares, and their
ability to create and redeem shares of the XLE Shares may be disrupted. Under these circumstances, the market price of shares of
the XLE Shares may vary substantially from the net asset value per share of the XLE Shares or the level of the share underlying
index.
For all of the foregoing reasons, the performance
of the XLE Shares may not correlate with the performance of the share underlying index, the performance of the component securities
of the share underlying index or the net asset value per share of the XLE Shares. Any of these events could materially
and adversely affect the price of the shares of the XLE Shares and, therefore, the value of the securities. Additionally,
if market volatility or these events were to occur on the final observation date, the calculation agent would maintain discretion
to determine whether such market volatility or events have caused a market disruption event to occur, and such determination may
affect the payment at maturity of the securities. If the calculation agent determines that no market disruption event
has taken place, the payment at maturity would be based on the published closing price per share of the XLE Shares on the final
observation date, even if the XLE Shares’ shares are underperforming the share underlying index or the component securities
of the share underlying index and/or trading below the net asset value per share of the XLE Shares.
|
§
|
The securities are subject to our credit risk,
and any actual or anticipated changes to our credit ratings or credit spreads may adversely affect the market value of the securities. You
are dependent on our ability to pay all amounts due on the securities at maturity, upon early redemption or on any coupon payment
date, and therefore you are subject to our credit risk. The securities are not guaranteed by any other entity. If
we default on our obligations under the securities, your investment would be at risk and you could lose some or all of your investment. As
a result, the market value of the securities prior to maturity will be affected by changes in the market’s view of our creditworthiness. Any
actual or anticipated decline in our credit ratings or increase in the credit spreads charged by the market for taking our credit
risk is likely to adversely affect the market value of the securities.
|
|
§
|
As a finance subsidiary, MSFL has no independent
operations and will have no independent assets. As a finance subsidiary, MSFL has no independent operations beyond
the issuance and administration of its securities and will have no independent assets available for distributions to holders of
MSFL securities if they make claims in respect of such securities in a bankruptcy, resolution or similar proceeding. Accordingly,
any recoveries by such holders will be limited to those available under the related guarantee by Morgan Stanley and that guarantee
will rank pari passu with all other unsecured, unsubordinated obligations of Morgan Stanley. Holders will have recourse
only to a single claim against Morgan Stanley and its assets under the guarantee. Holders of securities issued by MSFL should accordingly
assume that in any such proceedings they would not have any priority over and should be treated pari passu with the claims
of other unsecured, unsubordinated creditors of Morgan Stanley, including holders of Morgan Stanley-issued securities.
|
|
§
|
There are risks associated with investments in
securities linked to the value of foreign equity securities. The securities are linked to the value of foreign equity
securities. Investments in securities linked to the value of foreign equity securities involve risks associated with
the securities markets in those countries, including risks of volatility in those markets, governmental intervention in those markets
and cross-shareholdings in companies in certain countries. Also, there is generally less publicly available information about foreign
companies than about U.S. companies that are subject to the reporting requirements of the United States Securities and Exchange
Commission, and foreign
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
companies are subject to accounting, auditing and
financial reporting standards and requirements different from those applicable to U.S. reporting companies. The prices of securities
issued in foreign markets may be affected by political, economic, financial and social factors in those countries, or global regions,
including changes in government, economic and fiscal policies and currency exchange laws. Local securities markets may trade a
small number of securities and may be unable to respond effectively to increases in trading volume, potentially making prompt liquidation
of holdings difficult or impossible at times. Moreover, the economies in such countries may differ favorably or unfavorably from
the economy in the United States in such respects as growth of gross national product, rate of inflation, capital reinvestment,
resources, self-sufficiency and balance of payment positions.
|
§
|
Investing in the securities
is not equivalent to investing in the underlyings or the stocks composing the SX5E Index, the NDX Index or the share underlying
index. Investing in the securities is not equivalent to investing in any of the underlyings or the component stocks
of the SX5E Index, the NDX Index or the share underlying index. Investors in the securities will not participate in
any positive performance of any underlying, and will not have voting rights or rights to receive dividends or other distributions
or any other rights with respect to stocks that constitute the SX5E Index, the NDX Index or the share underlying index.
|
|
§
|
Reinvestment risk. The term of your
investment in the securities may be shortened due to the automatic early redemption feature of the securities. If the
securities are redeemed prior to maturity, you will receive no more contingent quarterly coupons and may be forced to invest in
a lower interest rate environment and may not be able to reinvest at comparable terms or returns. However, under no
circumstances will the securities be redeemed in the first year of the term of the securities.
|
|
§
|
The securities will not be listed on any securities
exchange and secondary trading may be limited. Accordingly, you should be willing to hold your securities for the entire
5-year term of the securities. The securities will not be listed on any securities exchange. Therefore,
there may be little or no secondary market for the securities. MS & Co. may, but is not obligated to, make a market
in the securities and, if it once chooses to make a market, may cease doing so at any time. When it does make a market,
it will generally do so for transactions of routine secondary market size at prices based on its estimate of the current value
of the securities, taking into account its bid/offer spread, our credit spreads, market volatility, the notional size of the proposed
sale, the cost of unwinding any related hedging positions, the time remaining to maturity and the likelihood that it will be able
to resell the securities. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade
or sell the securities easily. Since other broker-dealers may not participate significantly in the secondary market
for the securities, the price at which you may be able to trade your securities is likely to depend on the price, if any, at which
MS & Co. is willing to transact. If, at any time, MS & Co. were to cease making a market in the securities,
it is likely that there would be no secondary market for the securities. Accordingly, you should be willing to hold
your securities to maturity.
|
|
§
|
The rate we are willing to pay for securities of
this type, maturity and issuance size is likely to be lower than the rate implied by our secondary market credit spreads and advantageous
to us. Both the lower rate and the inclusion of costs associated with issuing, selling, structuring and hedging the
securities in the original issue price reduce the economic terms of the securities, cause the estimated value of the securities
to be less than the original issue price and will adversely affect secondary market prices. Assuming no change in
market conditions or any other relevant factors, the prices, if any, at which dealers, including MS & Co., may be willing to
purchase the securities in secondary market transactions will likely be significantly lower than the original issue price, because
secondary market prices will exclude the issuing, selling, structuring and hedging-related costs that are included in the original
issue price and borne by you and because the secondary market prices will reflect our secondary market credit spreads and the bid-offer
spread that any dealer would charge in a secondary market transaction of this type as well as other factors.
|
The inclusion of the costs of issuing, selling, structuring
and hedging the securities in the original issue price and the lower rate we are willing to pay as issuer make the economic terms
of the securities less favorable to you than they otherwise would be.
However, because the costs associated with issuing,
selling, structuring and hedging the securities are not fully deducted upon issuance, for a period of up to 5 months following
the issue date, to the extent that MS & Co. may buy or
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
sell the securities in the secondary market, absent
changes in market conditions, including those related to the underlyings, and to our secondary market credit spreads, it would
do so based on values higher than the estimated value, and we expect that those higher values will also be reflected in your brokerage
account statements.
|
§
|
The estimated value of the securities is determined
by reference to our pricing and valuation models, which may differ from those of other dealers and is not a maximum or minimum
secondary market price. These pricing and valuation models are proprietary and rely in part on subjective views
of certain market inputs and certain assumptions about future events, which may prove to be incorrect. As a result,
because there is no market-standard way to value these types of securities, our models may yield a higher estimated value of the
securities than those generated by others, including other dealers in the market, if they attempted to value the securities. In
addition, the estimated value on the pricing date does not represent a minimum or maximum price at which dealers, including MS
& Co., would be willing to purchase your notes in the secondary market (if any exists) at any time. The value of your securities
at any time after the date of this document will vary based on many factors that cannot be predicted with accuracy, including our
creditworthiness and changes in market conditions. See also “The market price will be influenced by many unpredictable
factors” above.
|
|
§
|
Hedging and trading activity by our affiliates
could potentially affect the value of the securities. One or more of our affiliates and/or third-party dealers have
carried out, and will continue to carry out, hedging activities related to the securities (and to other instruments linked to the
underlyings and the share underlying index), including trading in the XLE Shares, the stocks that constitute the SX5E Index, the
NDX Index or the share underlying index as well as in other instruments related to the underlyings. As a result, these
entities may be unwinding or adjusting hedge positions during the term of the securities, and the hedging strategy may involve
greater and more frequent dynamic adjustments to the hedge as the final observation date approaches. Some of our affiliates
also trade the underlyings and other financial instruments related to the underlyings and the share underlying index on a regular
basis as part of their general broker-dealer and other businesses. Any of these hedging or trading activities on or
prior to the pricing date could have increased the initial level of an underlying, and, therefore, could have increased (i) the
level at or above which such underlying must close on any redemption determination date so that the securities are redeemed prior
to maturity for the early redemption payment (depending also on the performance of the other underlyings), (ii) the level at or
above which such underlying must close on each observation date in order for you to earn a contingent quarterly coupon (depending
also on the performance of the other underlyings) and (iii) the level at or above which such underlying must close on the final
observation date so that you are not exposed to the negative performance of the worst performing underlying at maturity (depending
also on the performance of the other underlyings). Additionally, such hedging or trading activities during the term
of the securities could affect the value of an underlying on the redemption determination dates and the observation dates, and,
accordingly, whether we redeem the securities prior to maturity, whether we pay a contingent quarterly coupon on the securities
and the amount of cash you receive at maturity, if any (depending also on the performance of the other underlyings).
|
|
§
|
The calculation agent, which is a subsidiary of
Morgan Stanley and an affiliate of MSFL, will make determinations with respect to the securities. As calculation
agent, MS & Co. has determined the initial level, coupon threshold level and downside threshold level for each underlying and
will determine whether you receive a contingent quarterly coupon on each coupon payment date and/or at maturity, whether the securities
will be redeemed on any early redemption date and the payment at maturity, if any. Moreover, certain determinations
made by MS & Co., in its capacity as calculation agent, may require it to exercise discretion and make subjective judgments,
such as with respect to the occurrence or non-occurrence of market disruption events, any adjustments to the adjustment factor
and the selection of a successor index or calculation of the closing level of any underlying in the event of a market disruption
event or discontinuance of the SX5E Index, the NDX Index or the share underlying index. These potentially subjective
determinations may adversely affect the payout to you at maturity, if any. For further information regarding these types
of determinations, see "Description of Auto-Callable Securities—Postponement of Determination Dates," "—Alternate
Exchange Calculation in Case of an Event of Default,” "—Discontinuance of Any Underlying Index; Alternation of
Method of Calculation,” “Discontinuance of the Underlying Shares of an Exchange-Traded Fund and/or Share Underlying
Index; Alteration of Method of Calculation,” “—Antidilution Adjustments” and "—Calculation Agent
and
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
Calculations" in the accompanying product supplement.
In addition, MS & Co. has determined the estimated value of the securities on the pricing date.
|
§
|
Adjustments to the SX5E Index or the NDX Index
could adversely affect the value of the securities. The publisher of each of the SX5E Index or the NDX Index may
add, delete or substitute the component stocks of such underlying or make other methodological changes that could change the value
of such underlying. Any of these actions could adversely affect the value of the securities. The publisher
of each of the SX5E Index or the NDX Index may also discontinue or suspend calculation or publication of such underlying at any
time. In these circumstances, MS & Co., as the calculation agent, will have the sole discretion to substitute a
successor index that is comparable to the discontinued index. MS & Co. could have an economic interest that is different
than that of investors in the securities insofar as, for example, MS & Co. is permitted to consider indices that are calculated
and published by MS & Co. or any of its affiliates. If MS & Co. determines that there is no appropriate successor
index on any observation date, the determination of whether a contingent quarterly coupon will be payable on the securities on
the applicable coupon payment date, whether the securities will be redeemed and/or the amount payable at maturity, if any, will
be based on the value of such underlying, based on the closing prices of the stocks constituting such underlying at the time of
such discontinuance, without rebalancing or substitution, computed by MS & Co. as calculation agent in accordance with the
formula for calculating such underlying last in effect prior to such discontinuance, as compared to the relevant initial level,
coupon threshold level or downside threshold level, as applicable (depending also on the performance of the other underlyings).
|
|
§
|
The U.S. federal income tax consequences of an
investment in the securities are uncertain. There is no direct legal authority as to the proper treatment of the securities
for U.S. federal income tax purposes, and, therefore, significant aspects of the tax treatment of the securities are uncertain.
|
Please read the discussion under “Additional
Information—Tax considerations” in this document concerning the U.S. federal income tax consequences of an investment
in the securities. We intend to treat a security for U.S. federal income tax purposes as a single financial contract
that provides for a coupon that will be treated as gross income to you at the time received or accrued, in accordance with your
regular method of tax accounting. Under this treatment, the ordinary income treatment of the coupon payments, in conjunction
with the capital loss treatment of any loss recognized upon the sale, exchange or settlement of the securities, could result in
adverse tax consequences to holders of the securities because the deductibility of capital losses is subject to limitations. We
do not plan to request a ruling from the Internal Revenue Service (the “IRS”) regarding the tax treatment of the securities,
and the IRS or a court may not agree with the tax treatment described herein. If the IRS were successful in asserting
an alternative treatment for the securities, the timing and character of income or loss on the securities might differ significantly
from the tax treatment described herein. For example, under one possible treatment, the IRS could seek to recharacterize
the securities as debt instruments. In that event, U.S. Holders (as defined below) would be required to accrue into
income original issue discount on the securities every year at a “comparable yield” determined at the time of issuance
(as adjusted based on the difference, if any, between the actual and the projected amount of any contingent payments on the securities)
and recognize all income and gain in respect of the securities as ordinary income. The risk that financial instruments
providing for buffers, triggers or similar downside protection features, such as the securities, would be recharacterized as debt
is greater than the risk of recharacterization for comparable financial instruments that do not have such features.
Non-U.S. Holders (as defined below) should note
that we currently intend to withhold on any coupon paid to Non-U.S. Holders generally at a rate of 30%, or at a reduced rate specified
by an applicable income tax treaty under an “other income” or similar provision, and will not be required to pay any
additional amounts with respect to amounts withheld.
In 2007, the U.S. Treasury Department and the IRS
released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar
instruments. While it is not clear whether the securities would be viewed as similar to the prepaid forward contracts
described in the notice, it is possible that any Treasury regulations or other guidance promulgated after consideration of these
issues could materially and adversely affect the tax consequences of an investment in the securities, possibly with retroactive
effect. The notice focuses on a number of
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
issues, the most relevant of which for holders of
the securities are the character and timing of income or loss and the degree, if any, to which income realized by non-U.S. investors
should be subject to withholding tax. Both U.S. and Non-U.S. Holders should consult their tax advisers regarding the
U.S. federal income tax consequences of an investment in the securities, including possible alternative treatments, the issues
presented by this notice and any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
EURO STOXX 50® Index Overview
The EURO STOXX 50® Index was created by STOXX
Limited, which is owned by Deutsche Börse AG and SIX Group AG. Publication of the EURO STOXX 50® Index began
on February 26, 1998, based on an initial index value of 1,000 at December 31, 1991. The EURO STOXX 50® Index is
composed of 50 component stocks of market sector leaders from within the STOXX 600 Supersector Indices, which includes stocks selected
from the Eurozone. The component stocks have a high degree of liquidity and represent the largest companies across all market sectors. For
additional information about the EURO STOXX 50® Index, see the information set forth under “EURO STOXX 50®
Index” in the accompanying index supplement.
Information as of market close on October 18, 2019:
Bloomberg Ticker Symbol:
|
SX5E
|
52 Week High (on 10/16/2019):
|
3,599.25
|
Current Index Value:
|
3,579.41
|
52 Week Low (on 12/27/2018):
|
2,937.36
|
52 Weeks Ago:
|
3,190.09
|
|
|
|
|
|
|
The following graph sets forth the daily index closing values
of the SX5E Index for the period from January 1, 2014 through October 18, 2019. The related table sets forth the published
high and low index closing values, as well as end-of-quarter index closing values, of the SX5E Index for each quarter for the period
from January 1, 2014 through October 18, 2019. The index closing value of the SX5E Index on October 18, 2019 was 3,579.41. We
obtained the information in the table below from Bloomberg Financial Markets, without independent verification. The
SX5E Index has experienced periods of high volatility, and you should not take the historical values of the SX5E Index as an indication
of its future performance.
SX5E Index Daily Closing
Values
January 1, 2014 to October
18, 2019
|
|
* The red line in the graph indicates the downside threshold level of 1,968.676, which is approximately 55% of the initial level, and the black line in the graph indicates the coupon threshold level of 2,326.617, which is approximately 65% of the initial level.
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
EURO STOXX 50® Index
|
High
|
Low
|
Period End
|
2014
|
|
|
|
First Quarter
|
3,172.43
|
2,962.49
|
3,161.60
|
Second Quarter
|
3,314.80
|
3,091.52
|
3,228.24
|
Third Quarter
|
3,289.75
|
3,006.83
|
3,225.93
|
Fourth Quarter
|
3,277.38
|
2,874.65
|
3,146.43
|
2015
|
|
|
|
First Quarter
|
3,731.35
|
3,007.91
|
3,697.38
|
Second Quarter
|
3,828.78
|
3,424.30
|
3,424.30
|
Third Quarter
|
3,686.58
|
3,019.34
|
3,100.67
|
Fourth Quarter
|
3,506.45
|
3,069.05
|
3,267.52
|
2016
|
|
|
|
First Quarter
|
3,178.01
|
2,680.35
|
3,004.93
|
Second Quarter
|
3,151.69
|
2,697.44
|
2,864.74
|
Third Quarter
|
3,091.66
|
2,761.37
|
3,002.24
|
Fourth Quarter
|
3,290.52
|
2,954.53
|
3,290.52
|
2017
|
|
|
|
First Quarter
|
3,500.93
|
3,230.68
|
3,500.93
|
Second Quarter
|
3,658.79
|
3,409.78
|
3,441.88
|
Third Quarter
|
3,594.85
|
3,388.22
|
3,594.85
|
Fourth Quarter
|
3,697.40
|
3,503.96
|
3,503.96
|
2018
|
|
|
|
First Quarter
|
3,672.29
|
3,278.72
|
3,361.50
|
Second Quarter
|
3,592.18
|
3,340.35
|
3,395.60
|
Third Quarter
|
3,527.18
|
3,293.36
|
3,399.20
|
Fourth Quarter
|
3,414.16
|
2,937.36
|
3,001.42
|
2019
|
|
|
|
First Quarter
|
3,409.00
|
2,954.66
|
3,351.71
|
Second Quarter
|
3,514.62
|
3,280.43
|
3,473.69
|
Third Quarter
|
3,571.39
|
3,282.78
|
3,569.45
|
Fourth Quarter (through October 18, 2019)
|
3,599.25
|
3,413.31
|
3,579.41
|
|
|
|
|
The “EURO STOXX 50® Index” is a trademark
of FTSE Russell. For more information, see “EURO STOXX 50® Index” in the accompanying index
supplement.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
The NASDAQ-100 Index® Overview
The NASDAQ-100 Index®, which is calculated, maintained
and published by Nasdaq, Inc., is a modified capitalization-weighted index of 100 of the largest and most actively traded equity
securities of non-financial companies listed on The NASDAQ Stock Market LLC. The NASDAQ-100 Index includes companies across a variety
of major industry groups. At any moment in time, the value of the NASDAQ-100 Index equals the aggregate value of the then-current
NASDAQ-100 Index share weights of each of the NASDAQ-100 Index component securities, which are based on the total shares outstanding
of each such NASDAQ-100 Index component security, multiplied by each such security’s respective last sale price on NASDAQ
(which may be the official closing price published by NASDAQ), and divided by a scaling factor, which becomes the basis for the
reported NASDAQ-100 Index value. For additional information about the NASDAQ-100 Index®, see the information set
forth under “NASDAQ-100 Index®” in the accompanying index supplement.
Information as of market close on October 18, 2019:
Bloomberg Ticker Symbol:
|
NDX
|
52 Week High (on 7/26/2019):
|
8,016.953
|
Current Index Value:
|
7,868.491
|
52 Week Low (on 12/24/2018):
|
5,899.354
|
52 Weeks Ago:
|
7,116.088
|
|
|
|
|
|
|
The following graph sets forth the daily index closing values
of the NDX Index for in the period from January 1, 2014 through October 18, 2019. The related table sets forth the published
high and low index closing values, as well as end-of-quarter index closing values, of the NDX Index for each quarter for the period
from January 1, 2014 to October 18, 2019. The index closing value of the NDX Index on October 18, 2019 was 7,868.491. We
obtained the information in the table and graph below from Bloomberg Financial Markets, without independent verification. The
NDX Index has at times experienced periods of high volatility, and you should not take the historical values of the NDX Index as
an indication of its future performance.
NDX Index Daily Index
Closing Values
January 1, 2014 to October
18, 2019
|
|
* The red line in the graph indicates the downside threshold level of 4,327.670, which is approximately 55% of the initial level, and the black line in the graph indicates the coupon threshold level of 5,114.519, which is approximately 65% of the initial level.
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
NASDAQ-100 Index®
|
High
|
Low
|
Period End
|
2014
|
|
|
|
First Quarter
|
3,727.185
|
3,440.502
|
3,595.736
|
Second Quarter
|
3,849.479
|
3,446.845
|
3,849.479
|
Third Quarter
|
4,103.083
|
3,857.938
|
4,049.445
|
Fourth Quarter
|
4,337.785
|
3,765.281
|
4,236.279
|
2015
|
|
|
|
First Quarter
|
4,483.049
|
4,089.648
|
4,333.688
|
Second Quarter
|
4,548.740
|
4,311.257
|
4,396.761
|
Third Quarter
|
4,679.675
|
4,016.324
|
4,181.060
|
Fourth Quarter
|
4,719.053
|
4,192.963
|
4,593.271
|
2016
|
|
|
|
First Quarter
|
4,497.857
|
3,947.804
|
4,483.655
|
Second Quarter
|
4,565.421
|
4,201.055
|
4,417.699
|
Third Quarter
|
4,891.363
|
4,410.747
|
4,875.697
|
Fourth Quarter
|
4,965.808
|
4,660.457
|
4,863.620
|
2017
|
|
|
|
First Quarter
|
5,439.742
|
4,911.333
|
5,436.232
|
Second Quarter
|
5,885.296
|
5,353.586
|
5,646.917
|
Third Quarter
|
6,004.380
|
5,596.956
|
5,979.298
|
Fourth Quarter
|
6,513.269
|
5,981.918
|
6,396.422
|
2018
|
|
|
|
First Quarter
|
7,131.121
|
6,306.100
|
6,581.126
|
Second Quarter
|
7,280.705
|
6,390.837
|
7,040.802
|
Third Quarter
|
7,660.180
|
7,014.554
|
7,627.650
|
Fourth Quarter
|
7,645.453
|
5,899.354
|
6,329.964
|
2019
|
|
|
|
First Quarter
|
7,493.270
|
6,147.128
|
7,378.771
|
Second Quarter
|
7,845.729
|
6,978.018
|
7,671.075
|
Third Quarter
|
8,016.953
|
7,415.691
|
7,749.449
|
Fourth Quarter (through October 18, 2019)
|
7,942.851
|
7,550.786
|
7,868.491
|
|
|
|
|
“Nasdaq®,” “NASDAQ-100®”
and “NASDAQ-100 Index®” are trademarks of Nasdaq, Inc. For more information, see “NASDAQ-100 Index®”
in the accompanying index supplement.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
Energy Select Sector SPDR® Fund
Overview
The Energy Select Sector SPDR® Fund is an exchange-traded
fund managed by the Select Sector SPDR® Trust (the “Trust”), a registered investment company. The Trust
consists of nine separate investment portfolios, including the Energy Select Sector SPDR® Fund. The Energy Select
Sector SPDR® Fund seeks investment results that correspond generally to the price and yield performance, before
fees and expenses, of the Energy Select Sector Index. It is possible that this fund may not fully replicate the performance of
the Energy Select Sector Index due to the temporary unavailability of certain securities in the secondary market or due to other
extraordinary circumstances. Information provided to or filed with the Securities and Exchange Commission (the “Commission”)
by the Trust pursuant to the Securities Act of 1933 and the Investment Company Act of 1940 can be located by reference to Commission
file numbers 333-57791 and 811-08837, 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 any such publicly available information regarding the Energy Select Sector SPDR® Fund is accurate or complete.
Information as of market close on October 18, 2019:
Bloomberg Ticker Symbol:
|
XLE UP
|
52 Week High (on 10/18/2018):
|
$72.17
|
Current Share Price:
|
$57.03
|
52 Week Low (on 12/24/2018):
|
$53.84
|
52 Weeks Ago:
|
$72.17
|
|
|
|
|
|
|
The following graph sets forth the daily closing prices of the
XLE Shares for the period from January 1, 2014 through October 18, 2019. The related table sets forth the published
high and low closing prices, as well as end-of-quarter closing prices, of the XLE Shares for each quarter for the period from January
1, 2014 through October 18, 2019. The closing price of the XLE Shares on October 18, 2019 was $57.03. We
obtained the information in the table and graph below from Bloomberg Financial Markets, without independent verification. The
XLE Shares have experienced periods of high volatility, and you should not take the historical prices of the XLE Shares as an indication
of their future performance.
XLE Shares Daily Closing Prices
January 1, 2014 to October 18, 2019
|
|
* The red line in the graph indicates the downside threshold
level of $31.367, which is approximately 55% of the initial level, and the black line in the graph indicates the coupon threshold
level of $37.070, which is approximately 65% of the initial level.
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
Energy Select Sector SPDR® Fund (CUSIP: 81369Y506)
|
High ($)
|
Low ($)
|
Period End ($)
|
2014
|
|
|
|
First Quarter
|
89.06
|
81.89
|
89.06
|
Second Quarter
|
101.29
|
88.45
|
100.10
|
Third Quarter
|
100.58
|
90.62
|
90.62
|
Fourth Quarter
|
88.77
|
73.36
|
79.16
|
2015
|
|
|
|
First Quarter
|
82.29
|
72.86
|
77.58
|
Second Quarter
|
82.94
|
74.64
|
75.16
|
Third Quarter
|
74.54
|
59.22
|
61.20
|
Fourth Quarter
|
71.40
|
58.78
|
60.55
|
2016
|
|
|
|
First Quarter
|
63.75
|
51.80
|
61.92
|
Second Quarter
|
69.50
|
60.18
|
68.24
|
Third Quarter
|
71.80
|
65.27
|
70.61
|
Fourth Quarter
|
77.83
|
67.77
|
75.32
|
2017
|
|
|
|
First Quarter
|
76.17
|
68.24
|
69.90
|
Second Quarter
|
70.90
|
63.95
|
64.92
|
Third Quarter
|
68.49
|
62.00
|
68.48
|
Fourth Quarter
|
72.60
|
67.08
|
72.26
|
2018
|
|
|
|
First Quarter
|
78.03
|
66.02
|
67.41
|
Second Quarter
|
78.91
|
66.06
|
75.94
|
Third Quarter
|
77.37
|
71.91
|
75.74
|
Fourth Quarter
|
77.79
|
53.84
|
57.35
|
2019
|
|
|
|
First Quarter
|
67.29
|
57.90
|
66.12
|
Second Quarter
|
68.61
|
58.77
|
63.71
|
Third Quarter
|
64.44
|
55.85
|
59.20
|
Fourth Quarter (through October 18, 2019)
|
58.10
|
55.90
|
57.03
|
This document relates only to the securities referenced hereby
and does not relate to the XLE Shares. We have derived all disclosures contained in this document regarding the Trust from the
publicly available documents described above. In connection with the offering of the securities, neither we nor the agent has participated
in the preparation of such documents or made any due diligence inquiry with respect to the Trust. Neither we nor the agent makes
any representation that such publicly available documents or any other publicly available information regarding the 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 XLE Shares (and therefore the price of the XLE Shares at the time we priced the securities) have been publicly disclosed.
Subsequent disclosure of any such events or the disclosure of or failure to disclose material future events concerning the Trust
could affect the value received with respect to the securities and therefore the value of the securities.
Neither we nor any of our affiliates makes any representation
to you as to the performance of the XLE Shares.
We and/or our affiliates may presently or from time to time engage
in business with the Trust. In the course of such business, we and/or our affiliates may acquire non-public information with respect
to the 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 XLE Shares. The statements in the preceding two sentences
are not intended to affect the rights of investors in the securities under the securities laws. As a purchaser of the securities,
you should undertake an independent investigation of the Trust as in your judgment is appropriate to make an informed decision
with respect to an investment linked to the XLE Shares.
“Standard & Poor’s®”,
“S&P®”, “S&P 500®”, “SPDR®”, “Select
Sector SPDR” and “Select Sector SPDRs” are trademarks of Standard & Poor’s Financial Services LLC,
an affiliate of The McGraw-Hill Companies, Inc. (“MGH”). The securities are not sponsored, endorsed, sold, or promoted
by S&P, MGH or the Trust. S&P, MGH and the Trust make no representations or warranties to the owners of the securities
or any member of the public regarding the advisability of investing in the Securities.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
S&P, MGH and the Trust have no obligation or liability
in connection with the operation, marketing, trading or sale of the securities.
The Energy Select Sector Index. The
Energy Select Sector Index is calculated and disseminated by S&P and is designed to provide an effective representation of
the energy sector of the S&P 500® Index. The Energy Select Sector Index includes companies in the following
industries: (i) oil, gas and consumable fuels and (ii) energy equipment and services. See “Energy Select Sector Index”
in the accompanying index supplement.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
Additional
Terms of the Securities
Please read this information in conjunction with the summary
terms on the front cover of this document.
If the terms described herein are inconsistent with those described in the accompanying product supplement, index supplement or prospectus, the terms described herein shall control.
|
Underlying index publishers:
|
With respect to the SX5E Index, STOXX Limited, or any successor
thereof.
With respect to the NDX Index, Nasdaq, Inc., or any
successor thereof.
|
Share underlying index:
|
With respect to the XLE Shares, the Energy Select Sector Index
|
Underlying share publisher:
|
With respect to the XLE Shares, S&P Dow Jones Indices LLC, or any successor thereof.
|
Interest period:
|
Quarterly
|
Record date:
|
The record date for each coupon payment date shall be the date one business day prior to such scheduled coupon payment date; provided, however, that any coupon payable at maturity (or upon early redemption) shall be payable to the person to whom the payment at maturity or early redemption payment, as the case may be, shall be payable.
|
Threshold level:
|
The accompanying product supplement refers to the threshold level as the “trigger level.”
|
Day count convention:
|
30/360
|
Postponement of coupon payment dates (including the maturity date) and early redemption dates:
|
If any observation date or redemption determination date is postponed due to a non-index business day or non-trading day, as applicable, or certain market disruption events so that it falls less than two business days prior to the relevant scheduled coupon payment date (including the maturity date) or early redemption date, as applicable, the coupon payment date (or the maturity date) or the early redemption date will be postponed to the second business day following that observation date or redemption determination date as postponed, and no adjustment will be made to any coupon payment or early redemption payment made on that postponed date.
|
Denominations:
|
$1,000 per security and integral multiples thereof
|
Trustee:
|
The Bank of New York Mellon
|
Calculation agent:
|
MS & Co.
|
Issuer notices to registered security holders, the trustee and the depositary:
|
In the event that the maturity date is postponed due to postponement
of the final observation date, the issuer shall give notice of such postponement and, once it has been determined, of the date
to which the maturity date has been rescheduled (i) to each registered holder of the securities by mailing notice of such postponement
by first class mail, postage prepaid, to such registered holder’s last address as it shall appear upon the registry books,
(ii) to the trustee by facsimile, confirmed by mailing such notice to the trustee by first class mail, postage prepaid, at its
New York office and (iii) to The Depository Trust Company (the “depositary”) by telephone or facsimile confirmed by
mailing such notice to the depositary by first class mail, postage prepaid. Any notice that is mailed to a registered
holder of the securities in the manner herein provided shall be conclusively presumed to have been duly given to such registered
holder, whether or not such registered holder receives the notice. The issuer shall give such notice as promptly as
possible, and in no case later than (i) with respect to notice of postponement of the maturity date, the business day immediately
preceding the scheduled maturity date and (ii) with respect to notice of the date to which the maturity date has been rescheduled,
the business day immediately following the final observation date as postponed.
In the event that the securities are subject to early redemption,
the issuer shall, (i) on the business day following the applicable redemption determination date, give notice of the early redemption
and the early redemption payment, including specifying the payment date of the amount due upon the early redemption, (x) to each
registered holder of the securities by mailing notice of such early redemption by first class mail, postage prepaid, to such registered
holder’s last address as it shall appear upon the registry books, (y) to the trustee by facsimile confirmed by mailing such
notice to the trustee by first class mail, postage prepaid, at its New York office and (z) to the depositary by telephone or facsimile
confirmed by mailing such notice to the depositary by first class mail, postage prepaid, and (ii) on or prior to the early redemption
date, deliver the aggregate cash amount due with respect to the securities to the trustee for delivery to the depositary, as holder
of the securities. Any notice that is mailed to a registered holder of the securities in the manner herein provided
shall be conclusively
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
|
presumed to have been duly given to such registered holder, whether
or not such registered holder receives the notice. This notice shall be given by the issuer or, at the issuer’s request,
by the trustee in the name and at the expense of the issuer, with any such request to be accompanied by a copy of the notice to
be given.
The issuer shall, or shall cause the calculation agent to, (i)
provide written notice to the trustee, on which notice the trustee may conclusively rely, and to the depositary of the amount of
cash to be delivered as contingent quarterly coupon, if any, with respect to each security on or prior to 10:30 a.m. (New York
City time) on the business day preceding each coupon payment date, and (ii) deliver the aggregate cash amount due, if any, with
respect to the contingent quarterly coupon to the trustee for delivery to the depositary, as holder of the securities, on the applicable
coupon payment date.
The issuer shall, or shall cause the calculation agent to, (i)
provide written notice to the trustee, on which notice the trustee may conclusively rely, and to the depositary of the amount of
cash to be delivered with respect to each stated principal amount of the securities, on or prior to 10:30 a.m. (New York City time)
on the business day preceding the maturity date, and (ii) deliver the aggregate cash amount due with respect to the securities
to the trustee for delivery to the depositary, as holder of the securities, on the maturity date.
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
Additional Information About the Securities
Please read this information in conjunction with the summary
terms on the front cover of this document.
Minimum ticketing size:
|
$1,000 / 1 security
|
Tax considerations:
|
Prospective investors should note that the discussion under
the section called “United States Federal Taxation” in the accompanying product supplement does not apply to the securities
issued under this document and is superseded by the following discussion.
The following is a general discussion of the material U.S. federal
income tax consequences and certain estate tax consequences of the ownership and disposition of the securities. This
discussion applies only to investors in the securities who:
· purchase
the securities in the original offering; and
· hold
the securities as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”).
This discussion does not describe all of the tax consequences
that may be relevant to a holder in light of the holder’s particular circumstances or to holders subject to special rules,
such as:
· certain
financial institutions;
· insurance
companies;
· certain
dealers and traders in securities or commodities;
· investors
holding the securities as part of a “straddle,” wash sale, conversion transaction, integrated transaction or constructive
sale transaction;
· U.S.
Holders (as defined below) whose functional currency is not the U.S. dollar;
· partnerships
or other entities classified as partnerships for U.S. federal income tax purposes;
· regulated
investment companies;
· real
estate investment trusts; or
· tax-exempt
entities, including “individual retirement accounts” or “Roth IRAs” as defined in Section 408 or 408A of
the Code, respectively.
If an entity that is classified as a partnership for U.S. federal
income tax purposes holds the securities, the U.S. federal income tax treatment of a partner will generally depend on the status
of the partner and the activities of the partnership. If you are a partnership holding the securities or a partner in such a partnership,
you should consult your tax adviser as to the particular U.S. federal tax consequences of holding and disposing of the securities
to you.
As the law applicable to the U.S. federal income taxation of
instruments such as the securities is technical and complex, the discussion below necessarily represents only a general summary.
The effect of any applicable state, local or non-U.S. tax laws is not discussed, nor are any alternative minimum tax consequences
or consequences resulting from the Medicare tax on investment income. Moreover, the discussion below does not address the consequences
to taxpayers subject to special tax accounting rules under Section 451(b) of the Code.
This discussion is based on the Code, administrative pronouncements,
judicial decisions and final, temporary and proposed Treasury regulations, all as of the date hereof, changes to any of which subsequent
to the date hereof may affect the tax consequences described herein. Persons considering the purchase of the securities
should consult their tax advisers with regard to the application of the U.S. federal income tax laws to their particular situations
as well as any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
General
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
|
Due to the absence of statutory, judicial or administrative authorities
that directly address the treatment of the securities or instruments that are similar to the securities for U.S. federal income
tax purposes, no assurance can be given that the IRS or a court will agree with the tax treatment described herein. We
intend to treat a security for U.S. federal income tax purposes as a single financial contract that provides for a coupon that
will be treated as gross income to you at the time received or accrued in accordance with your regular method of tax accounting. In
the opinion of our counsel, Davis Polk & Wardwell LLP, this treatment of the securities is reasonable under current law; however,
our counsel has advised us that it is unable to conclude affirmatively that this treatment is more likely than not to be upheld,
and that alternative treatments are possible.
You should consult your tax adviser regarding all aspects
of the U.S. federal tax consequences of an investment in the securities (including possible alternative treatments of the securities). Unless
otherwise stated, the following discussion is based on the treatment of each security as described in the previous paragraph.
Tax Consequences to U.S. Holders
This section applies to you only if you are a U.S. Holder. As
used herein, the term “U.S. Holder” means a beneficial owner of a security that is, for U.S. federal income tax purposes:
· a
citizen or individual resident of the United States;
· a
corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state
thereof or the District of Columbia; or
· an
estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.
Tax Treatment of the Securities
Assuming the treatment of the securities as set forth above is
respected, the following U.S. federal income tax consequences should result.
Tax Basis. A U.S. Holder’s tax basis
in the securities should equal the amount paid by the U.S. Holder to acquire the securities.
Tax Treatment of Coupon Payments. Any coupon
payment on the securities should be taxable as ordinary income to a U.S. Holder at the time received or accrued, in accordance
with the U.S. Holder’s regular method of accounting for U.S. federal income tax purposes.
Sale, Exchange or Settlement of the Securities. Upon
a sale, exchange or settlement of the securities, a U.S. Holder should recognize gain or loss equal to the difference between the
amount realized on the sale, exchange or settlement and the U.S. Holder’s tax basis in the securities sold, exchanged or
settled. For this purpose, the amount realized does not include any coupon paid at settlement and may not include sale
proceeds attributable to an accrued coupon, which may be treated as a coupon payment. Any such gain or loss recognized
should be long-term capital gain or loss if the U.S. Holder has held the securities for more than one year at the time of the sale,
exchange or settlement, and should be short-term capital gain or loss otherwise. The ordinary income treatment of the
coupon payments, in conjunction with the capital loss treatment of any loss recognized upon the sale, exchange or settlement of
the securities, could result in adverse tax consequences to holders of the securities because the deductibility of capital losses
is subject to limitations.
Possible Alternative Tax Treatments of an Investment in
the Securities
Due to the absence of authorities that directly address the proper
tax treatment of the securities, no assurance can be given that the IRS will accept, or that a court will uphold, the treatment
described above. In particular, the IRS could seek to analyze the U.S. federal income tax consequences of owning the securities
under Treasury regulations governing contingent payment debt instruments (the “Contingent Debt Regulations”). If the
IRS were successful in asserting that the Contingent Debt Regulations applied to the securities, the timing and character of income
thereon would be significantly affected. Among other things, a
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
|
U.S. Holder would be required to accrue into income original
issue discount on the securities every year at a “comparable yield” determined at the time of their issuance, adjusted
upward or downward to reflect the difference, if any, between the actual and the projected amount of any contingent payments on
the securities. Furthermore, any gain realized by a U.S. Holder at maturity or upon a sale, exchange or other disposition of the
securities would be treated as ordinary income, and any loss realized would be treated as ordinary loss to the extent of the U.S.
Holder’s prior accruals of original issue discount and as capital loss thereafter. The risk that financial instruments
providing for buffers, triggers or similar downside protection features, such as the securities, would be recharacterized as debt
is greater than the risk of recharacterization for comparable financial instruments that do not have such features.
Other alternative federal income tax treatments of the securities
are possible, which, if applied, could significantly affect the timing and character of the income or loss with respect to the
securities. In 2007, the U.S. Treasury Department and the IRS released a notice requesting comments on the U.S. federal
income tax treatment of “prepaid forward contracts” and similar instruments. The notice focuses on whether
to require holders of “prepaid forward contracts” and similar 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; whether these instruments
are or should be subject to the “constructive ownership” rule, which very generally can operate to recharacterize certain
long-term capital gain as ordinary income and impose an interest charge; and appropriate transition rules and effective dates. While
it is not clear whether instruments such as the securities would be viewed as similar to the prepaid forward contracts described
in the notice, any Treasury regulations or other guidance promulgated after consideration of these issues could materially and
adversely affect the tax consequences of an investment in the securities, possibly with retroactive effect. U.S. Holders
should consult their tax advisers regarding the U.S. federal income tax consequences of an investment in the securities, including
possible alternative treatments and the issues presented by this notice.
Backup Withholding and Information Reporting
Backup withholding may apply in respect of payments on the securities
and the payment of proceeds from a sale, exchange or other disposition of the securities, unless a U.S. Holder provides proof of
an applicable exemption or a correct taxpayer identification number and otherwise complies with applicable requirements of the
backup withholding rules. The amounts withheld under the backup withholding rules are not an additional tax and may
be refunded, or credited against the U.S. Holder’s U.S. federal income tax liability, provided that the required information
is timely furnished to the IRS. In addition, information returns will be filed with the IRS in connection with payments
on the securities and the payment of proceeds from a sale, exchange or other disposition of the securities, unless the U.S. Holder
provides proof of an applicable exemption from the information reporting rules.
Tax Consequences to Non-U.S. Holders
This section applies to you only if you are a Non-U.S. Holder. As
used herein, the term “Non-U.S. Holder” means a beneficial owner of a security that is for U.S. federal income tax
purposes:
· an
individual who is classified as a nonresident alien;
· a
foreign corporation; or
· a
foreign estate or trust.
The term “Non-U.S. Holder” does not include any of
the following holders:
· a
holder who is an individual present in the United States for 183 days or more in the taxable year of disposition and who is not
otherwise a resident of the United States for U.S. federal income tax purposes;
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
|
· certain
former citizens or residents of the United States; or
· a
holder for whom income or gain in respect of the securities is effectively connected with the conduct of a trade or business in
the United States.
Such holders should consult their tax advisers regarding the
U.S. federal income tax consequences of an investment in the securities.
Although significant aspects of the tax treatment of each security
are uncertain, we intend to withhold on any coupon paid to a Non-U.S. Holder generally at a rate of 30% or at a reduced rate specified
by an applicable income tax treaty under an “other income” or similar provision. We will not be required
to pay any additional amounts with respect to amounts withheld. In order to claim an exemption from, or a reduction
in, the 30% withholding tax, a Non-U.S. Holder of the securities must comply with certification requirements to establish that
it is not a U.S. person and is eligible for such an exemption or reduction under an applicable tax treaty. If you are
a Non-U.S. Holder, you should consult your tax adviser regarding the tax treatment of the securities, including the possibility
of obtaining a refund of any withholding tax and the certification requirement described above.
Section 871(m) Withholding Tax on Dividend Equivalents
Section 871(m) of the Code and Treasury regulations promulgated
thereunder (“Section 871(m)”) generally impose a 30% (or a lower applicable treaty rate) withholding tax on dividend
equivalents paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments linked to U.S. equities or indices
that include U.S. equities (each, an “Underlying Security”). Subject to certain exceptions, Section 871(m)
generally applies to securities that substantially replicate the economic performance of one or more Underlying Securities, as
determined based on tests set forth in the applicable Treasury regulations (a “Specified Security”). However,
pursuant to an IRS notice, Section 871(m) will not apply to securities issued before January 1, 2021 that do not have a delta of
one with respect to any Underlying Security. Based on our determination that the securities do not have a delta of one
with respect to any Underlying Security, our counsel is of the opinion that the securities should not be Specified Securities and,
therefore, should not be subject to Section 871(m).
Our determination is not binding on the IRS, and the IRS may
disagree with this determination. Section 871(m) is complex and its application may depend on your particular circumstances,
including whether you enter into other transactions with respect to an Underlying Security. If Section 871(m) withholding
is required, we will not be required to pay any additional amounts with respect to the amounts so withheld. You should
consult your tax adviser regarding the potential application of Section 871(m) to the securities.
U.S. Federal Estate Tax
Individual Non-U.S. Holders and entities the property of which
is potentially includible in such an individual’s gross estate for U.S. federal estate tax purposes (for example, a trust
funded by such an individual and with respect to which the individual has retained certain interests or powers) should note that,
absent an applicable treaty exemption, the securities may be treated as U.S.-situs property subject to U.S. federal estate tax. Prospective
investors that are non-U.S. individuals, or are entities of the type described above, should consult their tax advisers regarding
the U.S. federal estate tax consequences of an investment in the securities.
Backup Withholding and Information Reporting
Information returns will be filed with the IRS in connection
with any coupon payment and may be filed with the IRS in connection with the payment at maturity on the securities and the payment
of proceeds from a sale, exchange or other disposition. A Non-U.S. Holder may be subject to backup withholding in respect
of amounts paid to the Non-U.S. Holder, unless such Non-U.S. Holder complies with certification procedures to establish that it
is not a U.S. person for U.S. federal income tax purposes or otherwise establishes an exemption. The amount of any backup
withholding from a payment to a Non-U.S. Holder will be allowed as a credit against the Non-U.S. Holder’s U.S. federal income
tax liability and may entitle the Non-U.S. Holder to a refund, provided that the required information is timely furnished to the
IRS.
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
|
FATCA
Legislation commonly referred to as “FATCA” generally
imposes a withholding tax of 30% on payments to certain non-U.S. entities (including financial intermediaries) with respect to
certain financial instruments, unless various U.S. information reporting and due diligence requirements have been satisfied. An
intergovernmental agreement between the United States and the non-U.S. entity’s jurisdiction may modify these requirements. FATCA
generally applies to certain financial instruments that are treated as paying U.S.-source interest or other U.S.-source “fixed
or determinable annual or periodical” income (“FDAP income”). Withholding (if applicable) applies
to payments of U.S.-source FDAP income and to payments of gross proceeds of the disposition (including upon retirement) of certain
financial instruments treated as providing for U.S.-source interest or dividends. Under recently proposed regulations
(the preamble to which specifies that taxpayers are permitted to rely on them pending finalization), no withholding will apply
on payments of gross proceeds (other than amounts treated as FDAP income). While the treatment of the securities is
unclear, you should assume that any coupon payment with respect to the securities will be subject to the FATCA rules. If
withholding applies to the securities, we will not be required to pay any additional amounts with respect to amounts withheld. Both
U.S. and Non-U.S. Holders should consult their tax advisers regarding the potential application of FATCA to the securities.
The discussion in the preceding paragraphs, insofar as it
purports to describe provisions of U.S. federal income tax laws or legal conclusions with respect thereto, constitutes the full
opinion of Davis Polk & Wardwell LLP regarding the material U.S. federal tax consequences of an investment in the securities.
|
Use of proceeds and hedging:
|
The proceeds from the sale of the securities will be used by
us for general corporate purposes. We will receive, in aggregate, $1,000 per security issued, because, when we enter
into hedging transactions in order to meet our obligations under the securities, our hedging counterparty will reimburse the cost
of the agent’s commissions. The costs of the securities borne by you and described beginning on page 3 above comprise
the agent’s commissions and the cost of issuing, structuring and hedging the securities.
On or prior to the pricing date, we hedged our anticipated exposure
in connection with the securities by entering into hedging transactions with our affiliates and/or third-party dealers. We
expect our hedging counterparties to have taken positions in the XLE Shares, in stocks constituting the SX5E Index, the NDX Index
or the share underlying index and in futures and/or options contracts on the XLE Shares, the SX5E Index, the NDX Index, the share
underlying index or their component stocks listed on major securities markets. Such purchase activity could have increased
the initial level of an underlying, and, as a result, could have increased (i) the level at or above which such underlying must
close on any redemption determination date so that the securities are redeemed prior to maturity for the early redemption payment
(depending also on the performance of the other underlyings), (ii) the level at or above which such underlying must close on each
observation date in order for you to earn a contingent quarterly coupon (depending also on the performance of the other underlyings)
and (iii) the level at or above which such underlying must close on the final observation date so that you are not exposed to the
negative performance of the worst performing underlying at maturity (depending also on the performance of the other underlyings). These
entities may be unwinding or adjusting hedge positions during the term of the securities, and the hedging strategy may involve
greater and more frequent dynamic adjustments to the hedge as the final observation date approaches. Additionally, our
hedging activities, as well as our other trading activities, during the term of the securities could potentially affect the value
of an underlying on the redemption determination dates and observation dates, and, accordingly, whether we redeem the securities
prior to maturity, whether we pay a contingent quarterly coupon on the securities and the amount of cash you receive at maturity,
if any (depending also on the performance of the other underlyings).
|
Benefit plan investor considerations:
|
Each fiduciary of a pension, profit-sharing or other employee benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (a “Plan”), should consider the fiduciary standards of ERISA in the context of the Plan’s particular circumstances before authorizing an investment in the securities. Accordingly, among other factors, the fiduciary should consider whether the investment would satisfy the prudence and diversification requirements of ERISA and would be consistent with the documents and
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
|
instruments governing the Plan.
In addition, we and certain of our affiliates, including
MS & Co., may each be considered a “party in interest” within the meaning of ERISA, or a “disqualified person”
within the meaning of the Internal Revenue Code of 1986, as amended (the “Code”), with respect to many Plans, as well
as many individual retirement accounts and Keogh plans (such accounts and plans, together with other plans, accounts and arrangements
subject to Section 4975 of the Code, also “Plans”). ERISA Section 406 and Code Section 4975 generally prohibit
transactions between Plans and parties in interest or disqualified persons. Prohibited transactions within the meaning
of ERISA or the Code would likely arise, for example, if the securities are acquired by or with the assets of a Plan with respect
to which MS & Co. or any of its affiliates is a service provider or other party in interest, unless the securities are acquired
pursuant to an exemption from the “prohibited transaction” rules. A violation of these “prohibited
transaction” rules could result in an excise tax or other liabilities under ERISA and/or Section 4975 of the Code for such
persons, unless exemptive relief is available under an applicable statutory or administrative exemption.
The U.S. Department of Labor has issued five prohibited
transaction class exemptions (“PTCEs”) that may provide exemptive relief for direct or indirect prohibited transactions
resulting from the purchase or holding of the securities. Those class exemptions are PTCE 96-23 (for certain transactions
determined by in-house asset managers), PTCE 95-60 (for certain transactions involving insurance company general accounts), PTCE
91-38 (for certain transactions involving bank collective investment funds), PTCE 90-1 (for certain transactions involving insurance
company separate accounts) and PTCE 84-14 (for certain transactions determined by independent qualified professional asset managers). In
addition, ERISA Section 408(b)(17) and Code Section 4975(d)(20) provide an exemption for the purchase and sale of securities and
the related lending transactions, provided that neither the issuer of the securities nor any of its affiliates has or exercises
any discretionary authority or control or renders any investment advice with respect to the assets of the Plan involved in the
transaction and provided further that the Plan pays no more, and receives no less, than “adequate consideration”
in connection with the transaction (the so-called “service provider” exemption). There can be no assurance
that any of these class or statutory exemptions will be available with respect to transactions involving the securities.
Because we may be considered a party in interest with
respect to many Plans, the securities may not be purchased, held or disposed of by any Plan, any entity whose underlying assets
include “plan assets” by reason of any Plan’s investment in the entity (a “Plan Asset Entity”) or
any person investing “plan assets” of any Plan, unless such purchase, holding or disposition is eligible for exemptive
relief, including relief available under PTCEs 96-23, 95-60, 91-38, 90-1, 84-14 or the service provider exemption or such purchase,
holding or disposition is otherwise not prohibited. Any purchaser, including any fiduciary purchasing on behalf of a
Plan, transferee or holder of the securities will be deemed to have represented, in its corporate and its fiduciary capacity, by
its purchase and holding of the securities that either (a) it is not a Plan or a Plan Asset Entity and is not purchasing such securities
on behalf of or with “plan assets” of any Plan or with any assets of a governmental, non-U.S. or church plan that is
subject to any federal, state, local or non-U.S. law that is substantially similar to the provisions of Section 406 of ERISA or
Section 4975 of the Code (“Similar Law”) or (b) its purchase, holding and disposition of these securities will not
constitute or result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or violate any
Similar Law.
Due to the complexity of these rules and the penalties
that may be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries
or other persons considering purchasing the securities on behalf of or with “plan assets” of any Plan consult with
their counsel regarding the availability of exemptive relief.
The securities are contractual financial instruments. The
financial exposure provided by the securities is not a substitute or proxy for, and is not intended as a substitute or proxy for,
individualized investment management or advice for the benefit of any purchaser or holder of the securities. The securities
have not been designed and will not be administered in a manner intended to reflect the individualized needs and objectives of
any purchaser or holder of the securities.
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
|
Each purchaser or holder of any securities acknowledges and agrees
that:
(i)
the purchaser or holder or its fiduciary has made and
shall make all investment decisions for the purchaser or holder and the purchaser or holder has not relied and shall not rely in
any way upon us or our affiliates to act as a fiduciary or adviser of the purchaser or holder with respect to (A) the design and
terms of the securities, (B) the purchaser or holder’s investment in the securities, or (C) the exercise of or failure to
exercise any rights we have under or with respect to the securities;
(ii)
we and our affiliates have acted
and will act solely for our own account in connection with (A) all transactions relating to the securities and (B) all hedging
transactions in connection with our obligations under the securities;
(iii)
any and all assets and positions
relating to hedging transactions by us or our affiliates are assets and positions of those entities and are not assets and positions
held for the benefit of the purchaser or holder;
(iv)
our interests are adverse to
the interests of the purchaser or holder; and
(v)
neither we nor any of our affiliates
is a fiduciary or adviser of the purchaser or holder in connection with any such assets, positions or transactions, and any information
that we or any of our affiliates may provide is not intended to be impartial investment advice.
Each purchaser and holder of the securities has exclusive
responsibility for ensuring that its purchase, holding and disposition of the securities do not violate the prohibited transaction
rules of ERISA or the Code or any Similar Law. The sale of any securities to any Plan or plan subject to Similar Law
is in no respect a representation by us or any of our affiliates or representatives that such an investment meets all relevant
legal requirements with respect to investments by plans generally or any particular plan, or that such an investment is appropriate
for plans generally or any particular plan. In this regard, neither this discussion nor anything provided in this document is or
is intended to be investment advice directed at any potential Plan purchaser or at Plan purchasers generally and such purchasers
of these securities should consult and rely on their own counsel and advisers as to whether an investment in these securities is
suitable.
However, individual retirement accounts, individual retirement
annuities and Keogh plans, as well as employee benefit plans that permit participants to direct the investment of their accounts,
will not be permitted to purchase or hold the securities if the account, plan or annuity is for the benefit of an employee of Morgan
Stanley, Morgan Stanley Wealth Management or a family member and the employee receives any compensation (such as, for example,
an addition to bonus) based on the purchase of the securities by the account, plan or annuity.
|
Additional considerations:
|
Client accounts over which Morgan Stanley, Morgan Stanley Wealth Management or any of their respective subsidiaries have investment discretion are not permitted to purchase the securities, either directly or indirectly.
|
Supplemental information regarding plan of distribution; conflicts of interest:
|
Selected dealers, which may include our affiliates, and their
financial advisors will collectively receive from the agent a fixed sales commission of $40.25 for each security they sell.
MS & Co. is an affiliate of MSFL and a wholly owned subsidiary
of Morgan Stanley, and it and other affiliates of ours expect to make a profit by selling, structuring and, when applicable, hedging
the securities.
MS & Co. will conduct this offering in compliance with the
requirements of FINRA Rule 5121 of the Financial Industry Regulatory Authority, Inc., which is commonly referred to as FINRA, regarding
a FINRA member firm’s distribution of the securities of an affiliate and related conflicts of interest. MS & Co. or any
of our other affiliates may not make sales in this offering to any discretionary account. See “Plan of Distribution (Conflicts
of Interest)” and “Use of Proceeds and Hedging” in the accompanying product supplement for auto-callable securities.
|
Validity of the securities:
|
In the opinion of Davis Polk & Wardwell LLP, as special counsel to MSFL and Morgan Stanley, when the securities offered by this pricing supplement have been executed and issued by MSFL, authenticated by the trustee pursuant to the MSFL Senior Debt Indenture (as defined in the accompanying prospectus) and delivered against payment as contemplated herein, such securities will be valid and binding obligations of MSFL and the related guarantee will be a
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due October 23, 2024, with 1-Year Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the EURO STOXX 50® Index, the NASDAQ-100 Index® and the Energy Select Sector SPDR® Fund
Principal at Risk Securities
|
|
valid and binding obligation of Morgan Stanley, enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, concepts of reasonableness and equitable principles of general applicability (including, without limitation, concepts of good faith, fair dealing and the lack of bad faith), provided that such counsel expresses no opinion as to (i) the effect of fraudulent conveyance, fraudulent transfer or similar provision of applicable law on the conclusions expressed above and (ii) any provision of the MSFL Senior Debt Indenture that purports to avoid the effect of fraudulent conveyance, fraudulent transfer or similar provision of applicable law by limiting the amount of Morgan Stanley’s obligation under the related guarantee. This opinion is given as of the date hereof and is limited to the laws of the State of New York, the General Corporation Law of the State of Delaware and the Delaware Limited Liability Company Act. In addition, this opinion is subject to customary assumptions about the trustee’s authorization, execution and delivery of the MSFL Senior Debt Indenture and its authentication of the securities and the validity, binding nature and enforceability of the MSFL Senior Debt Indenture with respect to the trustee, all as stated in the letter of such counsel dated November 16, 2017, which is Exhibit 5-a to the Registration Statement on Form S-3 filed by Morgan Stanley on November 16, 2017.
|
Where you can find more information:
|
Morgan Stanley and MSFL have filed a registration statement (including
a prospectus, as supplemented by the product supplement for auto-callable securities and the index supplement) with the Securities
and Exchange Commission, or SEC, for the offering to which this communication relates. You should read the prospectus
in that registration statement, the product supplement for auto-callable securities, the index supplement and any other documents
relating to this offering that Morgan Stanley and MSFL have filed with the SEC for more complete information about Morgan Stanley,
MSFL and this offering. You may get these documents without cost by visiting EDGAR on the SEC web site at.www.sec.gov. Alternatively,
Morgan Stanley, MSFL, any underwriter or any dealer participating in the offering will arrange to send you the prospectus, the
product supplement for auto-callable securities and the index supplement if you so request by calling toll-free 1-(800)-584-6837.
You may access these documents on the SEC web site at.www.sec.gov
as follows:
Product Supplement for Auto-Callable Securities dated November 16, 2017
Index Supplement dated November 16, 2017
Prospectus dated November 16, 2017
Terms used but not defined in this document are defined in the
product supplement for auto-callable securities, in the index supplement or in the prospectus.
|
Morgan Stanley Depository Shares Representing 1/1000TH Preferred Series 1 Fixed TO Floating Non (Cum) (NYSE:MSPI)
Historical Stock Chart
From Jun 2024 to Jul 2024
Morgan Stanley Depository Shares Representing 1/1000TH Preferred Series 1 Fixed TO Floating Non (Cum) (NYSE:MSPI)
Historical Stock Chart
From Jul 2023 to Jul 2024