CALCULATION OF REGISTRATION FEE
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Title of Each Class of Securities Offered
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Maximum Aggregate Offering Price
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Amount of Registration Fee
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Equity-Linked Partial Principal at Risk Securities due 2022
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$739,000
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$95.92
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October 2019
Pricing Supplement No. 2,705
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
Equity-Linked Partial Principal at Risk Securities
due October 21, 2022
Based on the Performance of a Basket Consisting
of Two Indices and Two Exchange-Traded Funds
Fully and Unconditionally Guaranteed by Morgan
Stanley
The
Equity-Linked Partial Principal at Risk Securities, which we refer to as the securities, are unsecured obligations of Morgan Stanley
Finance LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley. The securities will
pay no interest, provide for a minimum payment amount of only 95% of principal at maturity and have the terms described in the
accompanying prospectus supplement, index supplement and prospectus, as supplemented and modified by this document. At
maturity, if the basket of two indices and two exchange-traded funds has appreciated in value, investors will receive the stated
principal amount of $1,000 plus a supplemental redemption amount, if any, based on the closing value of the basket on the determination
date. If the basket appreciates, your upside return will in all cases be less than the basket percent change. However,
if, at maturity, the basket has depreciated in value, investors will lose 1% for every 1% decline of the final basket closing
value from the initial basket value, subject to the minimum payment amount. Investors may lose up to 5% of the stated principal
amount of the securities. The securities are for investors who are concerned about principal risk, but seek a return based
on a basket of equity components, and who are willing to risk 5% of their principal and to forgo current income and full participation
in any appreciation of the basket in exchange for the repayment of at least 95% of principal at maturity plus the potential
to receive a supplemental redemption amount, if any. The securities are notes issued as part of MSFL’s Series
A Global Medium-Term Notes program.
All
payments on the securities, including the payment of the minimum payment amount at maturity, 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.
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FINAL TERMS
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Issuer:
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Morgan Stanley Finance LLC
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Guarantor:
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Morgan Stanley
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Issue price:
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$1,000 per security (see “Commissions and issue price” below)
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Stated principal amount:
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$1,000 per security
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Aggregate principal amount:
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$739,000
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Pricing date:
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October 18, 2019
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Original issue date:
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October 23, 2019 (3 business days after the pricing date)
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Maturity date:
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October 21, 2022
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Interest:
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None
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Basket:
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Basket component*
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Ticker symbol*
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Basket component weighting
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Initial basket component value
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Multiplier
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S&P 500® Index (the “SPX Index”)
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SPX
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50%
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2,986.20
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0.016743688
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Russell 2000® Index (the “RTY Index”)
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RTY
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10%
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1,535.482
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0.006512613
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Shares of the iShares® MSCI Emerging Markets ETF (the “EEM Shares”)
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EEM UP
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20%
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$41.98
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0.476417342
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Shares of the iShares® MSCI EAFE ETF (the “EFA Shares”)
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EFA UP
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20%
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$66.27
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0.301795684
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* Ticker symbols are being provided for reference purposes only. We refer to the SPX Index and the RTY Index, collectively, as the underlying indices, and the EEM Shares and the EFA Shares, collectively, as the underlying shares and, together with the underlying indices, as the basket components.
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Payment at maturity:
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The payment due at maturity per $1,000 stated principal amount
will equal:
·
If the final basket closing value is greater than
the initial basket value:
$1,000 + supplemental redemption amount,
if any.
Because the participation rate is less than 100%, you will
not participate fully in any appreciation of the basket.
·
If the final basket closing value is less than
or equal to the initial basket value:
$1,000 × (final basket closing value
/ initial basket value), subject to the minimum payment amount
Under these circumstances, the payment at maturity will be
less than the stated principal amount of $1,000 per security by an amount that is proportionate to the percentage decline of the
basket. However, under no circumstances will the payment due at maturity be less than the minimum payment amount of
$950 per security.
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Supplemental redemption amount:
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(i) $1,000 times (ii) the basket percent change times (iii) the participation rate, provided that the supplemental redemption amount will not be less than $0.
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Minimum payment amount:
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$950 per security (95% of the stated principal amount)
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Participation rate:
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66%
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Maximum payment at maturity:
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None
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Basket percent change:
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(final basket closing value – initial basket value) / initial basket value
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Listing:
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The securities will not be listed on any securities exchange.
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Terms continued on the following page
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Agent:
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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.”
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Estimated value on the pricing date:
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$985.00 per security. See “Investment Summary” on page 3.
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Commissions and issue price:
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Price to public
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Agent’s commissions(1)
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Proceeds to us(2)
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Per security
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$1,000
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$6
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$994
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Total
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$739,000
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$4,434
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$734,566
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(1)
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Selected dealers and their financial advisors will
collectively receive from the agent, MS & Co., a fixed sales commission of $6 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 prospectus supplement.
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(2)
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See “Use of proceeds and hedging” on page
30.
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The securities involve risks not associated
with an investment in ordinary debt securities. See “Risk Factors” beginning on page 7.
The Securities and Exchange Commission
and state securities regulators have not approved or disapproved these securities, or determined if this document or the accompanying
prospectus supplement, index supplement and prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
The securities are not bank deposits
and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations of,
or guaranteed by, a bank.
You should read this document together
with the related prospectus supplement, index supplement and prospectus, each of which can be accessed via the hyperlinks below. Please
also see “Additional Terms of the Securities” and “Additional Information About the Securities” at the
end of this 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.
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Morgan Stanley Finance LLC
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Equity-Linked Partial Principal at Risk Securities due October 21, 2022
Based on the Performance of a Basket Consisting of Two Indices and Two Exchange-Traded Funds
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Terms continued from previous page:
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Initial basket value:
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The initial basket value is 100, which is equal to the sum of the products of (i) the initial basket component value of each basket component, as set forth under “Basket—Initial basket component value” above, and (ii) the multiplier for such basket component, as set forth under “Basket—Multiplier” above, each as determined on the pricing date.
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Final basket closing value:
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The basket closing value on the determination date
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Determination date:
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October 18, 2022, subject to postponement for non-index business days or non-trading days, as applicable, and certain market disruption events
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Basket closing value:
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On any date, the sum of the products of (i) the basket component closing value of each basket component on such date, and (ii) the multiplier for such basket component.
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Basket component closing value:
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In the case of each underlying index, on any index business day, the index closing value as published by the relevant index publisher. In the case of each of the underlying shares, on any trading day, the closing price of one share of such underlying shares on such day times the adjustment factor for such underlying shares on such day.
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Multiplier:
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The multiplier for each basket component was set on the pricing date so that each basket component represents its applicable basket component weighting in the predetermined initial basket value of 100. Each multiplier will remain constant for the term of the securities.
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Adjustment factor:
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With respect to each of the underlying shares, 1.0, subject to adjustment for certain events affecting such underlying shares.
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CUSIP:
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61769HZU2
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ISIN:
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US61769HZU21
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Morgan Stanley Finance LLC
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Equity-Linked Partial Principal at Risk Securities due October 21, 2022
Based on the Performance of a Basket Consisting of Two Indices and Two Exchange-Traded Funds
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Investment Summary
Equity-Linked Partial Principal at Risk Securities
The Equity-Linked Partial Principal at Risk Securities due October
21, 2022 Based on a Basket Consisting of Two Indices and Two Exchange-Traded Funds (the “securities”) offer the potential
for a supplemental redemption amount at maturity based on the closing value of a basket of two indices and two exchange-traded
funds on the determination date while maintaining 1:1 downside exposure to any depreciation of the basket, subject to the minimum
payment amount at maturity of $950 per security.
At maturity, if the final basket closing value is greater
than the initial basket value, the securities will pay the stated principal amount of $1,000 plus a supplemental redemption
amount. The supplemental redemption amount provides 66% upside participation (e.g., if the basket appreciates 10% from the initial
basket value to the final basket closing value, the investor receives 100% of principal plus 6.60% at maturity) in the performance
of the basket. Because the participation rate is less than 100%, you will not participate fully in any appreciation of the basket.
If the final basket closing value is equal to or less than the initial basket value, the payment at maturity per
security will be equal to or less than the $1,000 principal amount by an amount proportionate to the decline in the basket as of
the determination date, subject to the minimum payment amount of $950 per security. The securities do not pay interest, and all
payments on the securities, including the payment of the minimum payment amount at maturity, are subject to our credit risk.
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Maturity:
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Approximately 3 years
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Minimum payment amount:
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$950 per security (95% of the stated principal amount). You could lose up to 5% of the stated principal amount of the securities.
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Participation rate:
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66%
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Interest:
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None
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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 $985.00.
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 basket components. The
estimated value of the securities is determined using our own pricing and valuation models, market inputs and assumptions relating
to the basket components, instruments based on the basket components, 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 minimum payment amount and the participation rate, we use an internal funding rate, which is likely to be lower than our secondary
market credit spreads and therefore advantageous to us. If the issuing, selling, structuring and hedging costs borne
by you were lower or if the internal funding rate were higher, one or more of the economic terms of the securities would be more
favorable to you.
What is the relationship between the estimated value on the
pricing date and the secondary market price of the securities?
The price at which MS & Co. purchases the securities in the
secondary market, absent changes in market conditions, including those related to the underlying indices, 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,
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Morgan Stanley Finance LLC
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Equity-Linked Partial Principal at Risk Securities due October 21, 2022
Based on the Performance of a Basket Consisting of Two Indices and Two Exchange-Traded Funds
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because the costs associated with issuing, selling, structuring
and hedging the securities are not fully deducted upon issuance, for a period of up to 6 months following the issue date, to the
extent that MS & Co. may buy or sell the securities in the secondary market, absent changes in market conditions, including
those related to the underlying indices, 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.
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Morgan Stanley Finance LLC
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Equity-Linked Partial Principal at Risk Securities due October 21, 2022
Based on the Performance of a Basket Consisting of Two Indices and Two Exchange-Traded Funds
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Key Investment Rationale
The securities offer investors exposure to the performance of
a basket composed of the S&P 500® Index, the Russell 2000® Index, shares of the iShares®
MSCI Emerging Markets ETF and shares of the iShares® MSCI EAFE ETF while providing for a minimum repayment
of 95% of the stated principal amount if the securities are held to maturity, in exchange for forgoing current income and interest. They
are for investors who are concerned about principal risk, but seek a return based on a basket of equity components, and who are
willing to risk 5% of their principal and to forgo current income and full participation in any appreciation of the basket in exchange
for the repayment of at least 95% of principal at maturity plus the potential to receive a supplemental redemption amount, if any.
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Minimum Payment Amount of 95% of Principal at Maturity
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The securities provide for the minimum payment amount of 95% of principal if held to maturity, subject to our creditworthiness.
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Upside Scenario
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The basket closing value on the determination date is greater than the initial basket value of 100, and, at maturity, the securities pay the stated principal amount of $1,000 plus 66% of the positive percent change from the initial basket value to the final basket closing value. If the basket appreciates, your upside return will in all cases be less than the basket percent change. There is no limitation on the appreciation potential.
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Downside Scenario
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The final basket closing value is less than the initial basket value, and, at maturity, the securities redeem for less than the $1,000 stated principal amount by an amount proportionate to the decline in the value of the basket, subject to the minimum payment amount of $950 per security (95% of the stated principal amount).
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Morgan Stanley Finance LLC
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Equity-Linked Partial Principal at Risk Securities due October 21, 2022
Based on the Performance of a Basket Consisting of Two Indices and Two Exchange-Traded Funds
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How the Securities Work
Payoff Diagram
The payoff diagram below illustrates the
payment at maturity on the securities, based on the following terms:
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Stated principal amount:
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$1,000 per security
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Participation rate:
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66%
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Minimum payment amount
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$950 per security (95% of the stated principal amount)
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Payoff Diagram
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How it works
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§
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Upside Scenario. If
the final basket closing value is greater than the initial basket value, investors would receive the $1,000 stated principal
amount plus 66% participation in the appreciation of the basket. Because the participation rate is less than 100%, you will not
participate fully in any appreciation of the basket.
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o
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If the basket appreciates 10%, investors would receive a 6.60% return, or $1,066 per security.
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§
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Par or Downside Scenario. If
the final basket closing value is less than or equal to the initial basket value, investors would receive an amount less
than or equal to the $1,000 stated principal amount, based on a 1% loss of principal for each 1% decline in the basket over the
term of the securities, subject to the minimum payment amount of $950 per security.
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o
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If the basket depreciates 1.50% from the initial basket value to the final basket closing value, investors would lose 1.50%
of their principal and receive only $985 per security at maturity, or 98.50% of the stated principal amount.
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o
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If the basket depreciates 50% from the initial basket value to the final basket closing value, investors would receive the
minimum payment amount of $950 per security at maturity, or 95% of the stated principal amount.
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Morgan Stanley Finance LLC
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Equity-Linked Partial Principal at Risk Securities due October 21, 2022
Based on the Performance of a Basket Consisting of Two Indices and Two Exchange-Traded Funds
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Risk Factors
The following is a non-exhaustive list
of certain key risk factors for investors in the securities. For further discussion of these and other risks you should
read the section entitled “Risk Factors” in the accompanying prospectus supplement and prospectus. You should
also consult with your investment, legal, tax, accounting and other advisers in connection with your investment in the securities.
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§
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The securities do not pay interest and provide for a minimum payment amount of only 95% of principal. The
terms of the securities differ from those of ordinary debt securities in that the securities do not pay interest and provide for
a minimum payment amount of only 95% of principal at maturity. If the basket has depreciated over the term of the securities, the
payout at maturity will be an amount in cash that is less than the $1,000 stated principal amount of each security by an amount
proportionate to the decrease in the value of the basket, subject to the minimum payment amount of $950 per security (95% of the
stated principal amount). You could lose up to 5% of your investment in the securities.
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§
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The securities offer only reduced upside participation in any appreciation of the basket. If the final basket
closing value is greater than the initial basket closing value, you will receive at maturity a return equal to $1,000 plus
the supplemental redemption amount. However, because the participation rate is less than 100%, you will not participate
fully in the appreciation of the basket. If the basket appreciates, your upside return will in all cases be less than
the basket percent change.
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§
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Changes in the value of the basket components may offset each other. Movements in the levels of the basket components
may not correlate with each other. At a time when the level of one basket component increases, the levels of the other
basket components may decline in value. Therefore, in calculating the payment at maturity, increases in the level of
one basket component may be moderated, or wholly offset, by declines in the levels of the other basket components. Furthermore,
the basket components do not have the same basket component weightings. The SPX Index is weighted at 50%, the RTY Index is weighted
at 10%, the EEM Shares are weighted at 20% and the EFA Shares are weighted at 20% of the basket. Therefore, the same percentage
change over the term of the securities in each of the basket components would have different effects on the basket performance.
A decrease in the value of a more heavily weighted basket component could moderate, offset or more than offset an increase in the
value of a less heavily weighted basket component. For example, because the weighting of the SPX Index is significantly greater
than the weighting of the EEM Shares, a 5% decrease in the value of the SPX Index will more than offset a 9% increase in the value
of the EEM Shares, which has a lower weighting.
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§
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The market price of the securities 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, including the values of the basket
components at any time, the volatility (frequency and magnitude of changes in value) of the underlying indices, dividend rate on
the stocks underlying the basket components, interest and yield rates in the market, time
remaining until the securities mature, geopolitical conditions and economic, financial,
political, regulatory or judicial events that affect the underlying indices or equities markets generally and which may affect
the closing values of the underlying indices on the determination date and the actual or anticipated changes in our credit ratings
or credit spreads. The values of the underlying indices may be, and have recently been, volatile, and we can give you
no assurance that the volatility will lessen. See “Historical Information” below. You may receive
less, and possibly significantly less, than the stated principal amount per security if you try to sell your securities prior to
maturity.
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§
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The securities are linked to the Russell 2000® Index and are subject to risks associated with small-capitalization
companies. As the Russell 2000® Index is one of the underlyings, and the Russell 2000® Index
consists of stocks issued by companies with relatively small market capitalization, the securities are linked to the value of small-capitalization
companies. These companies often have greater stock price volatility, lower trading volume and less liquidity than large-capitalization
companies and therefore the Russell 2000® Index may be more volatile than indices that consist of stocks issued
by large-capitalization companies. Stock prices of small-
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Morgan Stanley Finance LLC
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Equity-Linked Partial Principal at Risk Securities due October 21, 2022
Based on the Performance of a Basket Consisting of Two Indices and Two Exchange-Traded Funds
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capitalization companies are also
more vulnerable than those of large-capitalization companies to adverse business and economic developments, and the stocks of small-capitalization
companies may be thinly traded. In addition, small capitalization companies are typically less well-established and less stable
financially than large-capitalization companies and may depend on a small number of key personnel, making them more vulnerable
to loss of personnel. Such companies tend to have smaller revenues, less diverse product lines, smaller shares of their product
or service markets, fewer financial resources and less competitive strengths than large-capitalization companies and are more susceptible
to adverse developments related to their products.
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§
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There are risks associated with investments in securities linked to the value of foreign (and especially emerging markets)
equity securities. The securities are linked to the value of foreign equity securities. The EEM Shares track the performance
of the MSCI Emerging Markets IndexSM, which is linked to the value of foreign (and especially emerging markets) equity
securities. The EFA Shares track the performance of the MSCI EAFE IndexSM, which is 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
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 between
countries.
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In addition, the stocks included
in the MSCI Emerging Markets IndexSM and that are generally tracked by the EEM Shares have been issued by companies
in various emerging markets countries, which pose further risks in addition to the risks associated with investing in foreign equity
markets generally. Countries with emerging markets may have relatively unstable governments, may present the risks of nationalization
of businesses, restrictions on foreign ownership and prohibitions on the repatriation of assets, and may have less protection of
property rights than more developed countries. The economies of countries with emerging markets may be based on only a few industries,
may be highly vulnerable to changes in local or global trade conditions, and may suffer from extreme and volatile debt burdens
or inflation rates.
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§
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The securities are subject to currency exchange risk. Because the prices of the EEM Shares and the EFA Shares are related
to the U.S. dollar value of stocks underlying the MSCI Emerging Markets IndexSM and the MSCI EAFE IndexSM,
respectively, holders of the securities will be exposed to currency exchange rate risk with respect to each of the currencies
in which such component securities trade. Exchange rate movements for a particular currency are volatile and are the result of
numerous factors including the supply of, and the demand for, those currencies, as well as relevant government policy, intervention
or actions, but are also influenced significantly from time to time by political or economic developments, and by macroeconomic
factors and speculative actions related to the relevant region. An investor’s net exposure will depend on the extent to which
the currencies of the component securities strengthen or weaken against the U.S. dollar and the relative weight of each currency.
If, taking into account such weighting, the dollar strengthens against the currencies of the component securities represented in
the MSCI Emerging Markets IndexSM or the MSCI EAFE IndexSM, the final level of the relevant underlying
shares will be adversely affected and the payment at maturity on the securities may be reduced.
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Of particular importance to potentially
currency exchange risk are:
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o
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existing and expected rates of inflation;
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o
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existing and expected interest rate levels;
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Morgan Stanley Finance LLC
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Equity-Linked Partial Principal at Risk Securities due October 21, 2022
Based on the Performance of a Basket Consisting of Two Indices and Two Exchange-Traded Funds
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o
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the balance of payments; and
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o
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the extent of governmental surpluses or deficits in the countries represented in the MSCI Emerging Markets IndexSM,
the MSCI EAFE IndexSM and the United States.
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All of these factors are in turn
sensitive to the monetary, fiscal and trade policies pursued by the governments of various countries represented in the MSCI Emerging
Markets IndexSM or the MSCI EAFE IndexSM and the United States and other countries important
to international trade and finance.
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§
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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 and therefore you are subject to our credit risk. If we default on our obligations under
the securities, your investment would be at risk and you could lose some or all of your investment. As a result, the
market value of the securities prior to maturity will be affected by changes in the market’s view of our creditworthiness. Any
actual or anticipated decline in our credit ratings or increase in the credit spreads charged by the market for taking our credit
risk is likely to adversely affect the market value of the securities.
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§
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As a finance subsidiary, MSFL has no independent operations and will have no independent assets. As a finance
subsidiary, MSFL has no independent operations beyond the issuance and administration of its securities and will have no independent
assets available for distributions to holders of MSFL securities if they make claims in respect of such securities in a bankruptcy,
resolution or similar proceeding. Accordingly, any recoveries by such holders will be limited to those available under
the related guarantee by Morgan Stanley and that guarantee will rank pari passu with all other unsecured, unsubordinated obligations
of Morgan Stanley. Holders will have recourse only to a single claim against Morgan Stanley and its assets under the guarantee.
Holders of securities issued by MSFL should accordingly assume that in any such proceedings they would not have any priority over
and should be treated pari passu with the claims of other unsecured, unsubordinated creditors of Morgan Stanley, including holders
of Morgan Stanley-issued securities.
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§
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The amount payable on the securities is not linked to the value of the basket components at any time other than the determination
date. The amount payable on the securities will be based on the basket closing value on the determination date,
subject to postponement for non-index business days or non-trading days, as applicable, and certain market disruption events. Even
if the value of the basket appreciates prior to the determination date but then drops by the determination date, the payment at
maturity will be less, and may be significantly less, than it would have been had the payment at maturity been linked to the value
of the basket prior to such drop. Although the actual value of the basket on the stated maturity date or at other times
during the term of the securities may be higher than the final basket closing value, the payment at maturity will be based solely
on the final basket closing value.
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§
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The rate we are willing to pay for securities of this type, maturity and issuance size is likely to be lower than the rate
implied by our secondary market credit spreads and advantageous to us. Both the lower rate and the inclusion of costs
associated with issuing, selling, structuring and hedging the 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.
|
Morgan Stanley Finance LLC
|
|
Equity-Linked Partial Principal at Risk Securities due October 21, 2022
Based on the Performance of a Basket Consisting of Two Indices and Two Exchange-Traded Funds
|
However, because the costs associated
with issuing, selling, structuring and hedging the securities are not fully deducted upon issuance, for a period of up to 6 months
following the issue date, to the extent that MS & Co. may buy or sell the securities in the secondary market, absent changes
in market conditions, including those related to the basket components, and to our secondary market credit spreads, it would do
so based on values higher than the estimated value, and we expect that those higher values will also be reflected in your brokerage
account statements.
|
|
§
|
The estimated value of the securities is determined by reference to our pricing and valuation models, which may differ from
those of other dealers and is not a maximum or minimum secondary market price. These pricing and valuation models
are proprietary and rely in part on subjective views of certain market inputs and certain assumptions about future events, which
may prove to be incorrect. As a result, because there is no market-standard way to value these types of securities,
our models may yield a higher estimated value of the securities than those generated by others, including other dealers in the
market, if they attempted to value the securities. In addition, the estimated value on the pricing date does not represent
a minimum or maximum price at which dealers, including MS & Co., would be willing to purchase your securities in the secondary
market (if any exists) at any time. The value of your securities at any time after the date of this document will vary based on
many factors that cannot be predicted with accuracy, including our creditworthiness and changes in market conditions. See
also “The market price of the securities will be influenced by many unpredictable factors” above.
|
|
|
§
|
Adjustments to an underlying index could adversely affect the value of the securities. The index publisher
of each underlying index can add, delete or substitute the stocks underlying such underlying index, and can make other methodological
changes that could change the value of such underlying index. Any of these actions could adversely affect the value
of the securities. In addition, the index publisher of an underlying index may discontinue or suspend calculation or
publication of such underlying index at any time. In these circumstances, MS & Co., as the calculation agent, will
have the sole discretion to substitute a successor index that is comparable to the discontinued underlying index and 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 the determination date, the basket
component closing value on the determination date will be an amount based on the stocks
underlying the discontinued index at the time of such discontinuance, without rebalancing or substitution, computed by MS &
Co, as calculation agent, in accordance with the formula for calculating the basket component closing value last in effect prior
to discontinuance of the index.
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|
|
§
|
Adjustments to any of the underlying shares or to the MSCI Emerging Markets IndexSM
or the MSCI EAFE IndexSM could adversely affect the value of the securities. The investment adviser to
each of the EEM Shares and the EFA Shares seeks investment results that correspond generally to the price and yield performance,
before fees and expenses, of the MSCI Emerging Markets IndexSM or the MSCI EAFE IndexSM, as applicable (each
a “share underlying index”). Pursuant to its investment strategy or otherwise, the investment adviser
may add, delete or substitute the components of the applicable underlying shares. Any of these actions could adversely
affect the price of the applicable underlying shares and, consequently, the value of the securities. In addition, the
publisher of the share underlying index is responsible for calculating and maintaining such share underlying index. The
index publisher may add, delete or substitute the stocks constituting such share underlying index or make other methodological
changes that could change the value of such share underlying index. The index publisher may also discontinue or suspend
calculation or publication of such share underlying index at any time. If this discontinuance or suspension occurs following
the termination of the related underlying shares, the calculation agent will have the sole discretion to substitute a successor
index that is comparable to the discontinued share underlying index, and is permitted to consider indices that are calculated and
published by the calculation agent or any of its affiliates. Any of these actions could adversely affect the values
of the underlying shares and, consequently, the value of the securities.
|
|
|
§
|
The performance and market price of the EEM and the EFA Shares, particularly during periods
of market volatility, may not correlate with the performance of the relevant share underlying index, the performance of the component
securities of the relevant share underlying index or the net asset value per share of the underlying shares. The
EEM Shares and the EFA Shares do not fully replicate the relevant share underlying index and may hold securities that are different
than those included in the relevant share
|
|
Morgan Stanley Finance LLC
|
|
Equity-Linked Partial Principal at Risk Securities due October 21, 2022
Based on the Performance of a Basket Consisting of Two Indices and Two Exchange-Traded Funds
|
underlying
index. In addition, the performance of the underlying shares will reflect additional transaction costs and fees that
are not included in the calculation of the relevant share underlying index. All of these factors may lead to a lack
of correlation between the performance of the underlying shares and the relevant share underlying index. In addition,
corporate actions (such as mergers and spin-offs) with respect to the equity securities underlying the underlying shares may impact
the variance between the performances of the underlying shares and the relevant share underlying index. Finally, because
the shares of the underlying shares are traded on an exchange and are subject to market supply and investor demand, the market
price of one share of the underlying shares may differ from the net asset value per share of the underlying shares.
In
particular, during periods of market volatility, or unusual trading activity, trading in the securities underlying the underlying
shares may be disrupted or limited, or such securities may be unavailable in the secondary market. Under these circumstances,
the liquidity of the underlying shares may be adversely affected, market participants may be unable to calculate accurately the
net asset value per share of the underlying shares, and their ability to create and redeem shares of the underlying shares may
be disrupted. Under these circumstances, the market price of the underlying shares may vary substantially from the net asset value
per share of the underlying shares or the level of the relevant share underlying index.
For
all of the foregoing reasons, the performance of the underlying shares may not correlate with the performance of the relevant share
underlying index, the performance of the component securities of the relevant share underlying index or the net asset value per
share of the underlying shares. Any of these events could materially and adversely affect the price of the underlying
shares and, therefore, the value of the securities. Additionally, if market volatility or these events were to occur
on the determination date, the calculation agent would maintain discretion to determine whether such market volatility or events
have caused a market disruption event to occur, and such determination would affect the payment at maturity of the securities. If
the calculation agent determines that no market disruption event has taken place, the payment at maturity would be based solely
on the published closing price per share of the underlying shares on the determination date, even if the underlying shares are
underperforming the relevant share underlying index or the component securities of the relevant share underlying index and/or trading
below the net asset value per share of the underlying shares.
|
|
§
|
The antidilution adjustments the calculation agent is required to make do not cover every event that could affect the underlying
shares. MS & Co., as calculation agent, will adjust the adjustment factor for certain events affecting the underlying
shares. However, the calculation agent will not make an adjustment for every event that could affect the underlying
shares. If an event occurs that does not require the calculation agent to adjust the adjustment factor, the market price
of the securities may be materially and adversely affected.
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|
|
§
|
Investing in the securities is not equivalent to investing in the basket components;
you have no shareholder or other rights in the basket components and are exposed to our credit risk. Investing in the securities
is not equivalent to investing in the basket components. As an investor in the securities, you will not have voting
rights or the right to receive dividends or other distributions or any other rights with respect to the component stocks of either
basket component. Furthermore, investing in the securities is not equivalent to investing in the basket components or
their component stocks. In addition, you are subject to our credit risk.
|
|
|
§
|
The securities will not be listed on any securities exchange and secondary trading may be limited. 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 &
|
|
Morgan Stanley Finance LLC
|
|
Equity-Linked Partial Principal at Risk Securities due October 21, 2022
Based on the Performance of a Basket Consisting of Two Indices and Two Exchange-Traded Funds
|
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 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 basket component value and multiplier
for each basket component, will determine the final basket closing value and the basket percent change and will calculate the amount
of cash you will receive at maturity. Moreover, certain determinations made by MS & Co., in its capacity as calculation
agent, may require it to exercise discretion and make subjective judgments, such as with respect to the occurrence or non-occurrence
of market disruption events, any adjustments to the adjustment factor and the selection of a successor basket component or calculation
of the basket closing value in the event of a discontinuance of any basket component or a market disruption event with respect
to any basket component. These potentially subjective determinations may affect the payout to you at maturity. For
further information regarding these types of determinations, see “Additional Terms of the Securities—Additional Terms—Calculation
agent,” “—Adjustment factor,” “—Antidilution adjustments,” “—Index closing
value,” “—Closing price,” “—Market disruption event” “—Discontinuance of
the SPX Index or the RTY Index; alteration of method of calculation,” “—Discontinuance of the EEM Shares or the
EFA Shares and/or the relevant share underlying index; alteration of method of calculation,” “—Alternate exchange
calculation in case of an event of default” and related definitions below. In addition, MS & Co. has determined
the estimated value of the securities on the pricing date.
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|
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§
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Hedging and trading activity by our affiliates could potentially adversely 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 basket components or the component stocks of the underlying indices or
share underlying index), including trading in the underlying shares or the component stocks of the underlying indices or the share
underlying index and in other instruments related to the underlying indices. 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 determination date approaches. Some of our affiliates also trade the underlying shares or the component stocks
of the underlying indices or the share underlying index and other financial instruments related to the basket components 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 basket component values, and, therefore, could have increased the values
at or above which the underlying indices must close on the determination date so that investors do not suffer a loss on their initial
investment in the securities. Additionally, such hedging or trading activities during the term of the securities, including
on the determination date, could adversely affect the closing values of the underlying indices on the determination date, and,
accordingly, the amount of cash an investor will receive at maturity.
|
|
Morgan Stanley Finance LLC
|
|
Equity-Linked Partial Principal at Risk Securities due October 21, 2022
Based on the Performance of a Basket Consisting of Two Indices and Two Exchange-Traded Funds
|
Basket Overview
The basket consists of the S&P 500® Index
(the “SPX Index”), the Russell 2000® Index (the “RTY Index”), shares of the iShares®
MSCI Emerging Markets ETF (the “EEM Shares”) and shares of the iShares® MSCI EAFE ETF (the “EFA
Shares”) and offers exposure to price movements in the U.S. and international equity markets.
S&P 500®
Index
The S&P 500® Index, which is calculated,
maintained and published by Standard & Poor’s Financial Services LLC (“S&P”), consists of 500 component
stocks selected to provide a performance benchmark for the U.S. equity markets. The calculation of the S&P 500® Index
is based on the relative value of the float adjusted aggregate market capitalization of the 500 component companies as of a particular
time as compared to the aggregate average market capitalization of 500 similar companies during the base period of the years 1941
through 1943. For additional information about the S&P 500® Index, see the information set forth under
“S&P 500® Index” in the accompanying index supplement.
“Standard & Poor’s®,” “S&P®,”
“S&P 500®,” “Standard & Poor’s 500” and “500” are trademarks of
Standard and Poor’s Financial Services LLC. See “S&P 500® Index” in the accompanying
index supplement.
Russell 2000® Index
The Russell 2000® Index is an index calculated,
published and disseminated by FTSE Russell, and measures the composite price performance of stocks of 2,000 companies incorporated
in the U.S. and its territories. All 2,000 stocks are traded on a major U.S. exchange and are the 2,000 smallest securities that
form the Russell 3000® Index. The Russell 3000® Index is composed of the 3,000 largest
U.S. companies as determined by market capitalization and represents approximately 98% of the U.S. equity market. The Russell 2000® Index
consists of the smallest 2,000 companies included in the Russell 3000® Index and represents a small
portion of the total market capitalization of the Russell 3000® Index. The Russell 2000® Index
is designed to track the performance of the small capitalization segment of the U.S. equity market.
The “Russell 2000® Index” is
a trademark of FTSE Russell. See “Russell 2000® Index” in the accompanying index supplement.
iShares® MSCI
Emerging Markets ETF. The iShares® MSCI Emerging Markets ETF is an exchange-traded fund that
seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI Emerging
Markets Index®. The iShares® MSCI Emerging Markets ETF is managed by iShares®,
Inc. (“iShares”), a registered investment company that consists of numerous separate investment portfolios, including
the iShares® MSCI Emerging Markets ETF. Information provided to or filed with the Securities and Exchange Commission
(the “Commission”") by iShares pursuant to the Securities Act of 1933 and the Investment Company Act of 1940 can
be located by reference to Commission file numbers 033-97598 and 811-09102, respectively, through the Commission’s website
at www.sec.gov. In addition, information may be obtained from other publicly available sources. We make no representation or warranty
as to the accuracy or completeness of such information.
The MSCI Emerging Markets IndexSM. The
MSCI Emerging Markets IndexSM is a stock index calculated, published and disseminated daily by MSCI Inc. and is
intended to provide performance benchmarks for certain emerging equity markets including Brazil, Chile, China, Colombia, Czech
Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia,
South Africa, Taiwan, Thailand, Turkey and United Arab Emirates. The MSCI Emerging Markets IndexSM is described
in “MSCI Emerging Markets IndexSM” and “MSCI Global Investable Market Indices Methodology” in
the accompanying index supplement.
This document relates only to the securities referenced hereby
and does not relate to the underlying shares. We have derived all disclosures contained in this document regarding iShares from
the publicly available documents described above. In connection with the offering of the securities, neither we nor the agent has
participated in the preparation of such documents or made any due diligence inquiry with respect to iShares. Neither we nor the
agent makes any representation that such publicly available documents or any other publicly available information regarding iShares
is accurate or complete. Furthermore, we cannot give any assurance that all events occurring prior to the date hereof (including
events that would affect the accuracy or completeness of the publicly available documents described above) that would affect the
trading price of the underlying shares (and therefore the price of the underlying shares at the time we priced the securities)
|
Morgan Stanley Finance LLC
|
|
Equity-Linked Partial Principal at Risk Securities due October 21, 2022
Based on the Performance of a Basket Consisting of Two Indices and Two Exchange-Traded Funds
|
have been publicly disclosed. Subsequent disclosure of any
such events or the disclosure of or failure to disclose material future events concerning iShares could affect the value received
at maturity with respect to the 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 underlying shares.
We and/or our affiliates may presently or from time to time engage
in business with iShares. In the course of such business, we and/or our affiliates may acquire non-public information with respect
to iShares, and neither we nor any of our affiliates undertakes to disclose any such information to you. In addition, one or more
of our affiliates may publish research reports with respect to the underlying shares. The statements in the preceding two sentences
are not intended to affect the rights of investors in the securities under the securities laws. As a purchaser of the securities,
you should undertake an independent investigation of iShares as in your judgment is appropriate to make an informed decision with
respect to an investment linked to the underlying shares.
iShares® is a registered trademark of
BlackRock Institutional Trust Company, N.A. (“BTC”). The securities are not sponsored, endorsed, sold, or promoted
by BTC. BTC makes no representations or warranties to the owners of the securities or any member of the public regarding the advisability
of investing in the securities. BTC has no obligation or liability in connection with the operation, marketing, trading or sale
of the securities.
iShares® MSCI
EAFE ETF. The iShares® MSCI EAFE ETF is an exchange-traded fund that seeks investment
results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI EAFE IndexSM.
The iShares® MSCI EAFE ETF is managed by iShares Trust (“iShares”), a registered investment company
that consists of numerous separate investment portfolios, including the iShares® MSCI EAFE ETF. Information
provided to or filed with the Securities and Exchange Commission (the “Commission”) by iShares pursuant to the Securities
Act of 1933 and the Investment Company Act of 1940 can be located by reference to Commission file numbers 333-92935 and 811-09729,
respectively, through the Commission’s website at www.sec.gov.In addition, information may be obtained from other publicly
available sources. We make no representation or warranty as to the accuracy or completeness of such information.
The MSCI EAFE IndexSM. The MSCI EAFE IndexSM is
a stock index calculated, published and disseminated daily by MSCI Inc. (“MSCI”). The index is a free float-adjusted
market capitalization index that is designed to measure the equity market performance of developed markets, excluding the United
States and Canada, and it consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark,
Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore,
Spain, Sweden, Switzerland and the United Kingdom. For additional information about the MSCI EAFE IndexSM, see the information
set forth under “MSCI EAFE IndexSM” and “MSCI Global Investable Market Indices Methodology”
in the accompanying index supplement.
This document relates only to the securities referenced hereby
and does not relate to the underlying shares. We have derived all disclosures contained in this document regarding iShares from
the publicly available documents described above. In connection with the offering of the securities, neither we nor the agent has
participated in the preparation of such documents or made any due diligence inquiry with respect to iShares. Neither we nor the
agent makes any representation that such publicly available documents or any other publicly available information regarding iShares
is accurate or complete. Furthermore, we cannot give any assurance that all events occurring prior to the date hereof (including
events that would affect the accuracy or completeness of the publicly available documents described above) that would affect the
trading price of the underlying shares (and therefore the price of the underlying shares at the time we priced the securities)
have been publicly disclosed. Subsequent disclosure of any such events or the disclosure of or failure to disclose material future
events concerning iShares could affect the value received at maturity 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 underlying shares.
We and/or our affiliates may presently or from time to time engage
in business with iShares. In the course of such business, we and/or our affiliates may acquire non-public information with respect
to iShares, and neither we nor any of our affiliates undertakes to disclose any such information to you. In addition, one or more
of our affiliates may publish research reports with respect to the underlying 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
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Morgan Stanley Finance LLC
|
|
Equity-Linked Partial Principal at Risk Securities due October 21, 2022
Based on the Performance of a Basket Consisting of Two Indices and Two Exchange-Traded Funds
|
securities, you should undertake an independent investigation
of iShares as in your judgment is appropriate to make an informed decision with respect to an investment linked to the underlying
shares.
iShares® is a registered trademark of
BlackRock Institutional Trust Company, N.A. (“BTC”). The securities are not sponsored, endorsed, sold, or promoted
by BTC. BTC makes no representations or warranties to the owners of the securities or any member of the public regarding the advisability
of investing in the securities. BTC has no obligation or liability in connection with the operation, marketing, trading or sale
of the securities.
|
Morgan Stanley Finance LLC
|
|
Equity-Linked Partial Principal at Risk Securities due October 21, 2022
Based on the Performance of a Basket Consisting of Two Indices and Two Exchange-Traded Funds
|
Information as of market close on October 18, 2019:
|
Basket Component Information as of October 18, 2019
|
|
|
Ticker Symbol
|
Current Basket Component Closing Value
|
52 Weeks Ago
|
52 Week High
|
52 Week Low
|
|
S&P 500® Index
|
SPX
|
2,986.20
|
2,768.78
|
3,025.86 (on 7/26/2019)
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2,351.10 (on 12/24/2018)
|
|
Russell 2000® Index
|
RTY
|
1,535.482
|
1,560.752
|
1,614.976 (on 5/6/2019)
|
1,266.925 (on 12/24/2018)
|
|
Shares of the iShares® MSCI Emerging Markets ETF
|
EEM UP
|
$41.98
|
$39.30
|
$44.59 (on 4/17/2019)
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$38.00 (on 10/29/2018)
|
|
Shares of the iShares® MSCI EAFE ETF
|
EFA UP
|
$66.27
|
$63.38
|
$66.99 (on 5/3/2019)
|
$56.89 (on 12/24/2018)
|
The following graph is calculated based on an initial basket
value of 100 on January 1, 2014 (assuming that each basket component is weighted as described in “Basket” on the cover
page) and illustrates the effect of the offset and/or correlation among the basket components during such period. The
graph does not take into account the terms of the securities, nor does it attempt to show in any way your expected return on an
investment in the securities. The historical performance of the basket should not be taken as an indication of its future
performance.
|
Basket Historical Performance
January 1, 2014 to October
18, 2019
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|
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Morgan Stanley Finance LLC
|
|
Equity-Linked Partial Principal at Risk Securities due October 21, 2022
Based on the Performance of a Basket Consisting of Two Indices and Two Exchange-Traded Funds
|
Historical Information
The following tables set forth the published high and low closing
values as well as end-of-quarter closing values for each of the basket components for each quarter in the period from January 1,
2014 through October 18, 2019. The closing values on October 18, 2019 were (i) in the case of the SPX Index, 2,986.20,
(ii) in the case of the RTY Index, 1,535.482, (iii) in the case of the EEM Shares, $41.98, and (iv) in the case of the EFA Shares,
$66.27. The related graphs set forth the daily closing values for each of the basket components in the same period. We
obtained the information in the tables and graphs below from Bloomberg Financial Markets, without independent verification. The
historical information of the basket components should not be taken as an indication of their future performance, and no assurance
can be given as to the basket closing value on the determination date.
|
S&P 500® Index
|
High
|
Low
|
Period End
|
|
2014
|
|
|
|
|
First Quarter
|
1,878.04
|
1,741.89
|
1,872.34
|
|
Second Quarter
|
1,962.87
|
1,815.69
|
1,960.23
|
|
Third Quarter
|
2,011.36
|
1,909.57
|
1,972.29
|
|
Fourth Quarter
|
2,090.57
|
1,862.49
|
2,058.90
|
|
2015
|
|
|
|
|
First Quarter
|
2,117.39
|
1,992.67
|
2,067.89
|
|
Second Quarter
|
2,130.82
|
2,057.64
|
2,063.11
|
|
Third Quarter
|
2,128.28
|
1,867.61
|
1,920.03
|
|
Fourth Quarter
|
2,109.79
|
1,923.82
|
2,043.94
|
|
2016
|
|
|
|
|
First Quarter
|
2,063.95
|
1,829.08
|
2,059.74
|
|
Second Quarter
|
2,119.12
|
2,000.54
|
2,098.86
|
|
Third Quarter
|
2,190.15
|
2,088.55
|
2,168.27
|
|
Fourth Quarter
|
2,271.72
|
2,085.18
|
2,238.83
|
|
2017
|
|
|
|
|
First Quarter
|
2,395.96
|
2,257.83
|
2,362.72
|
|
Second Quarter
|
2,453.46
|
2,328.95
|
2,423.41
|
|
Third Quarter
|
2,519.36
|
2,409.75
|
2,519.36
|
|
Fourth Quarter
|
2,690.16
|
2,529.12
|
2,673.61
|
|
2018
|
|
|
|
|
First Quarter
|
2,872.87
|
2,581.00
|
2,640.87
|
|
Second Quarter
|
2,786.85
|
2,581.88
|
2,718.37
|
|
Third Quarter
|
2,930.75
|
2,713.22
|
2,913.98
|
|
Fourth Quarter
|
2,925.51
|
2,351.10
|
2,506.85
|
|
2019
|
|
|
|
|
First Quarter
|
2,854.88
|
2,447.89
|
2,834.40
|
|
Second Quarter
|
2,954.18
|
2,744.45
|
2,941.76
|
|
Third Quarter
|
3,025.86
|
2,840.60
|
2,976.74
|
|
Fourth Quarter (through October 18, 2019)
|
2,997.95
|
2,887.61
|
2,986.20
|
|
Morgan Stanley Finance LLC
|
|
Equity-Linked Partial Principal at Risk Securities due October 21, 2022
Based on the Performance of a Basket Consisting of Two Indices and Two Exchange-Traded Funds
|
|
S&P 500®
Index
Daily Index Closing Values
January 1, 2014 to October
18, 2019
|
|
|
Morgan Stanley Finance LLC
|
|
Equity-Linked Partial Principal at Risk Securities due October 21, 2022
Based on the Performance of a Basket Consisting of Two Indices and Two Exchange-Traded Funds
|
|
Russell 2000® Index
|
High
|
Low
|
Period End
|
|
2014
|
|
|
|
|
First Quarter
|
1,208.651
|
1,093.594
|
1,173.038
|
|
Second Quarter
|
1,192.964
|
1,095.986
|
1,192.964
|
|
Third Quarter
|
1,208.150
|
1,101.676
|
1,101.676
|
|
Fourth Quarter
|
1,219.109
|
1,049.303
|
1,204.696
|
|
2015
|
|
|
|
|
First Quarter
|
1,266.373
|
1,154.709
|
1,252.772
|
|
Second Quarter
|
1,295.799
|
1,215.417
|
1,253.947
|
|
Third Quarter
|
1,273.328
|
1,083.907
|
1,100.688
|
|
Fourth Quarter
|
1,204.159
|
1,097.552
|
1,135.889
|
|
2016
|
|
|
|
|
First Quarter
|
1,135.889
|
953.715
|
1,114.028
|
|
Second Quarter
|
1,188.954
|
1,089.646
|
1,151.923
|
|
Third Quarter
|
1,263.438
|
1,139.453
|
1,251.646
|
|
Fourth Quarter
|
1,388.073
|
1,156.885
|
1,357.130
|
|
2017
|
|
|
|
|
First Quarter
|
1,413.635
|
1,345.598
|
1,385.920
|
|
Second Quarter
|
1,425.985
|
1,345.244
|
1,415.359
|
|
Third Quarter
|
1,490.861
|
1,356.905
|
1,490.861
|
|
Fourth Quarter
|
1,548.926
|
1,464.095
|
1,535.511
|
|
2018
|
|
|
|
|
First Quarter
|
1,610.706
|
1,463.793
|
1,529.427
|
|
Second Quarter
|
1,706.985
|
1,492.531
|
1,643.069
|
|
Third Quarter
|
1,740.753
|
1,643.069
|
1,696.571
|
|
Fourth Quarter
|
1,672.992
|
1,266.925
|
1,348.559
|
|
2019
|
|
|
|
|
First Quarter
|
1,590.062
|
1,330.831
|
1,539.739
|
|
Second Quarter
|
1,614.976
|
1,465.487
|
1,566.572
|
|
Third Quarter
|
1,585.599
|
1,456.039
|
1,523.373
|
|
Fourth Quarter (through October 18, 2019)
|
1,541.844
|
1,472.598
|
1,535.482
|
|
|
|
|
|
|
Russell 2000®
Index
Daily Index Closing Values
January 1, 2014 to October
18, 2019
|
|
|
Morgan Stanley Finance LLC
|
|
Equity-Linked Partial Principal at Risk Securities due October 21, 2022
Based on the Performance of a Basket Consisting of Two Indices and Two Exchange-Traded Funds
|
|
iShares® MSCI Emerging Markets ETF (CUSIP 464287234)
|
High ($)
|
Low ($)
|
Period End ($)
|
|
2014
|
|
|
|
|
First Quarter
|
40.99
|
37.09
|
40.99
|
|
Second Quarter
|
43.95
|
40.82
|
43.23
|
|
Third Quarter
|
45.85
|
41.56
|
41.56
|
|
Fourth Quarter
|
42.44
|
37.73
|
39.29
|
|
2015
|
|
|
|
|
First Quarter
|
41.07
|
37.92
|
40.13
|
|
Second Quarter
|
44.09
|
39.04
|
39.62
|
|
Third Quarter
|
39.78
|
31.32
|
32.78
|
|
Fourth Quarter
|
36.29
|
31.55
|
32.19
|
|
2016
|
|
|
|
|
First Quarter
|
34.28
|
28.25
|
34.25
|
|
Second Quarter
|
35.26
|
31.87
|
34.36
|
|
Third Quarter
|
38.20
|
33.77
|
37.45
|
|
Fourth Quarter
|
38.10
|
34.08
|
35.01
|
|
2017
|
|
|
|
|
First Quarter
|
39.99
|
35.43
|
39.39
|
|
Second Quarter
|
41.93
|
38.81
|
41.39
|
|
Third Quarter
|
45.85
|
41.05
|
44.81
|
|
Fourth Quarter
|
47.81
|
44.82
|
47.12
|
|
2018
|
|
|
|
|
First Quarter
|
52.08
|
45.69
|
48.28
|
|
Second Quarter
|
48.28
|
42.33
|
43.33
|
|
Third Quarter
|
45.03
|
41.14
|
42.92
|
|
Fourth Quarter
|
42.93
|
38.00
|
39.06
|
|
2019
|
|
|
|
|
First Quarter
|
43.71
|
38.45
|
42.92
|
|
Second Quarter
|
44.59
|
39.91
|
42.91
|
|
Third Quarter
|
43.42
|
38.74
|
40.87
|
|
Fourth Quarter (through October 18, 2019)
|
42.20
|
40.27
|
41.98
|
|
|
|
|
|
|
Shares of the iShares®
MSCI Emerging Markets ETF
Daily Closing Prices
January 1, 2014 to October
18, 2019
|
|
|
Morgan Stanley Finance LLC
|
|
Equity-Linked Partial Principal at Risk Securities due October 21, 2022
Based on the Performance of a Basket Consisting of Two Indices and Two Exchange-Traded Funds
|
|
iShares® MSCI EAFE ETF (CUSIP 464287465)
|
High ($)
|
Low ($)
|
Period End ($)
|
|
2014
|
|
|
|
|
First Quarter
|
68.03
|
62.31
|
67.17
|
|
Second Quarter
|
70.67
|
66.26
|
68.37
|
|
Third Quarter
|
69.25
|
64.12
|
64.12
|
|
Fourth Quarter
|
64.51
|
59.53
|
60.84
|
|
2015
|
|
|
|
|
First Quarter
|
65.99
|
58.48
|
64.17
|
|
Second Quarter
|
68.42
|
63.49
|
63.49
|
|
Third Quarter
|
65.46
|
56.25
|
57.32
|
|
Fourth Quarter
|
62.06
|
57.50
|
58.75
|
|
2016
|
|
|
|
|
First Quarter
|
58.75
|
51.38
|
57.13
|
|
Second Quarter
|
59.87
|
52.64
|
55.81
|
|
Third Quarter
|
59.86
|
54.44
|
59.13
|
|
Fourth Quarter
|
59.20
|
56.20
|
57.73
|
|
2017
|
|
|
|
|
First Quarter
|
62.60
|
57.73
|
62.29
|
|
Second Quarter
|
67.22
|
61.44
|
65.20
|
|
Third Quarter
|
68.48
|
64.83
|
68.48
|
|
Fourth Quarter
|
70.80
|
68.42
|
70.31
|
|
2018
|
|
|
|
|
First Quarter
|
75.25
|
67.94
|
69.68
|
|
Second Quarter
|
71.90
|
66.35
|
66.97
|
|
Third Quarter
|
68.98
|
65.43
|
67.99
|
|
Fourth Quarter
|
68.07
|
56.89
|
58.78
|
|
2019
|
|
|
|
|
First Quarter
|
65.61
|
58.13
|
64.86
|
|
Second Quarter
|
66.99
|
63.40
|
65.73
|
|
Third Quarter
|
66.68
|
61.30
|
65.21
|
|
Fourth Quarter (through October 18, 2019)
|
66.30
|
63.25
|
66.27
|
|
|
|
|
|
|
Shares of the iShares® MSCI
EAFE ETF
Daily Closing Prices
January 1, 2014 to October
18, 2019
|
|
|
Morgan Stanley Finance LLC
|
|
Equity-Linked Partial Principal at Risk Securities due October 21, 2022
Based on the Performance of a Basket Consisting of Two Indices and Two Exchange-Traded Funds
|
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 prospectus supplement, index supplement or prospectus, the terms described herein shall control.
|
|
Underlying index publishers:
|
With respect to the SPX Index, S&P Dow Jones Indices LLC,
or any successor thereof.
With respect to the RTY Index, FTSE Russell, or any
successor thereof.
|
|
Share underlying indices:
|
With respect to the EEM Shares, the MSCI Emerging Markets IndexSM
With respect to the EFA Shares, the MSCI EAFE IndexSM
|
|
Share underlying index publishers:
|
With respect to each of the EEM Shares and the EFA Shares, MSCI Inc., or any successor thereof.
|
|
Senior security or subordinated security:
|
Senior
|
|
Specified currency:
|
U.S. dollars
|
|
Denominations:
|
$1,000 and integral multiples thereof
|
|
Interest:
|
None
|
|
Call right:
|
The securities are not callable prior to the maturity date.
|
|
Postponement of maturity date:
|
If the determination date for any basket component is postponed so that it falls less than two business days prior to the scheduled maturity date, the maturity date will be postponed to the second business day following the final determination date as postponed, by which date the basket percent change will have been determined.
|
|
Trustee:
|
The Bank of New York Mellon, a New York banking corporation
|
|
Calculation agent:
|
The calculation agent for the securities will be MS & Co. All
determinations made by the calculation agent will be at the sole discretion of the calculation agent and will, in the absence of
manifest error, be conclusive for all purposes and binding on you, the trustee and us.
All calculations with respect to the payment at maturity on the
securities shall be made by the calculation agent and shall be rounded to the nearest one hundred-thousandth, with five one-millionths
rounded upward (e.g., .876545 would be rounded to .87655); all dollar amounts related to determination of the amount of cash payable
per stated principal amount shall be rounded to the nearest ten-thousandth, with five one hundred-thousandths rounded upward (e.g.,
.76545 would be rounded up to .7655); and all dollar amounts paid on the aggregate principal amount of the securities shall be
rounded to the nearest cent, with one-half cent rounded upward.
Because the calculation agent is our affiliate, the economic
interests of the calculation agent and its affiliates may be adverse to your interests as an investor in the securities, including
with respect to certain determinations and judgments that the calculation agent must make in determining the payment that you will
receive at maturity or whether a market disruption event has occurred. See “Market disruption event,” “Discontinuance
of the underlying index; alteration of method of calculation” and “Discontinuance of the EEM Shares or the
EFA Shares and/or the relevant share underlying index; alteration of method of calculation” below. MS & Co.
is obligated to carry out its duties and functions as calculation agent in good faith and using its reasonable judgment.
|
|
Adjustment factor:
|
The adjustment factor with respect to each of the EEM Shares and the EFA Shares is initially set at 1.0, and is subject to adjustment in the event of certain corporate events affecting the EEM Shares or the EFA Shares. See “—Antidilution Adjustments” below.
|
|
Antidilution adjustments:
|
The adjustment factor with respect to each of the EEM Shares
and the EFA Shares shall be adjusted as follows:
If the EEM Shares or the EFA Shares are subject to a stock split
or reverse stock split, then once such split has become effective, the adjustment factor for the EEM Shares or the EFA Shares will
be adjusted by the calculation agent to equal the product of the prior adjustment factor and the number of shares issued in such
stock split or reverse stock split with respect
|
|
Morgan Stanley Finance LLC
|
|
Equity-Linked Partial Principal at Risk Securities due October 21, 2022
Based on the Performance of a Basket Consisting of Two Indices and Two Exchange-Traded Funds
|
|
|
to one share of the EEM Shares or the EFA Shares.
No adjustment to the adjustment factor pursuant to the paragraph
above will be required unless such adjustment would require a change of at least 0.1% in the amount being adjusted as then in effect. Any
number so adjusted will be rounded to the nearest one hundred-thousandth with five one-millionths being rounded upward.
The calculation agent will be solely responsible for the determination
and calculation of any adjustments to the adjustment factor or method of calculating the adjustment factor and of any related determinations,
and its determinations and calculations with respect thereto will be conclusive in the absence of manifest error.
The calculation agent will provide information as to any adjustments
to the adjustment factor upon written request by any investor in the securities.
|
|
Business day:
|
Any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in The City of New York.
|
|
Index business day:
|
With respect to each of the SPX Index and the RTY Index, a day, as determined by the calculation agent, on which trading is generally conducted on each of the relevant exchange(s) for such underlying index, other than a day on which trading on such exchange(s) is scheduled to close prior to the time of the posting of its regular final weekday closing price.
|
|
Trading day:
|
With respect to each of the EEM Shares and the EFA Shares, a day, as determined by the calculation agent, on which trading is generally conducted on the New York Stock Exchange, Nasdaq, the Chicago Mercantile Exchange and the Chicago Board of Options Exchange and in the over-the-counter market for equity securities in the United States.
|
|
Relevant exchange:
|
With respect to, the SPX Index and the RTY Index or their respective successor indices, the share underlying index or its successor index, the primary exchange(s) or market(s) of trading for (i) any security then included in such index and (ii) any futures or options contracts related to such index or to any security then included in such index.
|
|
Index closing value:
|
With respect to the SPX Index, the index
closing value on any index business day shall be determined by the calculation agent and shall equal the official closing value
of such underlying index, or any successor index as defined under “Discontinuance of an underlying index; alteration of method
of calculation” below, published at the regular official weekday close of trading on such index business day by the underlying
index publisher for the SPX Index, as determined by the calculation agent. In certain circumstances, the index closing
value for the SPX Index will be based on the alternate calculation of such underlying index as described under “Discontinuance
of an underlying index; alteration of method of calculation” below.
With respect to the RTY Index, the index
closing value on any index business day shall be determined by the calculation agent and shall equal the closing value of such
underlying index or any successor index reported by Bloomberg Financial Services, or any successor reporting service the calculation
agent may select, on such index business day. In certain circumstances, the index closing value for the RTY Index will be based
on the alternate calculation of such underlying index as described under “Discontinuance of an underlying index; alteration
of method of calculation” below.
The closing value of the RTY Index reported by Bloomberg Financial
Services may be lower or higher than the official closing value of the RTY Index published by the underlying index publisher for
such underlying index.
|
|
Closing price:
|
Subject to the provisions set out under “Discontinuance
of the EEM Shares or the EFA Shares and/or the relevant share underlying index; alteration of method of calculation” below,
the closing price for one share of the EEM Shares or the EFA Shares (or one unit of any other security for which a closing price
must be determined) on any trading day means:
(i)
if such underlying shares (or any such other security)
are listed on a national securities exchange (other than the Nasdaq), the last reported sale price, regular way, of the principal
trading session on such day on the principal national securities exchange registered under the Securities Exchange Act of 1934,
as amended, on which such underlying shares (or any such other security) are listed,
(ii)
if such underlying shares (or any such other security)
are securities of the Nasdaq, the official closing price of such underlying shares published by the Nasdaq on such day, or
|
|
Morgan Stanley Finance LLC
|
|
Equity-Linked Partial Principal at Risk Securities due October 21, 2022
Based on the Performance of a Basket Consisting of Two Indices and Two Exchange-Traded Funds
|
|
|
(iii)
if such underlying shares (or any such other security)
are not listed on any national securities exchange but are included in the OTC Bulletin Board Service (the “OTC Bulletin
Board”) operated by the Financial Industry Regulatory Authority, Inc. (“FINRA”), the last reported sale price
of the principal trading session on the OTC Bulletin Board on such day for such underlying shares.
If the EEM Shares or the EFA Shares (or any such other security)
are listed on any national securities exchange but the last reported sale price or the official closing price published by such
exchange, or by the Nasdaq, as applicable, is not available pursuant to the preceding sentence, then the closing price for one
share of such underlying shares (or one unit of any such other security) on any trading day will mean the last reported sale price
of the principal trading session on the over-the-counter market as reported on the Nasdaq or the OTC Bulletin Board on such day. If
a market disruption event (as defined below) occurs with respect to such underlying shares (or any such other security) or the
last reported sale price or the official closing price published by the Nasdaq, as applicable, for such underlying shares (or any
such other security) is not available pursuant to either of the two preceding sentences, then the closing price for any trading
day will be the mean, as determined by the calculation agent, of the bid prices for such underlying shares (or any such other security)
for such trading day obtained from as many recognized dealers in such security, but not exceeding three, as will make such bid
prices available to the calculation agent. Bids of MS & Co. and its successors or any of its affiliates may be included
in the calculation of such mean, but only to the extent that any such bid is the highest of the bids obtained. If no
bid prices are provided from any third party dealers, such closing price will be determined by the calculation agent in its sole
and absolute discretion (acting in good faith) taking into account any information that it deems relevant. The term
“OTC Bulletin Board Service” will include any successor service thereto, or, if applicable, the OTC Reporting Facility
operated by FINRA. See “Discontinuance of the EEM Shares or the EFA Shares and/or the relevant share underlying
index; alteration of method of calculation” below.
|
|
Market disruption event:
|
(A) Market disruption event means,
with respect to the SPX Index or the RTY Index:
(i) the occurrence or existence
of any of:
(a) a suspension, absence
or material limitation of trading of securities then constituting 20 percent or more of the value of such underlying index (or
a successor index) on the relevant exchange(s) for such securities for more than two hours of trading or during the one-half hour
period preceding the close of the principal trading session on such relevant exchange(s), or
(b) a breakdown or failure
in the price and trade reporting systems of any relevant exchange as a result of which the reported trading prices for securities
then constituting 20 percent or more of the value of such underlying index (or a successor index) during the last one-half hour
preceding the close of the principal trading session on such relevant exchange(s) are materially inaccurate, or
(c) the suspension, material
limitation or absence of trading on any major U.S. securities market for trading in futures or options contracts or exchange-traded
funds related to such underlying index (or a successor index) for more than two hours of trading or during the one-half hour period
preceding the close of the principal trading session on such market,
in each case as determined
by the calculation agent in its sole discretion; and
(ii) a determination by
the calculation agent in its sole discretion that any event described in clause (i) above materially interfered with our ability
or the ability of any of our affiliates to unwind or adjust all or a material portion of the hedge position with respect to the
securities.
For the purpose of determining
whether a market disruption event exists at any time with respect to the SPX Index or the RTY Index, if trading in a security included
in such underlying index is materially suspended or materially limited at that time, then the relevant percentage contribution
of that security to the value of such underlying index shall be based on a comparison of (x) the portion of the value of such underlying
index attributable to that security relative to (y) the overall value of such underlying index, in each case immediately before
that suspension or limitation.
For the purpose of determining
whether a market disruption event exists at any time with respect to the SPX Index or the RTY Index: (1) a limitation on the hours
or number of days of trading will not constitute a market disruption event if it results from an announced change in the regular
business hours of the relevant exchange or market, (2) a decision to permanently discontinue trading in the relevant futures or
options contract or exchange-traded fund will not constitute a market disruption event, (3) a suspension of trading in
|
|
Morgan Stanley Finance LLC
|
|
Equity-Linked Partial Principal at Risk Securities due October 21, 2022
Based on the Performance of a Basket Consisting of Two Indices and Two Exchange-Traded Funds
|
|
|
futures or options contracts
or exchange-traded funds on such underlying index by the primary securities market trading in such contracts or funds by reason
of (a) a price change exceeding limits set by such securities exchange or market, (b) an imbalance of orders relating to such contracts
or funds or (c) a disparity in bid and ask quotes relating to such contracts or funds will constitute a suspension, absence or
material limitation of trading in futures or options contracts or exchange-traded funds related to such underlying index and (4)
a “suspension, absence or material limitation of trading” on any relevant exchange or on the primary market on which
futures or options contracts or exchange-traded funds related to such underlying index are traded will not include any time when
such securities market is itself closed for trading under ordinary circumstances.
(B) Market disruption event means, with respect to the EEM or
the EFA Shares,
(i) the occurrence or existence of any of:
(i)
a suspension, absence or material limitation of trading
of such underlying shares on the primary market for such underlying shares for more than two hours of trading or during the one-half
hour period preceding the close of the principal trading session in such market; or a breakdown or failure in the price and trade
reporting systems of the primary market for such underlying shares as a result of which the reported trading prices for such underlying
shares during the last one-half hour preceding the close of the principal trading session in such market are materially inaccurate;
or the suspension, absence or material limitation of trading on the primary market for trading in futures or options contracts
related to such underlying shares, if available, during the one-half hour period preceding the close of the principal trading session
in the applicable market, in each case as determined by the calculation agent in its sole discretion; or
(ii)
a suspension, absence or material limitation of trading
of stocks then constituting 20 percent or more of the value of the relevant share underlying index for such underlying shares on
the relevant exchange(s) for such securities for more than two hours of trading or during the one-half hour period preceding the
close of the principal trading session on such relevant exchange(s), in each case as determined by the calculation agent in its
sole discretion; or
(iii)
the suspension, material limitation or absence of trading
on any major U.S. securities market for trading in futures or options contracts related to the relevant share underlying index
or such underlying shares for more than two hours of trading or during the one-half hour period preceding the close of the principal
trading session on such market,
in each case as determined by the calculation agent in its sole
discretion; and
(ii) a determination by the calculation agent in its sole discretion
that any event described in clause (i) above materially interfered with our ability or the ability of any of our affiliates to
unwind or adjust all or a material portion of the hedge position with respect to the securities.
For the purpose of determining whether a market disruption event
exists at any time, if trading in a security included in the share underlying index is materially suspended or materially limited
at that time, then the relevant percentage contribution of that security to the level of the share underlying index will be based
on a comparison of (x) the portion of the level of the share underlying index attributable to that security relative to (y) the
overall level of the share underlying index, in each case immediately before that suspension or limitation.
For the purpose of determining
whether a market disruption event has occurred with respect to the EEM Shares or the EFA Shares: (1) a limitation on
the hours or number of days of trading will not constitute a market disruption event if it results from an announced change in
the regular business hours of the relevant exchange or market, (2) a decision to permanently discontinue trading in such underlying
shares or in the futures or options contract related to the relevant share underlying index or such underlying shares will not
constitute a market disruption event, (3) a suspension of trading in futures or options contracts on the relevant share underlying
index or such underlying shares by the primary securities market trading in such contracts by reason of (a) a price change exceeding
limits set by such securities exchange or market, (b) an imbalance of orders relating to such contracts or (c) a disparity in bid
and ask quotes relating to such contracts will constitute a suspension, absence or material limitation of trading in futures or
options contracts related to the relevant share underlying index or such underlying shares and (4) a “suspension, absence
or material limitation of trading” on any relevant exchange or on the primary market on which futures or options contracts
related to the relevant share underlying index or such underlying shares are traded will not include any time when such securities
market is itself closed for trading under ordinary circumstances. Regarding any permanent discontinuance of trading
in such underlying shares, see “Discontinuance of the EEM Shares or the EFA Shares and/or the relevant share underlying index;
alteration
|
|
Morgan Stanley Finance LLC
|
|
Equity-Linked Partial Principal at Risk Securities due October 21, 2022
Based on the Performance of a Basket Consisting of Two Indices and Two Exchange-Traded Funds
|
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of method of calculation” below.
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Discontinuance of the SPX Index or the RTY Index; alteration of method of calculation:
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If any underlying index publisher discontinues
publication of the relevant underlying index and such underlying index publisher or another entity (including MS & Co.) publishes
a successor or substitute index that the calculation agent determines, in its sole discretion, to be comparable to the discontinued
index (such index being referred to herein as the “successor index”), then any subsequent index closing value for the
discontinued index will be determined by reference to the published value of such successor index at the regular weekday close
of trading on any index business day that the index closing value for such underlying index is to be determined, and, to the extent
the index closing value of such successor index differs from the index closing value of the relevant underlying index at the time
of such substitution, proportionate adjustments shall be made by the calculation agent to the relevant initial basket component
value and multiplier.
Upon any selection by the calculation agent
of a successor index, the calculation agent will cause written notice thereof to be furnished to the trustee, to us and to the
depositary, as holder of the securities, within three business days of such selection. We expect that such notice will
be made available to you, as a beneficial owner of the securities, in accordance with the standard rules and procedures of the
depositary and its direct and indirect participants.
If any underlying index publisher discontinues
publication of the relevant underlying index or a successor index prior to, and such discontinuance is continuing on, the determination
date and the calculation agent determines, in its sole discretion, that no successor index is available at such time, then the
calculation agent will determine the index closing value for such underlying index for such date. The index closing
value of such underlying index or such successor index will be computed by the calculation agent in accordance with the formula
for and method of calculating such index last in effect prior to such discontinuance, using the closing price (or, if trading in
the relevant securities has been materially suspended or materially limited, its good faith estimate of the closing price that
would have prevailed but for such suspension or limitation) at the close of the principal trading session of the relevant exchange
on such date of each security most recently constituting such index without any rebalancing or substitution of such securities
following such discontinuance. Notwithstanding these alternative arrangements, discontinuance of the publication of
an underlying index may adversely affect the value of the securities.
If at any time, the method of calculating
any underlying index or any successor index, or the value thereof, is changed in a material respect, or if any underlying index
or any successor index is in any other way modified so that such index does not, in the opinion of the calculation agent, fairly
represent the value of such index had such changes or modifications not been made, then, from and after such time, the calculation
agent will, at the close of business in New York City on each date on which the index closing value for such index is to be determined,
make such calculations and adjustments as, in the good faith judgment of the calculation agent, may be necessary in order to arrive
at a value of a stock index comparable to such underlying index or such successor index, as the case may be, as if such changes
or modifications had not been made, and the calculation agent will calculate the index closing value with reference to such underlying
or such successor index, as adjusted. Accordingly, if the method of calculating any underlying index or any successor
index is modified so that the value of such index is a fraction of what it would have been if it had not been modified (e.g., due
to a split in such index), then the calculation agent will adjust such index in order to arrive at a value of such underlying index
or such successor index as if it had not been modified (e.g., as if such split had not occurred).
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Discontinuance of the EEM Shares or the EFA Shares or the relevant share underlying index; alteration of method of calculation:
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If trading in the relevant underlying shares
on every applicable national securities exchange, on the OTC Bulletin Board and in the over-the-counter market is permanently discontinued
or the iShares® MSCI Emerging Markets ETF or the iShares® MSCI EAFE ETF is liquidated or otherwise
terminated (a “discontinuance or liquidation event”), the closing price of the relevant underlying shares on any trading
day following the discontinuance or liquidation event will be determined by the calculation agent and will be deemed to equal the
product of (i) the closing value of the relevant share underlying index for such underlying shares (or any successor index, as
described below) on such date (taking into account any material changes in the method of calculating the relevant share underlying
index following such discontinuance or liquidation event) and (ii) a fraction, the numerator of which is the closing price of the
relevant underlying shares and the denominator of which is the closing value of the relevant share underlying index (or any successor
index, as described below), each determined as of the last day prior to the occurrence of the discontinuance or liquidation event
on which a closing price was available.
If, subsequent to a discontinuance or liquidation
event, the share underlying index publisher discontinues publication of the relevant share underlying index and the share underlying
index publisher or another entity (including MS & Co.) publishes a successor or substitute
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Morgan Stanley Finance LLC
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Equity-Linked Partial Principal at Risk Securities due October 21, 2022
Based on the Performance of a Basket Consisting of Two Indices and Two Exchange-Traded Funds
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index that the calculation agent determines,
in its sole discretion, to be comparable to the discontinued the relevant share underlying index (such index being referred to
herein as a “successor index”), then any subsequent closing price for the relevant underlying shares on any trading
day following a discontinuance or liquidation event will be determined by reference to the published value of such relevant successor
index at the regular weekday close of trading on such trading day, and, to the extent the value of the relevant successor index
differs from the value of the relevant share underlying index at the time of such substitution, proportionate adjustments shall
be made by the calculation agent for purposes of calculating payments on the securities.
Upon any selection by the calculation agent
of a relevant successor index, the calculation agent will cause written notice thereof to be furnished to the trustee, to us and
to the depositary, as holder of the securities, within three business days of such selection. We expect that such notice
will be made available to you, as a beneficial owner of the securities, in accordance with the standard rules and procedures of
the depositary and its direct and indirect participants.
If, subsequent to a discontinuance or liquidation
event, the share underlying index publisher discontinues publication of the relevant share underlying index prior to, and such
discontinuance is continuing on, the determination date, and the calculation agent determines, in its sole discretion, that no
relevant successor index is available at such time, then the calculation agent will determine the closing price for the relevant
underlying shares for such date. Such closing price will be computed by the calculation agent in accordance with the
formula for and method of calculating the relevant share underlying index last in effect prior to such discontinuance, using the
closing price (or, if trading in the relevant securities has been materially suspended or materially limited, its good faith estimate
of the closing price that would have prevailed but for such suspension or limitation) at the close of the principal trading session
of the relevant exchange on such date of each security most recently composing the relevant share underlying index without any
rebalancing or substitution of such securities following such discontinuance.
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Alternate exchange calculation in case of an event of default:
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If an event of default with respect to the securities will have
occurred and be continuing, the amount declared due and payable upon any acceleration of the securities (the “Acceleration
Amount”) will be an amount, determined by the calculation agent in its sole discretion, that is equal to the cost of having
a qualified financial institution, of the kind and selected as described below, expressly assume all our payment and other obligations
with respect to the securities as of that day and as if no default or acceleration had occurred, or to undertake other obligations
providing substantially equivalent economic value to you with respect to the securities. That cost will equal:
·
the lowest amount that a qualified financial institution
would charge to effect this assumption or undertaking, plus
·
the reasonable expenses, including reasonable attorneys’
fees, incurred by the holders of the securities in preparing any documentation necessary for this assumption or undertaking.
During the default quotation period for the securities, which
we describe below, the holders of the securities and/or we may request a qualified financial institution to provide a quotation
of the amount it would charge to effect this assumption or undertaking. If either party obtains a quotation, it must
notify the other party in writing of the quotation. The amount referred to in the first bullet point above will equal
the lowest—or, if there is only one, the only—quotation obtained, and as to which notice is so given, during the default
quotation period. With respect to any quotation, however, the party not obtaining the quotation may object, on reasonable
and significant grounds, to the assumption or undertaking by the qualified financial institution providing the quotation and notify
the other party in writing of those grounds within two business days after the last day of the default quotation period, in which
case that quotation will be disregarded in determining the Acceleration Amount.
Notwithstanding the foregoing, if a voluntary or involuntary
liquidation, bankruptcy or insolvency of, or any analogous proceeding is filed with respect to MSFL or Morgan Stanley, then depending
on applicable bankruptcy law, your claim may be limited to an amount that could be less than the Acceleration Amount.
If the maturity of the securities is accelerated because of an
event of default as described above, we will, or will cause the calculation agent to, provide written notice to the trustee at
its New York office, on which notice the trustee may conclusively rely, and to the depositary of the Acceleration Amount and the
aggregate cash amount due, if any, with respect to the securities as promptly as possible and in no event later than two business
days after the date of such acceleration.
Default quotation period
The default quotation period is the period beginning on the day
the Acceleration Amount
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Morgan Stanley Finance LLC
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Equity-Linked Partial Principal at Risk Securities due October 21, 2022
Based on the Performance of a Basket Consisting of Two Indices and Two Exchange-Traded Funds
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first becomes due and ending on the third business day after
that day, unless:
·
no quotation of the kind referred to above is obtained,
or
·
every quotation of that kind obtained is objected
to within five business days after the due date as described above.
If either of these two events occurs, the default quotation period
will continue until the third business day after the first business day on which prompt notice of a quotation is given as described
above. If that quotation is objected to as described above within five business days after that first business day,
however, the default quotation period will continue as described in the prior sentence and this sentence.
In any event, if the default quotation period and the subsequent
two business day objection period have not ended before the determination date, then the Acceleration Amount will equal the principal
amount of the securities.
Qualified financial institutions
For the purpose of determining the Acceleration Amount at any
time, a qualified financial institution must be a financial institution organized under the laws of any jurisdiction in the United
States or Europe, which at that time has outstanding debt obligations with a stated maturity of one year or less from the date
of issue and rated either:
·
A-2 or higher by Standard & Poor’s Ratings
Services or any successor, or any other comparable rating then used by that rating agency, or
·
P-2 or higher by Moody’s Investors Service or
any successor, or any other comparable rating then used by that rating agency.
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Issuer notice to registered security holders, the trustee and the depositary:
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In the event that the maturity date is postponed due to postponement
of the determination 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 actual determination date as postponed.
The issuer shall, or shall cause the calculation agent to, (i)
provide written notice to the trustee at its New York office, on which notice the trustee may conclusively rely, and to the depositary
of the payment at maturity 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.
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Morgan Stanley Finance LLC
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Equity-Linked Partial Principal at Risk Securities due October 21, 2022
Based on the Performance of a Basket Consisting of Two Indices and Two Exchange-Traded Funds
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