CALCULATION OF REGISTRATION FEE
|
|
Maximum Aggregate
|
|
Amount of Registration
|
Title of Each Class of Securities Offered
|
|
Offering Price
|
|
Fee
|
|
|
|
|
|
Contingent Income Securities due 2031
|
|
$1,793,000
|
|
$180.56
|
Morgan
Stanley Finance LLC
|
May
2016
Pricing
Supplement No. 913
Registration
Statement Nos. 333-200365; 333-200365-12
Dated
May 25, 2016
Filed
pursuant to Rule 424(b)(2)
|
Structured
Investments
Opportunities in U.S. Equities
Contingent Income Securities due May 30, 2031
Payments on the Securities Based on the Worst
Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Fully and Unconditionally Guaranteed by Morgan
Stanley
Principal at Risk Securities
The securities are unsecured obligations of Morgan Stanley Finance
LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley. The securities have the terms described
in the accompanying prospectus supplement, index supplement and prospectus, as supplemented or modified by this document. The securities
do not guarantee the repayment of principal and do not provide for the regular payment of interest after the first 5 years. For
the first 5 years, the securities will pay a fixed monthly coupon at the rate specified below. Thereafter, the securities will
pay a contingent monthly coupon
but only if
the index closing value of
each of the Russell 2000
®
Index
and the S&P 500
®
Index
on the related observation date is
at or above
60% of its respective initial
index value
, which we refer to as the coupon barrier level. If the index closing value
of either underlying index
is
less than the coupon barrier level for such index on any observation date after the first 5 years, we will pay no interest for
the related interest period. At maturity, if the final index value of
each
underlying index is greater than or equal to
50% of the respective initial index value, which we refer to as the downside threshold level, the payment at maturity will be the
stated principal amount, and, if the final index value of
each
underlying index is also greater than or equal to its coupon
barrier level, the related contingent monthly coupon. If, however, the final index value of
either
underlying index is less
than its downside threshold level, investors will be exposed to the decline in the worst performing underlying index on a 1 to
1 basis and will receive a payment at maturity that is less than 50% of the stated principal amount of the securities and could
be zero.
Accordingly,
i
nvestors in the securities must be willing to accept the risk of losing their entire initial investment
based on the performance of either index and also the risk of not receiving any contingent monthly coupons after the first 5 years.
Because payments on the securities are based on the worst performing of the underlying indices, a decline beyond the respective
coupon barrier level and/or respective downside threshold level, as applicable, of
either
underlying index will result in
few or no contingent monthly coupons after the first 5 years and/or a significant loss of your investment, as applicable, even
if the other underlying index has appreciated or has not declined as much. Investors will not participate in any appreciation in
either underlying index. These long-dated securities are for investors who are willing to risk their principal and seek an opportunity
to earn interest at a potentially above-market rate in exchange for the risk of receiving no monthly interest after the first 5
years if
either underlying index
closes below the coupon barrier level for such index on the observation dates. The securities
are notes issued as part of MSFL’s Series A Global Medium-Term Notes program.
All payments are subject to our credit risk. If we default
on our obligations, you could lose some or all of your investment. These securities are not secured obligations and you will not
have any security interest in, or otherwise have any access to, any underlying reference asset or assets.
FINAL TERMS
|
Issuer:
|
Morgan Stanley Finance LLC
|
Guarantor:
|
Morgan Stanley
|
Underlying indices:
|
Russell 2000
®
Index (the “RTY
Index”) and S&P 500
®
Index (the “SPX Index”)
|
Aggregate principal amount:
|
$1,793,000
|
Stated
principal amount:
|
$1,000 per security
|
Issue
price:
|
$1,000 per security (see “Commissions and
issue price” below)
|
Pricing
date:
|
May 25, 2016
|
Original
issue date:
|
May 31, 2016 (3 business days after the pricing
date)
|
Maturity date:
|
May 30, 2031
|
Monthly coupon:
|
Years 1-5: On all coupon
payment dates through May 2021, a fixed coupon at an annual rate of 7.00% (corresponding to approximately $5.833 per month
per security) is paid monthly.
Years 6-15: Beginning
with the June 2021 coupon payment date, a
contingent
coupon at an annual rate of 7.00% (corresponding to approximately
$5.833 per month per security) is paid monthly
but only if
the closing value of
each underlying index
is
at or above
its respective coupon barrier level on the related observation date.
If, on any observation
date in years 6-15, the closing value of either underlying index is less than the coupon barrier level for such index,
we will pay no coupon for the applicable interest period. It is possible that one or both underlying indices will remain
below the respective coupon barrier level(s) for extended periods of time or even throughout years 6-15 so that you will
receive few or no contingent monthly coupons during that period.
|
Payment
at maturity:
|
If the final index value
of
each
underlying index is
greater than or equal to
its respective downside threshold level: the stated
principal amount, and, if the final index value of
each
underlying index is also
greater than or equal to
its respective coupon barrier level, the contingent monthly coupon with respect to the final observation date.
If the final index value
of
either
underlying index is
less than
its respective downside threshold level: (i) the stated principal
amount
multiplied by
(ii) the index performance factor of the worst performing underlying index. Under these circumstances,
the payment at maturity will be less than 50% of the stated principal amount of the securities and could be zero.
|
|
Terms
continued on the following page
|
Agent:
|
Morgan Stanley & Co. LLC (“MS &
Co.”), an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley. See “Supplemental information
regarding plan of distribution; conflicts of interest.”
|
Estimated value on the pricing
date:
|
$893.80 per security. See “Investment
Overview” beginning on page 3.
|
Commissions
and issue price:
|
Price
to public
(1)
|
Agent’s
commissions
(2)
|
Proceeds
to us
(3)
|
Per security
|
$1,000
|
$35
|
$965
|
Total
|
$1,793,000
|
$62,755
|
$1,730,245
|
|
(1)
|
The price to public for investors purchasing the securities in fee-based advisory accounts will be $970 per security.
|
|
(2)
|
Selected dealers and their financial advisors will collectively receive from the agent, MS & Co., a fixed sales commission
of $35 for each security they sell; provided that dealers selling to investors purchasing the securities in fee-based advisory
accounts will receive a sales commission of $5 per security. 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.
|
|
(3)
|
See “Use of proceeds and hedging” on page 26.
|
The securities involve risks not associated with an investment
in ordinary debt securities. See “Risk Factors” beginning on page 10.
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 deposits or savings accounts and are
not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they obligations
of, or guaranteed by, a bank.
You should read this document together with the related prospectus
supplement, index supplement and prospectus, each of which can be accessed via the hyperlinks below. Please also see “Additional
Information About the Securities” at the end of this document.
References to “we,” “us,” and “our”
refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Morgan
Stanley Finance LLC
Contingent Income Securities due May 30, 2031
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Terms continued from previous page:
|
Coupon barrier level:
|
With respect to the RTY Index: 684.614, which is approximately
60% of the initial index value for such index
With respect to the SPX Index: 1,254.324, which is 60% of the
initial index value for such index
|
Downside threshold level:
|
With respect to the RTY Index: 570.512, which is 50% of the initial
index value for such index
With respect to the SPX Index: 1,045.27, which is 50% of the
initial index value for such index
|
Initial index value:
|
With respect to the RTY Index: 1,141.024, which is the index
closing value of such index on the pricing date
With respect to the SPX Index: 2,090.54, which is the index closing
value of such index on the pricing date
|
Final index value:
|
With respect to each index, the respective index closing value on the final observation date
|
Worst performing
underlying index:
|
The underlying index with the larger percentage decrease from the respective initial index value to the respective final index value
|
Index performance factor:
|
Final index value
divided by
the initial index value
|
Coupon payment dates:
|
Monthly, on the 30th day of each month (or, in the case of February, the last calendar day of such month), beginning June 30, 2016;
provided
that if any such day is not a business day, that contingent monthly coupon, if any, will be paid on the next succeeding business day and no adjustment will be made to any coupon payment made on that succeeding business day;
provided further
that the contingent monthly coupon, if any, with respect to the final observation date shall be paid on the maturity date.
|
Observation dates:
|
The third scheduled business day preceding each scheduled coupon payment date, beginning with the June 30, 2021 scheduled coupon payment date, subject to postponement for non-index business days and certain market disruption events. We also refer to the third scheduled business day prior to the scheduled maturity date as the final observation date.
|
CUSIP / ISIN:
|
61766BAQ4 / US61766BAQ41
|
Listing:
|
The securities will not be listed on any securities exchange.
|
Morgan
Stanley Finance LLC
Contingent Income Securities due May 30, 2031
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Investment Overview
Contingent Income Securities
Principal at
Risk Securities
Contingent Income Securities due May 30, 2031 Payments on the
Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index (the
“securities”) do not guarantee the repayment of principal and do not provide for the regular payment of interest after
the first 5 years. For the first 5 years, the securities will pay a fixed monthly coupon at the rate specified below. Thereafter,
the securities will pay a contingent monthly coupon
but only if
the index closing value of
each of the Russell 2000
®
Index and the S&P 500
®
Index
(which we refer to together as the “underlying indices”) is
at
or above
60% of its respective initial index value, which we refer to as the coupon barrier level, on the related observation
date. If the index closing value
of either underlying index
is less than the coupon barrier level for such index on any
observation date after the first 5 years, we will pay no coupon for the related monthly period. It is possible that the index closing
value of one or both underlying indices will remain below the respective coupon barrier level(s) for extended periods of time or
even throughout years 6-15 so that you will receive few or no contingent monthly coupons during that period. We refer to the coupon
on the securities after the first 5 years as contingent, because there is no guarantee that you will receive a coupon payment on
any coupon payment date during that period. Even if an underlying index were to be at or above the coupon barrier level for such
index on some monthly observation dates, it may fluctuate below the coupon barrier level on others. In addition, even if one underlying
index were to be at or above the coupon barrier level for such index on all monthly observation dates, you will receive a contingent
monthly coupon only with respect to the observation dates on which the other underlying index is also at or above the coupon barrier
level for such index, if any. At maturity, if the final index value of
each
underlying index is greater than or equal to
50% of the respective initial index value, which we refer to as the downside threshold level, the payment at maturity will be the
stated principal amount, and, if the final index value of
each
underlying index is also greater than or equal to its coupon
barrier level, the related contingent monthly coupon. If, however, the final index value of
either
underlying index is less
than its downside threshold level, investors will be exposed to the decline in the worst performing underlying index on a 1 to
1 basis and will receive a payment at maturity that is less than 50% of the stated principal amount of the securities and could
be zero.
Accordingly, investors in the securities must be willing to accept the risk of losing their entire initial investment
based on the performance of either index and also the risk of not receiving any contingent monthly coupons after the first 5 years.
Maturity:
|
Approximately 15 years
|
Contingent monthly coupon:
|
Years 1-5: On all coupon payment dates through May 2021, a fixed
coupon at an annual rate of 7.00% (corresponding to approximately $5.833 per month per security) is paid monthly.
Years 6-15: Beginning with the June 2021 coupon payment date,
a
contingent
coupon at an annual rate of 7.00% (corresponding to approximately $5.833 per month per security) is paid monthly
but only if
the closing value of
each underlying index
is
at or above
its respective coupon barrier level
on the related observation date.
If, on any observation date, the closing value of either underlying
index is less than the coupon barrier level for such index, we will pay no coupon for the applicable interest period. It is possible
that one or both underlying indices will remain below the respective coupon barrier level(s) for extended periods of time or even
throughout years 6-15 so that you will receive few or no contingent monthly coupons during that period.
|
Payment at maturity:
|
If the final index value of
each
underlying index is
greater
than or equal to
its respective downside threshold level: the stated principal amount, and, if the final index value of
each
underlying index is also
greater than or equal to
its respective coupon barrier level, the contingent monthly coupon
with respect to the final observation date.
If the final index value of
either
underlying index is
less than
its respective downside threshold level: (i) the stated principal amount
multiplied by
(ii) the index performance
factor of the worst performing underlying index. Under these circumstances, the payment at maturity will be less than 50% of the
stated principal amount of the securities and could be zero.
|
Morgan Stanley clients may contact their local Morgan Stanley
branch office or our principal executive offices at 1585 Broadway, New York, New York 10036 (telephone number (866) 477-4776).
All other clients may contact their local brokerage representative. Third-party distributors may contact Morgan Stanley Structured
Investment Sales at (800) 233-1087.
Morgan
Stanley Finance LLC
Contingent Income Securities due May 30, 2031
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
The original issue price of each security is $1,000. This price
includes costs associated with issuing, selling, structuring and hedging the securities, which are borne by you, and, consequently,
the estimated value of the securities on the pricing date is less than $1,000. We estimate that the value of each security on the
pricing date is $893.80.
What goes into the estimated value on the pricing date?
In valuing the securities on the pricing date, we take into account
that the securities comprise both a debt component and a performance-based component linked to the underlying indices. The estimated
value of the securities is determined using our own pricing and valuation models, market inputs and assumptions relating to the
underlying indices, instruments based on the underlying indices, volatility and other factors including current and expected interest
rates, as well as an interest rate related to our secondary market credit spread, which is the implied interest rate at which our
conventional fixed rate debt trades in the secondary market.
What determines the economic terms of the securities?
In determining the economic terms of the securities, including
the contingent monthly coupon rate, the coupon barrier levels and the downside threshold levels, we use an internal funding rate,
which is likely to be lower than our secondary market credit spreads and therefore advantageous to us. If the issuing, selling,
structuring and hedging costs borne by you were lower or if the internal funding rate were higher, one or more of the economic
terms of the securities would be more favorable to you.
What is the relationship between the estimated value on the
pricing date and the secondary market price of the securities?
The price at which MS & Co. purchases the securities in the
secondary market, absent changes in market conditions, including those related to the 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, because the costs associated with issuing, selling, structuring and hedging the securities are not fully
deducted upon issuance, for a period of up to 18 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.
Morgan
Stanley Finance LLC
Contingent Income Securities due May 30, 2031
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Key Investment Rationale
The securities provide for fixed monthly coupon payments at the
rate specified herein for the first 5 years. Thereafter, the securities do not provide for the regular payment of interest and
instead will pay a contingent monthly coupon
but only if
the index closing value of
each underlying index
is
at
or above
60% of its initial index value, which we refer to as the coupon barrier level, on the related observation date. The
following scenarios are for illustration purposes only to demonstrate how the payment at maturity and contingent monthly coupon
are calculated, and do not attempt to demonstrate every situation that may occur. Accordingly, the contingent monthly coupon may
be payable with respect to none of, or some but not all of, the monthly periods during years 6-15, and the payment at maturity
may be less than 50% of the stated principal amount and could be zero. Investors will not participate in any appreciation in either
underlying index.
Scenario 1:
A contingent monthly coupon is paid for all interest periods, and investors receive principal back at maturity, which is the best-case scenario.
|
This scenario assumes that during years 6-15, each underlying index closes at or above its respective coupon barrier level on every monthly observation date. Investors receive the fixed monthly coupon for the monthly interest periods during the first 5 years, and investors receive the contingent monthly coupon for each interest period during years 6-15. At maturity, each underlying index closes above its respective downside threshold level and coupon barrier level, and so investors receive the stated principal amount and the contingent monthly coupon with respect to the final observation date.
|
Scenario 2:
A contingent monthly coupon is paid for some, but not all, interest periods, and investors receive principal back at maturity.
|
This scenario assumes that each underlying index closes at or above its respective coupon barrier level on some monthly observation dates after the first 5 years, but one or both underlying indices close below the respective coupon barrier level(s) for such index on the others. Investors receive the fixed monthly coupon for the monthly interest periods during the first 5 years. Investors receive the contingent monthly coupon for the monthly interest periods during years 6-15 for which the index closing value of each underlying index is at or above its respective coupon barrier level on the related observation date, but not for the interest periods for which one or both underlying indices close below the respective coupon barrier level(s) on the related observation date. On the final observation date, each underlying index closes at or above its downside threshold level. At maturity, investors receive the stated principal amount, and, depending on whether each final index value is greater than, equal to or below the respective coupon barrier level, the contingent monthly coupon with respect to the final observation date.
|
Scenario 3 :
No contingent monthly coupon is paid for any interest period during years 6-15, and investors suffer a substantial loss of principal at maturity.
|
This scenario assumes that one or both underlying indices close below the respective coupon barrier level(s) on every monthly observation date during years 6-15. Investors receive the fixed monthly coupon for the monthly interest periods during the first 5 years. However, since one or both underlying indices close below the respective coupon barrier level(s) on every monthly observation date during years 6-15, investors do not receive any contingent monthly coupon during that period. On the final observation date, one or both underlying indices close below the respective downside threshold level(s). At maturity, investors will receive an amount equal to the stated principal amount multiplied by the index performance factor of the worst performing underlying index. Under these circumstances, the payment at maturity will be less than 50% of the stated principal amount and could be zero.
|
Morgan
Stanley Finance LLC
Contingent Income Securities due May 30, 2031
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Underlying Indices Summary
Russell 2000
®
Index
The Russell 2000
®
Index is an index calculated,
published and disseminated by Russell Investments, and measures the composite price performance of stocks of 2,000 companies (the
“Russell 2000 Component Stocks”) 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.
Information as of market close on May 25, 2016:
Bloomberg Ticker Symbol:
|
RTY
|
Current Index Value:
|
1,141.024
|
52 Weeks Ago:
|
1,238.756
|
52 Week High (on 6/23/2015):
|
1,295.799
|
52 Week Low (on 2/11/2016):
|
953.715
|
For additional information about the Russell 2000
®
Index, see the information set forth under “Russell 2000
®
Index” in the accompanying index supplement.
Furthermore, for additional historical information, see “Russell 2000
®
Index Historical Performance”
below.
S&P 500
®
Index
The S&P 500
®
Index, which is calculated, maintained
and published by S&P Dow Jones Indices LLC (“S&P”), consists of stocks of 500 component companies selected
to provide a performance benchmark for the U.S. equity markets. The calculation of the S&P 500
®
Index is based
on the relative value of the float adjusted aggregate market capitalization of the 500 component companies as of a particular time
as compared to the aggregate average market capitalization of 500 similar companies during the base period of the years 1941 through
1943.
Information as of market close on May 25, 2016:
Bloomberg Ticker Symbol:
|
SPX
|
Current Index Value:
|
2,090.54
|
52 Weeks Ago:
|
2,104.20
|
52 Week High (on 7/20/2015):
|
2,128.28
|
52 Week Low (on 2/11/2016):
|
1,829.08
|
For additional information about the S&P 500
®
Index, see the information set forth under “S&P 500
®
Index” in the accompanying index supplement.
Furthermore, for additional historical information, see “S&P 500
®
Index Historical Performance”
below.
Morgan
Stanley Finance LLC
Contingent Income Securities due May 30, 2031
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Hypothetical Examples
The following hypothetical examples illustrate how to determine
whether a contingent monthly coupon is paid with respect to an observation date and how to calculate the payment at maturity. The
following examples are for illustrative purposes only. For the first 5 years, you will receive a fixed monthly coupon at a rate
of 7.00% per annum regardless of the performance of the underlying indices. Whether you receive a contingent monthly coupon after
the first 5 years will be determined by reference to the index closing value of each underlying index on each monthly observation
date, and the amount you will receive at maturity, if any, will be determined by reference to the final index value of each underlying
index on the final observation date. The actual initial index value, coupon barrier level and downside threshold level for each
underlying index are set forth on the cover of this document. All payments on the securities, if any, are subject to our credit
risk. The below examples are based on the following terms:
Contingent Monthly Coupon:
|
Years 1-5: On all coupon payment dates through May 2021, a fixed
coupon at an annual rate of 7.00% (corresponding to approximately $5.833 per month per security) is paid monthly.
Years 6-15: Beginning with the June 2021 coupon payment date,
a
contingent
coupon at an annual rate of 7.00% (corresponding to approximately $5.833 per month per security) is paid monthly
but only if
the closing value of
each underlying index
is
at or above
its respective coupon barrier level
on the related observation date.*
If, on any observation date in years 6-15, the closing value
of either underlying index is less than the coupon barrier level for such index, we will pay no coupon for the applicable interest
period. It is possible that one or both underlying indices will remain below the respective coupon barrier level(s) for extended
periods of time or even throughout years 6-15 so that you will receive few or no contingent monthly coupons during that period.
|
Payment at Maturity:
|
If the final index value of
each
underlying index is
greater
than or equal to
its respective downside threshold level: the stated principal amount, and, if the final index value of
each
underlying index is also
greater than or equal to
its respective coupon barrier level, the contingent monthly coupon
with respect to the final observation date
If the final index value of
either
underlying index is
less than
its respective downside threshold level: (i) the stated principal amount
multiplied by
(ii) the index performance
factor of the worst performing underlying index. Under these circumstances, the payment at maturity will be less than 50% of the
stated principal amount of the securities and could be zero.
|
Stated Principal Amount:
|
$1,000
|
Hypothetical Initial Index Value:
|
With respect to the RTY Index: 1,200
With respect to the SPX Index: 2,000
|
Hypothetical Coupon Barrier Level:
|
With respect to the RTY Index: 720, which is 60% of the hypothetical
initial index value for such index
With respect to the SPX Index: 1,200, which is 60% of the hypothetical
initial index value for such index
|
Hypothetical Downside Threshold Level:
|
With respect to the RTY Index: 600, which is 50% of the hypothetical
initial index value for such index
With respect to the SPX Index: 1,000, which is 50% of the hypothetical
initial index value for such index
|
* The actual monthly coupon will
be an amount determined by the calculation agent based on the number of days in the applicable payment period, calculated on a
30/360 basis. The hypothetical monthly coupon of $5.833 is used in these examples for ease of analysis.
Morgan
Stanley Finance LLC
Contingent Income Securities due May 30, 2031
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
How to determine whether a contingent monthly
coupon is payable with respect to an observation date during years 6-15:
|
Index Closing Value
|
Contingent Monthly Coupon
|
|
RTY Index
|
SPX Index
|
|
Hypothetical Observation Date 1
|
950 (
at or above
coupon barrier level)
|
1,500 (
at or above
coupon barrier level)
|
$5.833
|
Hypothetical Observation Date 2
|
1,200 (
at or above
coupon barrier level)
|
1,000 (
below
coupon barrier level)
|
$0
|
Hypothetical Observation Date 3
|
600 (
below
coupon barrier level)
|
1,600 (
at or above
coupon barrier level)
|
$0
|
Hypothetical Observation Date 4
|
500 (
below
coupon barrier level)
|
1,100 (
below
coupon barrier level)
|
$0
|
On hypothetical observation date 1, both the RTY Index and SPX
Index close at or above their respective coupon barrier levels. Therefore a contingent monthly coupon of $5.833 is paid on the
relevant coupon payment date.
On each of the hypothetical observation dates 2 and 3, one underlying
index closes at or above its coupon barrier level but the other underlying index closes below its coupon barrier level. Therefore,
no contingent monthly coupon is paid on the relevant coupon payment date.
On hypothetical observation date 4, each underlying index closes
below its respective coupon barrier level and accordingly no contingent monthly coupon is paid on the relevant coupon payment date.
Beginning after 5 years, you will not receive a contingent
monthly coupon on any coupon payment date if the closing value of either underlying index is below its respective coupon barrier
level on the related observation date.
How to calculate the payment at maturity:
|
Final Index Value
|
Payment at Maturity
|
|
RTY Index
|
SPX Index
|
|
Example 1:
|
950 (
at or above
the
downside threshold level and coupon barrier level)
|
1,800 (
at or above
the downside threshold level and coupon barrier level)
|
$1,005.833 (the stated principal amount
plus
the contingent monthly coupon with respect to the final observation date)
|
Example 2:
|
650 (
at or above
the
downside threshold level but
below
the coupon barrier level)
|
1,530 (
at or above
the downside threshold level and coupon barrier level)
|
$1,000.00
(the stated principal amount)
|
Example 3:
|
850 (
at or above
the
downside threshold level)
|
800 (
below
the downside threshold level)
|
$1,000 x index performance factor of the worst performing underlying = $1,000 x (800 / 2,000) = $400
|
Example 4:
|
480 (
below
the downside threshold level)
|
1,200 (
at or above
the downside threshold level)
|
$1,000 x (480 / 1,200) = $400
|
Example 5:
|
300 (
below
the downside threshold level)
|
800 (
below
the downside threshold level)
|
$1,000 x (300 / 1,200) = $250
|
Example 6:
|
480 (
below
the downside threshold level)
|
500 (
below
the downside threshold level)
|
$1,000 x (500 / 2,000) = $250
|
Morgan
Stanley Finance LLC
Contingent Income Securities due May 30, 2031
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
In example 1, the final index values of both the RTY Index and
SPX Index are at or above their downside threshold levels and coupon barrier levels. Therefore, investors receive at maturity the
stated principal amount of the securities and the contingent monthly coupon with respect to the final observation date.
In example 2, the final index values of both the RTY Index and
the SPX Index are at or above their downside threshold levels. However, the final index value of the RTY Index is below its coupon
barrier level. Therefore, investors receive at maturity the stated principal amount of the securities but do not receive the contingent
monthly coupon with respect to the final observation date.
In examples 3 and 4, the final index value of one underlying
index is at or above its downside threshold level but the final index value of the other underlying index is below its downside
threshold level. Therefore, investors are exposed to the downside performance of the worst performing underlying index at maturity
and receive at maturity an amount equal to the stated principal amount
times
the index performance factor of the worst performing
underlying index.
Similarly, in examples 5 and 6, the final index value of each
underlying index is below its respective downside threshold level, and investors receive at maturity an amount equal to the stated
principal amount
times
the index performance factor of the worst performing underlying index. In example 5, the RTY Index
has declined 75% from its initial index value to its final index value, while the SPX Index has declined 60% from its initial index
value to its final index value. Therefore, the payment at maturity equals the stated principal amount
times
the index performance
factor of the RTY Index, which is the worst performing underlying index in this example. In example 6, the RTY Index has declined
60% from its initial index value, while the SPX Index has declined 75% from its initial index value to its final index value. Therefore
the payment at maturity equals the stated principal amount
times
the index performance factor of the SPX Index, which is
the worst performing underlying index in this example.
If the final index value of EITHER underlying index is below
its respective downside threshold level, you will be exposed to the downside performance of the worst performing underlying index
at maturity, and your payment at maturity will be less than $500 per security and could be zero.
Morgan
Stanley Finance LLC
Contingent Income Securities due May 30, 2031
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Risk Factors
The following is a non-exhaustive list of certain key risk
factors for investors in the securities. For further discussion of these and other risks, you should read the section entitled
“Risk Factors” in the accompanying prospectus supplement, index supplement and prospectus. We also urge you to consult
with your investment, legal, tax, accounting and other advisers in connection with your investment in the securities.
|
§
|
The securities do not guarantee the return of any
principal.
The terms of the securities differ from those of ordinary debt securities in that they do not guarantee the repayment
of principal. If the final index value of either underlying index is less than its downside threshold level of 50% of its initial
index value, you will be exposed to the decline in the closing value of the worst performing underlying index, as compared to its
initial index value, on a 1 to 1 basis, and you will receive for each security that you hold at maturity an amount equal to the
stated principal amount
times
the index performance factor of the worst performing underlying index.
In this case, the
payment at maturity will be less than 50% of the stated principal amount and could be zero.
|
|
§
|
After the first 5 years, the securities do not
provide for regular interest payments.
The terms of the securities differ from those of ordinary debt securities in that they
do not provide for the regular payment of interest after the first 5 years. For the first 5 years, the securities will pay a fixed
monthly coupon at the rate specified herein. Thereafter, the securities will pay a contingent monthly coupon only if the index
closing value of each underlying index is at or above 60% of its respective initial index value, which we refer to as the coupon
barrier level, on the related observation date. If, on the other hand, the index closing value of either underlying index is lower
than the coupon barrier level for such index on the relevant observation date for any interest period during years 6-15, we will
pay no coupon on the applicable coupon payment date. It is possible that the index closing value of one or both underlying indices
will remain below the respective coupon barrier level(s) for extended periods of time or even throughout years 6-15 so that you
will receive few or no contingent monthly coupons during that period. If you do not earn sufficient contingent monthly coupons
over the term of the securities, the overall return on the securities may be less than the amount that would be paid on a conventional
debt security of the issuer of comparable maturity.
|
|
§
|
You are exposed to the price risk of both underlying
indices, with respect to both the contingent monthly coupons after the first 5 years, if any, and the payment at maturity, if any.
Your return on the securities is not linked to a basket consisting of both underlying indices. Rather, it will be contingent
upon the independent performance of each underlying index. Unlike an instrument with a return linked to a basket of underlying
assets in which risk is mitigated and diversified among all the components of the basket, you will be exposed to the risks related
to both underlying indices. Poor performance by
either
underlying index over the term of the securities may negatively affect
your return and will not be offset or mitigated by any positive performance by the other underlying index. To receive any contingent
monthly coupons after the first 5 years,
each
underlying index must close at or above its respective coupon barrier level
on the applicable observation date. In addition, if
either
underlying index has declined to below its respective downside
threshold level as of the final observation date, you will be
fully exposed
to the decline in the worst performing underlying
index over the term of the securities on a 1 to 1 basis, even if the other underlying index has appreciated or not declined as
much. Under this scenario, the value of any such payment will be less than 50% of the stated principal amount and could be zero.
Accordingly, your investment is subject to the price risk of both underlying indices.
|
|
§
|
Because the securities are linked to the performance
of the worst performing underlying index, you are exposed to greater risks of receiving no contingent monthly coupons and sustaining
a significant loss on your investment than if the securities were linked to just one index.
The risk that you will not receive
any contingent monthly coupons after the first 5 years, or that you will suffer a significant loss on your investment, is greater
if you invest in the securities as opposed to substantially similar securities that are linked to the performance of just one underlying
index. With two underlying indices, it is more likely that either underlying index will close below its coupon barrier level on
any observation date, or its downside threshold level on the final observation date, than if the securities were linked to only
one underlying index. Therefore, it is more likely that you will not receive any contingent monthly coupons and that you will suffer
a significant loss on your investment.
|
|
§
|
The contingent monthly coupon, if any, is based
only on the value of each underlying index on the related monthly observation date at the end of the related interest period.
Whether the contingent monthly coupon will be paid on any
|
Morgan
Stanley Finance LLC
Contingent Income Securities due May 30, 2031
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
coupon payment date during years 6-15 will be determined
at the end of the relevant interest period, based on the closing value of each underlying index on the relevant monthly observation
date. As a result, you will not know whether you will receive the contingent monthly coupon on any coupon payment date until near
the end of the relevant interest period. Moreover, because the contingent monthly coupon is based solely on the value of each underlying
index on monthly observation dates, if the closing value of either underlying index on any observation date is below the coupon
barrier level for such index, you will receive no coupon for the related interest period, even if the level of such underlying
index was at or above its respective coupon barrier level on other days during that interest period and even if the closing value
of the other underlying index is at or above the coupon barrier level for such index.
|
§
|
Investors will not participate
in any appreciation in either underlying index.
Investors will not participate in any appreciation in either underlying index
from the initial index value for such index, and the return on the securities will be limited to the fixed monthly coupons and
the contingent monthly coupons, if any, that are paid with respect to each observation date during years 6-15 on which the index
closing value of each underlying index is greater than or equal to its respective coupon barrier level.
|
|
§
|
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 underlying indices, 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-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.
|
|
§
|
The market price will be influenced by many unpredictable
factors.
Several factors, many of which are beyond our control, will influence the value of the securities in the secondary
market and the price at which MS & Co. may be willing to purchase or sell the securities in the secondary market. We expect
that generally the level of interest rates available in the market and the value of each underlying index on any day, including
in relation to its respective coupon barrier level and downside threshold level, will affect the value of the securities more than
any other factors. Other factors that may influence the value of the securities include:
|
|
o
|
the volatility (frequency and magnitude of changes in value) of the underlying indices,
|
|
o
|
whether the index closing value of either underlying index has been below its respective coupon barrier level on any observation
date,
|
|
o
|
geopolitical conditions and economic, financial, political, regulatory or judicial events that affect the component stocks
of the underlying indices or securities markets generally and which may affect the value of each underlying index,
|
|
o
|
dividend rates on the securities underlying the underlying indices,
|
|
o
|
the time remaining until the securities mature,
|
|
o
|
interest and yield rates in the market,
|
|
o
|
the availability of comparable instruments,
|
|
o
|
the composition of the underlying indices and changes in the constituent stocks of such indices, and
|
|
o
|
any actual or anticipated changes in our credit ratings or credit spreads.
|
Some or all of these factors will influence the price
that you will receive if you sell your securities prior to maturity. Generally, the longer the time remaining to maturity, the
more the market price of the securities will be affected by the other factors described above. In particular, if either underlying
index has closed near or below its coupon barrier level, and
Morgan
Stanley Finance LLC
Contingent Income Securities due May 30, 2031
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
especially if either underlying index has closed near
or below its downside threshold level, the market value of the securities is expected to decrease substantially and you may have
to sell your securities at a substantial discount from the stated principal amount of $1,000 per security.
You cannot predict the future performance of either
underlying index based on its historical performance. The value of either underlying index may decrease and be below the coupon
barrier level for such index on each observation date so that you will receive no return on your investment after the first 5 years,
and one or both underlying indices may close below the respective downside threshold level(s) on the final observation date so
that you lose more than 50% or all of your initial investment in the securities. There can be no assurance that the closing value
of each underlying index will be at or above the respective coupon barrier level on any observation date so that you will receive
a coupon payment on the securities for the applicable interest period or that they will be at or above their respective downside
threshold levels on the final observation date so that you do not suffer a significant loss on your initial investment in the securities.
See “Russell 2000
®
Index Historical Performance” and “S&P 500
®
Index Historical
Performance” below.
|
§
|
The securities are subject to our credit risk,
and any actual or anticipated changes to our credit ratings or credit spreads may adversely affect the market value of the securities.
You are dependent on our ability to pay all amounts due on the securities at maturity or on any coupon payment date, and therefore
you are subject to our credit risk. The securities are not guaranteed by any other entity. If we default on its obligations under
the securities, your investment would be at risk and you could lose some or all of your investment. As a result, the market value
of the securities prior to maturity will be affected by changes in the market’s view of our creditworthiness. Any actual
or anticipated decline in our credit ratings or increase in the credit spreads charged by the market for taking our credit risk
is likely to adversely affect the market value of the securities.
|
|
§
|
As a finance subsidiary, MSFL has no independent
operations and will have no independent assets.
As a finance subsidiary, MSFL has no independent operations beyond the issuance
and administration of its securities and will have no independent assets available for distributions to holders of MSFL securities
if they make claims in respect of such securities in a bankruptcy, resolution or similar proceeding. Accordingly, any recoveries
by such holders will be limited to those available under the related guarantee by Morgan Stanley and that guarantee will rank
pari
passu
with all other unsecured, unsubordinated obligations of Morgan Stanley. Holders will have recourse only to a single claim
against Morgan Stanley and its assets under the guarantee. Holders of securities issued by MSFL should accordingly assume that
in any such proceedings they would not have any priority over and should be treated
pari passu
with the claims of other
unsecured, unsubordinated creditors of Morgan Stanley, including holders of Morgan Stanley-issued securities.
|
|
§
|
Not equivalent to investing
in the underlying indices.
Investing in the securities is not equivalent to investing in either underlying index or the component
stocks of either underlying index. Investors in the securities will not participate in any positive performance of either underlying
index, and will not have voting rights or rights to receive dividends or other distributions or any other rights with respect to
stocks that constitute either underlying index.
|
|
§
|
The securities will not be listed on any securities
exchange and secondary trading may be limited. Accordingly, you should be willing to hold your securities for the entire 15-year
term of the securities
.
The securities will not be listed on any securities exchange. Therefore, there may be little
or no secondary market for the securities. MS & Co. may, but is not obligated to, make a market in the securities and, if it
once chooses to make a market, may cease doing so at any time. When it does make a market, it will generally do so for transactions
of routine secondary market size at prices based on its estimate of the current value of the securities, taking into account its
bid/offer spread, our credit spreads, market volatility, the notional size of the proposed sale, the cost of unwinding any related
hedging positions, the time remaining to maturity and the likelihood that it will be able to resell the securities. Even if there
is a secondary market, it may not provide enough liquidity to allow you to trade or sell the securities easily. Since other broker-dealers
may not participate significantly in the secondary market for the securities, the price at which you may be able to trade your
securities is likely to depend on the price, if any, at which MS & Co. is willing to transact. If, at any time, MS & Co.
were to cease making a market in the securities, it is likely that there would be no secondary market for the securities. Accordingly,
you should be willing to hold your securities to maturity.
|
|
§
|
The rate we are willing to pay for securities of
this type, maturity and issuance size is likely to be lower than the rate implied by our secondary market credit spreads and advantageous
to us.
Both the lower rate and the inclusion of costs associated with issuing, selling, structuring and hedging the securities
in the original issue price reduce the economic terms of the securities, cause the estimated value of the securities to be less
than the original
|
Morgan
Stanley Finance LLC
Contingent Income Securities due May 30, 2031
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
issue price and will adversely affect secondary
market prices.
Assuming no change in market conditions or any other relevant factors, the prices, if any, at which dealers,
including MS & Co., may be willing to purchase the securities in secondary market transactions will likely be significantly
lower than the original issue price, because secondary market prices will exclude the issuing, selling, structuring and hedging-related
costs that are included in the original issue price and borne by you and because the secondary market prices will reflect our secondary
market credit spreads and the bid-offer spread that any dealer would charge in a secondary market transaction of this type as well
as other factors.
The inclusion of the costs of issuing, selling, structuring
and hedging the securities in the original issue price and the lower rate we are willing to pay as issuer make the economic terms
of the securities less favorable to you than they otherwise would be.
However, because the costs associated with issuing,
selling, structuring and hedging the securities are not fully deducted upon issuance, for a period of up to 18 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, and we expect that those higher values will also be reflected in your brokerage account
statements.
|
§
|
The estimated value of the securities is determined
by reference to our pricing and valuation models, which may differ from those of other dealers and is not a maximum or minimum
secondary market price.
These pricing and valuation models are proprietary and rely in part on subjective views of certain
market inputs and certain assumptions about future events, which may prove to be incorrect. As a result, because there is no market-standard
way to value these types of securities, our models may yield a higher estimated value of the securities than those generated by
others, including other dealers in the market, if they attempted to value the securities. In addition, the estimated value on the
pricing date does not represent a minimum or maximum price at which dealers, including MS & Co., would be willing to purchase
your securities in the secondary market (if any exists) at any time. The value of your securities at any time after the date of
this document will vary based on many factors that cannot be predicted with accuracy, including our creditworthiness and changes
in market conditions. See also “The market price will be influenced by many unpredictable factors” above.
|
|
§
|
Hedging and trading activity by our affiliates
could potentially 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
underlying indices or their component stocks), including trading in the stocks that constitute the underlying indices as well as
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 final observation date approaches. Some of our affiliates also trade the stocks that constitute the underlying indices and
other financial instruments related to the underlying indices on a regular basis as part of their general broker-dealer and other
businesses. Any of these hedging or trading activities on or prior to the pricing date could have increased the initial index value
of an underlying index, and, therefore, could have increased (i) the coupon barrier level for such underlying index, which is the
value at or above which such underlying index must close on the observation dates in order for you to earn a contingent monthly
coupon (depending also on the performance of the other underlying index), and (ii) the downside threshold level for such underlying
index, which is the value at or above which the underlying index must close on the final observation date so that you are not exposed
to the negative performance of the worst performing underlying index at maturity (depending also on the performance of the other
underlying index). Additionally, such hedging or trading activities during the term of the securities could affect the value of
an underlying index on the observation dates, and, accordingly, whether we pay a contingent monthly coupon on the securities and
the amount of cash you receive at maturity, if any (depending also on the performance of the other underlying index).
|
|
§
|
The calculation agent, which is a subsidiary of
Morgan Stanley and an affiliate of MSFL, will make determinations with respect to the securities.
As calculation agent, MS
& Co. has determined the initial index value, coupon barrier level and downside threshold level for each underlying index,
and will determine the payment at maturity, if any, and whether you receive a contingent monthly coupon on each coupon payment
date after the first 5 years and at maturity. Moreover, certain determinations made by MS & Co., in its capacity as calculation
agent, may require it to exercise discretion and make subjective judgments, such as with respect to the occurrence or non-occurrence
of market disruption events and the selection of a successor index or calculation of the index closing value in the event of a
market disruption event or discontinuance of an underlying index. These potentially subjective determinations may affect the payout
to you at maturity,
|
Morgan
Stanley Finance LLC
Contingent Income Securities due May 30, 2031
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
if any. For further information regarding these types
of determinations, see “Additional Information About the Securities—Additional Provisions—Calculation agent,”
“—Market disruption event,” “—Postponement of observation dates,” “—Discontinuance
of an underlying index; alteration of method of calculation” and “—Alternate exchange calculation in case of
an event of default” below. In addition, MS & Co. has determined the estimated value of the securities on the pricing
date.
|
§
|
Adjustments to the underlying
indices could
adversely affect the value of the securities.
The publisher of each underlying index may add, delete or substitute the component
stocks of such underlying index or 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. The publisher of each underlying index may also 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 index. MS & Co.
could have an economic interest that is different than that of investors in the securities insofar as, for example, MS & Co.
is permitted to consider indices that are calculated and published by MS & Co. or any of its affiliates. If MS & Co. determines
that there is no appropriate successor index on any observation date, the determination of whether a contingent monthly coupon
will be payable on the securities on the applicable coupon payment date, and/or the amount payable at maturity, will be based on
the value of such underlying index, based on the closing prices of the stocks constituting such underlying index at the time of
such discontinuance, without rebalancing or substitution, computed by MS & Co. as calculation agent in accordance with the
formula for calculating such underlying index last in effect prior to such discontinuance, as compared to the coupon barrier level
or downside threshold level, as applicable (depending also on the performance of the other underlying index).
|
|
§
|
The U.S. federal income tax consequences of an
investment in the securities are uncertain.
There is no direct legal authority as to the proper treatment of the securities
for U.S. federal income tax purposes, and, therefore, significant aspects of the tax treatment of the securities are uncertain.
|
Please read the discussion under “Additional
Provisions—Tax considerations” in this document concerning the U.S. federal income tax consequences of an investment
in the securities. We intend to treat a security for U.S. federal income tax purposes as a single financial contract that provides
for a coupon that will be treated as gross income to you at the time received or accrued, in accordance with your regular method
of tax accounting. Under this treatment, the ordinary income treatment of the coupon payments, in conjunction with the capital
loss treatment of any loss recognized upon the sale, exchange or settlement of the securities, could result in adverse tax consequences
to holders of the securities because the deductibility of capital losses is subject to limitations. We do not plan to request a
ruling from the Internal Revenue Service (the “IRS”) regarding the tax treatment of the securities, and the IRS or
a court may not agree with the tax treatment described herein. If the IRS were successful in asserting an alternative treatment
for the securities, the timing and character of income or loss on the securities might differ significantly from the tax treatment
described herein. For example, under one possible treatment, the IRS could seek to recharacterize the securities as debt instruments.
In that event, U.S. Holders would be required to accrue into income original issue discount on the securities every year at a “comparable
yield” determined at the time of issuance (as adjusted based on the difference, if any, between the actual and the projected
amount of any contingent payments on the securities) and recognize all income and gain in respect of the securities as ordinary
income. The risk that financial instruments providing for buffers, triggers or similar downside protection features, such as the
securities, would be recharacterized as debt is greater than the risk of recharacterization for comparable financial instruments
that do not have such features.
Non-U.S. Holders should note that we currently intend to withhold on any coupon paid to Non-U.S.
Holders generally at a rate of 30%, or at a reduced rate specified by an applicable income tax treaty under an “other income”
or similar provision, and will not be required to pay any additional amounts with respect to amounts withheld.
In 2007, the U.S. Treasury Department and the IRS
released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar
instruments. While it is not clear whether the securities would be viewed as similar to the prepaid forward contracts described
in the notice, it is possible that any Treasury regulations or other guidance issued after consideration of these issues could
materially and adversely affect the tax consequences of an investment in the securities, possibly with retroactive effect. The
notice focuses on a number of issues, the most relevant of which for holders of the securities are the character and timing of
income or loss and the degree, if any, to which income realized by non-U.S. investors should be subject to withholding tax. Both
U.S. and Non-U.S. Holders (as defined below) should consult their tax advisers regarding the U.S. federal income tax consequences
of an investment in the securities, including possible alternative treatments, the issues presented by this notice and any tax
consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
Morgan
Stanley Finance LLC
Contingent Income Securities due May 30, 2031
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Russell 2000
®
Index Historical
Performance
The following graph sets forth the daily closing values of the
RTY Index for the period from January 1, 2006 through May 25, 2016. The related table sets forth the published high and low closing
values, as well as end-of-quarter closing values, of the RTY Index for each quarter for the period from January 1, 2011 through
May 25, 2016. The closing value of the underlying index on May 25, 2016 was 1,141.024. We obtained the information in the table
and graph below from Bloomberg Financial Markets, without independent verification. The RTY Index has at times experienced periods
of high volatility, and you should not take the historical values of the RTY Index as an indication of its future performance.
No assurance can be given as to the level of the RTY Index on any observation date, including the final observation date.
RTY
Index Daily Closing Values
January
1, 2006 to May 25, 2016
|
|
*The
black solid line in the graph indicates the coupon barrier level of 684.614, which is approximately 60% of the initial index
value, and the red solid line indicates the downside threshold level of 570.512, which is 50% of the initial index value.
|
Morgan
Stanley Finance LLC
Contingent Income Securities due May 30, 2031
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Russell 2000
®
Index
|
High
|
Low
|
Period End
|
2011
|
|
|
|
First Quarter
|
843.55
|
773.18
|
843.55
|
Second Quarter
|
865.29
|
777.20
|
827.43
|
Third Quarter
|
858.11
|
643.42
|
644.16
|
Fourth Quarter
|
765.43
|
609.49
|
740.92
|
2012
|
|
|
|
First Quarter
|
846.13
|
747.28
|
830.30
|
Second Quarter
|
840.63
|
737.24
|
798.49
|
Third Quarter
|
864.70
|
767.75
|
837.45
|
Fourth Quarter
|
852.50
|
769.48
|
849.35
|
2013
|
|
|
|
First Quarter
|
953.07
|
872.61
|
951.54
|
Second Quarter
|
999.99
|
901.51
|
977.48
|
Third Quarter
|
1,078.41
|
989.54
|
1,073.79
|
Fourth Quarter
|
1,163.64
|
1,043.46
|
1,163.64
|
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
|
1,114.028
|
953.715
|
1,114.028
|
Second Quarter (through May 25, 2016)
|
1,154.149
|
1,092.785
|
1,141.024
|
License Agreement between Russell Investments and Morgan Stanley
The “Russell 2000
®
Index” is a trademark
of Russell Investments and has been licensed for use by Morgan Stanley. For more information, see “Russell 2000
®
Index—License Agreement between Russell Investments and Morgan Stanley” in the accompanying index supplement.
Morgan
Stanley Finance LLC
Contingent Income Securities due May 30, 2031
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
S&P 500
®
Index Historical
Performance
The following graph sets forth the daily closing values of the
SPX Index for the period from January 1, 2006 through May 25, 2016. The related table sets forth the published high and low closing
values, as well as end-of-quarter closing values, of the SPX Index for each quarter for the period from January 1, 2011 through
May 25, 2016. The closing value of the SPX Index on May 25, 2016 was 2,090.54. We obtained the information in the table and graph
below from Bloomberg Financial Markets, without independent verification. The SPX Index has at times experienced periods of high
volatility, and you should not take the historical values of the SPX Index as an indication of its future performance. No assurance
can be given as to the level of the SPX Index on any observation date, including the final observation date.
SPX
Index Daily Closing Values
January 1, 2006 to May 25, 2016
|
|
* The black solid line
in the graph indicates the coupon barrier level of 1,254.324, which is 60% of the initial index value, and the red solid line
indicates the downside threshold level of 1,045.27, which is 50% of the initial index value.
|
Morgan
Stanley Finance LLC
Contingent Income Securities due May 30, 2031
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
S&P 500
®
Index
|
High
|
Low
|
Period End
|
2011
|
|
|
|
First Quarter
|
1,343.01
|
1,256.88
|
1,325.83
|
Second Quarter
|
1,363.61
|
1,265.42
|
1,320.64
|
Third Quarter
|
1,353.22
|
1,119.46
|
1,131.42
|
Fourth Quarter
|
1,285.09
|
1,099.23
|
1,257.60
|
2012
|
|
|
|
First Quarter
|
1,416.51
|
1,277.06
|
1,408.47
|
Second Quarter
|
1,419.04
|
1,278.04
|
1,362.16
|
Third Quarter
|
1,465.77
|
1,334.76
|
1,440.67
|
Fourth Quarter
|
1,461.40
|
1,353.33
|
1,426.19
|
2013
|
|
|
|
First Quarter
|
1,569.19
|
1,457.15
|
1,569.19
|
Second Quarter
|
1,669.16
|
1,541.61
|
1,606.28
|
Third Quarter
|
1,725.52
|
1,614.08
|
1,681.55
|
Fourth Quarter
|
1,848.36
|
1,655.45
|
1,848.36
|
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 (through May 25, 2016)
|
2,102.40
|
2,040.04
|
2,090.54
|
License Agreement between Morgan Stanley and Standard &
Poor’s Financial Services LLC
Standard & Poor’s
®
,” “S&P
®
,”
“S&P 500
®
,” “Standard & Poor’s 500” and “500” are trademarks of
Standard and Poor’s Financial Services LLC and have been licensed for use by S&P Dow Jones Indices LLC and Morgan Stanley.
See “S&P 500
®
Index” in the accompanying index supplement.
Morgan
Stanley Finance LLC
Contingent Income Securities due May 30, 2031
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
Additional Information About the Securities
Please read this information in conjunction with the summary
terms on the front cover of this pricing supplement.
Additional Provisions:
|
|
Day count convention:
|
30/360
|
Underlying index publishers:
|
With respect to the RTY Index, Russell Investments
With respect to the SPX Index, S&P Dow Jones Indices LLC
|
Denominations:
|
$1,000 per security and integral multiples thereof
|
Interest period:
|
Monthly
|
Book entry security or certificated security:
|
Book entry. The securities will be issued in the form of one or more fully registered global securities which will be deposited with, or on behalf of, the depositary and will be registered in the name of a nominee of the depositary. The depositary’s nominee will be the only registered holder of the securities. Your beneficial interest in the securities will be evidenced solely by entries on the books of the securities intermediary acting on your behalf as a direct or indirect participant in the depositary. In this pricing supplement, all references to payments or notices to you will mean payments or notices to the depositary, as the registered holder of the securities, for distribution to participants in accordance with the depositary’s procedures. For more information regarding the depositary and book entry notes, please read “The Depositary” in the accompanying prospectus supplement and “Forms of Securities—Global Securities—Registered Global Securities” in the accompanying prospectus.
|
Senior security or subordinated security:
|
Senior
|
Specified currency:
|
U.S. dollars
|
Record date:
|
One business day prior to the related scheduled coupon payment date;
provided
that any contingent monthly coupon payable at maturity shall be payable to the person to whom the payment at maturity shall be payable.
|
Minimum ticketing size:
|
$1,000 / 1 security
|
Tax considerations:
|
Prospective investors should note that the discussion under
the section called “United States Federal Taxation” in the accompanying prospectus supplement does not apply to the
securities issued under this document and is superseded by the following discussion.
The following is a general discussion of the material U.S. federal
income tax consequences and certain estate tax consequences of the ownership and disposition of the securities. This discussion
applies only to initial investors in the securities who:
·
purchase
the securities at their “issue price,” which will equal the first price at which a substantial amount of the securities
is sold to the public (not including bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters,
placement agents or wholesalers); and
·
hold
the securities as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”).
This discussion does not describe all of the tax consequences
that may be relevant to a holder in light of the holder’s particular circumstances or to holders subject to special rules,
such as:
·
certain
financial institutions;
·
insurance
companies;
·
certain
dealers and traders in securities or commodities;
·
investors
holding the securities as part of a “straddle,” wash sale, conversion transaction, integrated transaction or constructive
sale transaction;
·
U.S.
Holders (as defined below) whose functional currency is not the U.S. dollar;
·
partnerships
or other entities classified as partnerships for U.S. federal income tax purposes;
·
regulated
investment companies;
·
real
estate investment trusts; or
·
tax-exempt
entities, including “individual retirement accounts” or “Roth IRAs” as defined in Section 408 or 408A of
the Code, respectively.
If an entity that is classified as a partnership for U.S. federal
income tax purposes holds the securities, the U.S. federal income tax treatment of a partner will generally depend on the status
of the partner and the
|
Morgan
Stanley Finance LLC
Contingent Income Securities due May 30, 2031
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
activities of the partnership. If you are a partnership holding
the securities or a partner in such a partnership, you should consult your tax adviser as to the particular U.S. federal tax consequences
of holding and disposing of the securities to you.
As the law applicable to the U.S. federal income taxation of
instruments such as the securities is technical and complex, the discussion below necessarily represents only a general summary.
Moreover, the effect of any applicable state, local or non-U.S. tax laws is not discussed, nor are any alternative minimum tax
consequences or consequences resulting from the Medicare tax on investment income.
This discussion is based on the Code, administrative pronouncements,
judicial decisions and final, temporary and proposed Treasury regulations, all as of the date hereof, changes to any of which subsequent
to the date hereof may affect the tax consequences described herein. Persons considering the purchase of the securities should
consult their tax advisers with regard to the application of the U.S. federal income tax laws to their particular situations as
well as any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
General
Due to the absence of statutory, judicial or administrative authorities
that directly address the treatment of the securities or instruments that are similar to the securities for U.S. federal income
tax purposes, no assurance can be given that the IRS or a court will agree with the tax treatment described herein. We intend to
treat a security for U.S. federal income tax purposes as a single financial contract that provides for a coupon that will be treated
as gross income to you at the time received or accrued in accordance with your regular method of tax accounting. In the opinion
of our counsel, Davis Polk & Wardwell LLP, this treatment of the securities is reasonable under current law; however, our counsel
has advised us that it is unable to conclude affirmatively that this treatment is more likely than not to be upheld, and that alternative
treatments are possible.
You should consult your tax adviser regarding all aspects
of the U.S. federal tax consequences of an investment in the securities (including possible alternative treatments of the securities).
Unless otherwise stated, the following discussion is based on the treatment of each security as described in the previous paragraph.
Tax Consequences to U.S. Holders
This section applies to you only if you are a U.S. Holder. As
used herein, the term “U.S. Holder” means a beneficial owner of a security that is, for U.S. federal income tax purposes:
·
a
citizen or individual resident of the United States;
·
a
corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state
thereof or the District of Columbia; or
·
an
estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.
Tax Treatment of the Securities
Assuming the treatment of the securities as set forth above is
respected, the following U.S. federal income tax consequences should result.
Tax Basis
. A U.S. Holder’s tax basis in the securities
should equal the amount paid by the U.S. Holder to acquire the securities.
Tax Treatment of Coupon Payments
. Any coupon payment on
the securities should be taxable as ordinary income to a U.S. Holder at the time received or accrued, in accordance with the U.S.
Holder’s regular method of accounting for U.S. federal income tax purposes.
Sale, Exchange or Settlement of the Securities
. Upon a
sale, exchange or settlement of the securities, a U.S. Holder should recognize gain or loss equal to the difference between the
amount realized on the sale, exchange or settlement and the U.S. Holder’s tax basis in the securities sold, exchanged or
settled. For this purpose, the amount realized does not include any coupon paid at settlement and may not include sale proceeds
attributable to an accrued coupon, which may be treated as a coupon payment. Any such gain or loss recognized should be long-term
capital gain or loss if the U.S. Holder has held the securities for more
|
Morgan
Stanley Finance LLC
Contingent Income Securities due May 30, 2031
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
than one year at the time of the sale, exchange or settlement,
and should be short-term capital gain or loss otherwise. The ordinary income treatment of the coupon payments, in conjunction with
the capital loss treatment of any loss recognized upon the sale, exchange or settlement of the securities, could result in adverse
tax consequences to holders of the securities because the deductibility of capital losses is subject to limitations.
Possible Alternative Tax Treatments of an Investment in
the Securities
Due to the absence of authorities that directly address the proper
tax treatment of the securities, no assurance can be given that the IRS will accept, or that a court will uphold, the treatment
described above. In particular, the IRS could seek to analyze the U.S. federal income tax consequences of owning the securities
under Treasury regulations governing contingent payment debt instruments (the “Contingent Debt Regulations”). If the
IRS were successful in asserting that the Contingent Debt Regulations applied to the securities, the timing and character of income
thereon would be significantly affected. Among other things, a U.S. Holder would be required to accrue into income original
issue discount on the securities every year at a “comparable yield” determined at the time of their issuance, adjusted
upward or downward to reflect the difference, if any, between the actual and the projected amount of any contingent payments on
the securities. Furthermore, any gain realized by a U.S. Holder at maturity or upon a sale, exchange or other disposition of the
securities would be treated as ordinary income, and any loss realized would be treated as ordinary loss to the extent of the U.S.
Holder’s prior accruals of original issue discount and as capital loss thereafter. The risk that financial instruments providing
for buffers, triggers or similar downside protection features, such as the securities, would be recharacterized as debt is greater
than the risk of recharacterization for comparable financial instruments that do not have such features.
Other alternative federal income tax treatments of the securities
are possible, which, if applied, could significantly affect the timing and character of the income or loss with respect to the
securities. In 2007, the U.S. Treasury Department and the IRS released a notice requesting comments on the U.S. federal income
tax treatment of “prepaid forward contracts” and similar instruments. The notice focuses on whether to require holders
of “prepaid forward contracts” and similar instruments to accrue income over the term of their investment. It also
asks for comments on a number of related topics, including the character of income or loss with respect to these instruments; whether
short-term instruments should be subject to any such accrual regime; the relevance of factors such as the exchange–traded
status of the instruments and the nature of the underlying property to which the instruments are linked; whether these instruments
are or should be subject to the “constructive ownership” rule, which very generally can operate to recharacterize certain
long-term capital gain as ordinary income and impose an interest charge; and appropriate transition rules and effective dates.
While it is not clear whether instruments such as the securities would be viewed as similar to the prepaid forward contracts described
in the notice, any Treasury regulations or other guidance promulgated after consideration of these issues could materially and
adversely affect the tax consequences of an investment in the securities, possibly with retroactive effect. U.S. Holders should
consult their tax advisers regarding the U.S. federal income tax consequences of an investment in the securities, including possible
alternative treatments and the issues presented by this notice.
Backup Withholding and Information Reporting
Backup withholding may apply in respect of payments on the securities
and the payment of proceeds from a sale, exchange or other disposition of the securities, unless a U.S. Holder provides proof of
an applicable exemption or a correct taxpayer identification number and otherwise complies with applicable requirements of the
backup withholding rules. The amounts withheld under the backup withholding rules are not an additional tax and may be refunded,
or credited against the U.S. Holder’s U.S. federal income tax liability, provided that the required information is timely
furnished to the IRS. In addition, information returns will be filed with the IRS in connection with payments on the
securities and the payment of proceeds from a sale, exchange or other disposition of the securities, unless the U.S. Holder provides
proof of an applicable exemption from the information reporting rules.
Tax Consequences to Non-U.S. Holders
This section applies to you only if you are a Non-U.S. Holder.
As used herein, the term “Non-U.S. Holder” means a beneficial owner of a security that is for U.S. federal income tax
purposes:
·
an
individual who is classified as a nonresident alien;
·
a
foreign corporation; or
·
a
foreign estate or trust.
The term “Non-U.S. Holder” does
not include any of the following holders:
|
Morgan
Stanley Finance LLC
Contingent Income Securities due May 30, 2031
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
·
a
holder who is an individual present in the United States for 183 days or more in the taxable year of disposition and who is not
otherwise a resident of the United States for U.S. federal income tax purposes;
·
certain
former citizens or residents of the United States; or
·
a
holder for whom income or gain in respect of the securities is effectively connected with the conduct of a trade or business in
the United States.
Such holders should consult their tax advisers regarding the
U.S. federal income tax consequences of an investment in the securities.
Although significant aspects of the tax treatment of each security
are uncertain, we intend to withhold on any coupon paid to a Non-U.S. Holder generally at a rate of 30% or at a reduced rate specified
by an applicable income tax treaty under an “other income” or similar provision. We will not be required to pay any
additional amounts with respect to amounts withheld. In order to claim an exemption from, or a reduction in, the 30% withholding
tax, a Non-U.S. Holder of the securities must comply with certification requirements to establish that it is not a U.S. person
and is eligible for such an exemption or reduction under an applicable tax treaty. If you are a Non-U.S. Holder, you should consult
your tax adviser regarding the tax treatment of the securities, including the possibility of obtaining a refund of any withholding
tax and the certification requirement described above.
U.S. Federal Estate Tax
Individual Non-U.S. Holders and entities the property of which
is potentially includible in such an individual’s gross estate for U.S. federal estate tax purposes (for example, a trust
funded by such an individual and with respect to which the individual has retained certain interests or powers) should note that,
absent an applicable treaty exemption, the securities may be treated as U.S.-situs property subject to U.S. federal estate tax.
Prospective investors that are non-U.S. individuals, or are entities of the type described above, should consult their tax advisers
regarding the U.S. federal estate tax consequences of an investment in the securities.
Backup Withholding and Information Reporting
Information returns will be filed with the IRS in connection
with any coupon payment and may be filed with the IRS in connection with the payment at maturity on the securities and the payment
of proceeds from a sale, exchange or other disposition. A Non-U.S. Holder may be subject to backup withholding in respect of amounts
paid to the Non-U.S. Holder, unless such Non-U.S. Holder complies with certification procedures to establish that it is not a U.S.
person for U.S. federal income tax purposes or otherwise establishes an exemption. The amount of any backup withholding from a
payment to a Non-U.S. Holder will be allowed as a credit against the Non-U.S. Holder’s U.S. federal income tax liability
and may entitle the Non-U.S. Holder to a refund, provided that the required information is timely furnished to the IRS.
FATCA Legislation
Legislation commonly referred to as “FATCA” generally
imposes a withholding tax of 30% on payments to certain non-U.S. entities (including financial intermediaries) with respect to
certain financial instruments, unless various U.S. information reporting and due diligence requirements have been satisfied.
An intergovernmental agreement between the United States and the non-U.S. entity’s jurisdiction may modify these requirements.
This legislation generally applies to certain financial instruments that are treated as paying U.S.-source interest or other U.S.-source
“fixed or determinable annual or periodical” income (“FDAP income”). Withholding (if applicable) applies
to payments of U.S.-source FDAP income and, for dispositions after December 31, 2018, to payments of gross proceeds of the disposition
(including upon retirement) of certain financial instruments treated as providing for U.S.-source interest or dividends. While
the treatment of the securities is unclear, you should assume that any coupon payment with respect to the securities will be subject
to the FATCA rules. It is also possible in light of this uncertainty that an applicable withholding agent will treat gross proceeds
of a disposition (including upon retirement) of the securities after 2018 as being subject to the FATCA rules. If withholding applies
to the securities, we will not be required to pay any additional amounts with respect to amounts withheld. Both U.S. and Non-U.S.
Holders should consult their tax advisers regarding the potential application of FATCA to the securities.
The discussion in the preceding paragraphs, insofar as it
purports to describe provisions of U.S. federal income tax laws or legal conclusions with respect thereto, constitutes the full
opinion of Davis Polk & Wardwell LLP regarding the material U.S. federal tax consequences of an investment in the securities.
|
Morgan
Stanley Finance LLC
Contingent Income Securities due May 30, 2031
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
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 monthly coupon, if any,
and payment at maturity shall be made by the calculation agent and shall be rounded to the nearest one hundred-thousandth, with
five one-millionths rounded upward (e.g., .876545 would be rounded to .87655); all dollar amounts related to determination of the
amount of cash payable per stated principal amount, if any, shall be rounded to the nearest ten-thousandth, with five one hundred-thousandths
rounded upward (e.g., .76545 would be rounded up to .7655); and all dollar amounts paid on the aggregate principal amount of the
securities shall be rounded to the nearest cent, with one-half cent rounded upward.
Because the calculation agent is our affiliate, the economic
interests of the calculation agent and its affiliates may be adverse to your interests as an investor in the securities, including
with respect to certain determinations and judgments that the calculation agent must make in determining the payment that you will
receive, if any, on each coupon payment date and at maturity or whether a market disruption event has occurred. See “Market
disruption event” and “Discontinuance of an underlying index; alteration of method of calculation” below. MS
& Co. is obligated to carry out its duties and functions as calculation agent in good faith and using its reasonable judgment.
|
Business day:
|
Any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in The City of New York.
|
Index business day:
|
With respect to each underlying 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.
|
Index closing value:
|
With respect to the RTY Index, index closing value on any index
business day means 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.
With respect to the SPX Index, closing value on any index business
day means 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.
|
Market disruption event:
|
With respect to each underlying index, market disruption event
means:
(i) the occurrence or existence
of any of:
(a) a suspension, absence or material limitation of
trading of securities then constituting 20 percent or more of the value of 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)
|
Morgan
Stanley Finance LLC
Contingent Income Securities due May 30, 2031
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
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 an underlying 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 an underlying 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 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.
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Relevant exchange:
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With respect to each 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.
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Postponement of observation dates:
|
The observation dates are subject to postponement due to non-index
business days or certain market disruption events, as described in the following paragraph.
If any scheduled observation date, including the final observation
date, is not an index business day with respect to any underlying index or if there is a market disruption event on such day with
respect to any underlying index, the relevant observation date solely with respect to that affected underlying index shall be the
next succeeding index business day with respect to that underlying index on which there is no market disruption event with respect
to that underlying index;
provided
that if a market disruption event with respect to that underlying index has occurred
on each of the five index business days with respect to that underlying index immediately succeeding any of the scheduled observation
dates, then (i) such fifth succeeding index business day shall be deemed to be the relevant observation date with respect to that
affected underlying index, notwithstanding the occurrence of a market disruption event with respect to that underlying index on
such day and (ii) with respect to any such fifth index business day on which a market disruption event occurs with respect to that
underlying index, the calculation agent shall determine the index closing value on such fifth index business day in accordance
with the formula for and method of calculating that underlying index last in effect prior to the commencement of the market disruption
event, using the closing price (or, if trading in the relevant securities has been materially suspended or materially limited,
its good faith estimate of the closing price that would have prevailed but for such suspension or limitation) at the close of the
principal trading session of the relevant exchange on such index business day of each security most recently constituting that
affected underlying index without any rebalancing or substitution of such securities following the commencement of the market disruption
event.
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Postponement of coupon payment dates and maturity
date:
|
If any scheduled coupon payment date is not a business day, that monthly coupon, if any, shall be paid on the next succeeding business day;
provided
that the contingent monthly coupon, if any, with respect to the final observation date shall be paid on the maturity date;
provided further
that if, due to a market disruption event or otherwise, any observation date with respect to either underlying index is postponed so that it falls less than two business days prior to the scheduled coupon payment date or maturity date, as applicable, the coupon payment date or maturity date, as applicable, shall be postponed to the second business day following the observation date as postponed, by which date the index closing value of each underlying index has been determined. In any of these cases, no adjustment shall be made to any monthly coupon payment made on that postponed date.
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Discontinuance of an underlying index; alteration
of method of calculation:
|
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
|
Morgan
Stanley Finance LLC
Contingent Income Securities due May 30, 2031
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
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 will be made by the calculation agent to the relevant initial index value, coupon barrier level and downside
threshold level.
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, any observation 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 underlying 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
index 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 underlying 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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Alternate exchange calculation in case of
an event of default:
|
If an event of default with respect to the securities shall have
occurred and be continuing, the amount declared due and payable upon any acceleration of the securities (the “Acceleration
Amount”) will be an amount, determined by the calculation agent in its sole discretion, that is equal to the cost of having
a qualified financial institution, of the kind and selected as described below, expressly assume all our payment and other obligations
with respect to the securities as of that day and as if no default or acceleration had occurred, or to undertake other obligations
providing substantially equivalent economic value to you with respect to the securities. That cost will equal:
·
the
lowest amount that a qualified financial institution would charge to effect this assumption or undertaking, plus
·
the
reasonable expenses, including reasonable attorneys’ fees, incurred by the holders of the securities in preparing any documentation
necessary for this assumption or undertaking.
During the default quotation period for the securities, which
we describe below, the holders of the securities and/or we may request a qualified financial institution to provide a quotation
of the amount it would charge to effect this assumption or undertaking. If either party obtains a quotation, it must notify the
other party in writing of the quotation. The amount referred to in the first bullet point above will equal the lowest—or,
if there is only one, the only—quotation obtained, and as to which notice is so given, during the default quotation period.
With respect to any quotation, however, the party not obtaining the quotation may object, on reasonable and significant grounds,
to the assumption or undertaking by the qualified financial institution providing the quotation and notify the other party in writing
of those grounds within two business days after the last day of the default quotation period, in which case that quotation will
be disregarded in determining the Acceleration Amount.
Notwithstanding the foregoing, if a voluntary or involuntary
liquidation, bankruptcy or insolvency of, or any analogous proceeding is filed with respect to MSFL or Morgan Stanley, then depending
on applicable
|
Morgan
Stanley Finance LLC
Contingent Income Securities due May 30, 2031
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
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 shall, or shall cause the calculation agent to, provide written notice to the trustee at
its New York office, on which notice the trustee may conclusively rely, and to the depositary of the Acceleration Amount and the
aggregate cash amount due, if any, with respect to the securities as promptly as possible and in no event later than two business
days after the date of such acceleration.
Default quotation period
The default quotation period is the period beginning on the day
the Acceleration Amount first becomes due and ending on the third business day after that day, unless:
·
no
quotation of the kind referred to above is obtained, or
·
every
quotation of that kind obtained is objected to within five business days after the due date as described above.
If either of these two events occurs, the default quotation period
will continue until the third business day after the first business day on which prompt notice of a quotation is given as described
above. If that quotation is objected to as described above within five business days after that first business day, however, the
default quotation period will continue as described in the prior sentence and this sentence.
In any event, if the default quotation period and the subsequent
two business day objection period have not ended before the final observation 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.
|
Use of proceeds and hedging:
|
The proceeds from the sale of the securities will be used by
us for general corporate purposes. We will receive, in aggregate, $1,000 per security issued, because, when we enter into hedging
transactions in order to meet our obligations under the securities, our hedging counterparty will reimburse the cost of the agent’s
commissions. The costs of the securities borne by you and described beginning on page 3 above comprise the agent’s commissions
and the cost of issuing, structuring and hedging the securities. See also “Use of Proceeds” in the accompanying prospectus.
On or prior to the pricing date, we hedged our anticipated exposure
in connection with the securities by entering into hedging transactions with our affiliates and/or third party dealers. We expect
our hedging counterparties to have taken positions in the stocks constituting the underlying indices and in futures and/or options
contracts on the underlying indices or the component stocks of the underlying indices listed on major securities markets. Such
purchase activity could have increased the initial index value of an underlying index, and, as a result, could have increased (i)
the coupon barrier level for such underlying index, which is the level at or above which such underlying index must close on each
observation date in order for you to earn a contingent monthly coupon (depending also on the performance of the other underlying
index), and (ii) the downside threshold level for such underlying index, which is the level at or above which the underlying index
must close on the final observation date so that you are not exposed to the negative performance of the worst performing underlying
index at maturity (depending also on the performance of the other underlying index). These entities may be unwinding or adjusting
hedge positions during the term of the securities, and the hedging strategy may involve greater and more frequent dynamic adjustments
to the hedge as the final observation date approaches. Additionally, our hedging activities, as well as our other trading activities,
during the term of the securities could potentially affect the value of such underlying index on the observation dates, and, accordingly,
whether we pay a contingent monthly coupon on the securities and the amount of cash you receive at maturity, if any (depending
also on the performance of the other underlying index).
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Benefit plan investor considerations:
|
Each fiduciary of a pension, profit-sharing or other employee
benefit plan subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (a “Plan”),
should consider the fiduciary standards of ERISA in the context of the Plan’s particular circumstances before authorizing
an investment in the securities.
|
Morgan
Stanley Finance LLC
Contingent Income Securities due May 30, 2031
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
Accordingly, among other factors, the fiduciary should consider
whether the investment would satisfy the prudence and diversification requirements of ERISA and would be consistent with the documents
and instruments governing the Plan.
In addition, we and certain of our affiliates, including MS &
Co., may each be considered a “party in interest” within the meaning of ERISA, or a “disqualified person”
within the meaning of the Internal Revenue Code of 1986, as amended (the “Code”), with respect to many Plans, as well
as many individual retirement accounts and Keogh plans (also “Plans”). ERISA Section 406 and Code Section 4975 generally
prohibit transactions between Plans and parties in interest or disqualified persons. Prohibited transactions within the meaning
of ERISA or the Code would likely arise, for example, if the securities are acquired by or with the assets of a Plan with respect
to which MS & Co. or any of its affiliates is a service provider or other party in interest, unless the securities are acquired
pursuant to an exemption from the “prohibited transaction” rules. A violation of these “prohibited transaction”
rules could result in an excise tax or other liabilities under ERISA and/or Section 4975 of the Code for such persons, unless exemptive
relief is available under an applicable statutory or administrative exemption.
The U.S. Department of Labor has issued five prohibited transaction
class exemptions (“PTCEs”) that may provide exemptive relief for direct or indirect prohibited transactions resulting
from the purchase or holding of the securities. Those class exemptions are PTCE 96-23 (for certain transactions determined by in-house
asset managers), PTCE 95-60 (for certain transactions involving insurance company general accounts), PTCE 91-38 (for certain transactions
involving bank collective investment funds), PTCE 90-1 (for certain transactions involving insurance company separate accounts)
and PTCE 84-14 (for certain transactions determined by independent qualified professional asset managers). In addition, ERISA Section
408(b)(17) and Code Section 4975(d)(20) may provide an exemption for the purchase and sale of securities and the related lending
transactions, provided that neither the issuer of the securities nor any of its affiliates has or exercises any discretionary authority
or control or renders any investment advice with respect to the assets of the Plan involved in the transaction and provided further
that the Plan pays no more, and receives no less, than “adequate consideration” in connection with the transaction
(the so-called “service provider” exemption). There can be no assurance that any of these class or statutory exemptions
will be available with respect to transactions involving the securities.
Because we may be considered a party in interest with respect
to many Plans, the securities may not be purchased, held or disposed of by any Plan, any entity whose underlying assets include
“plan assets” by reason of any Plan’s investment in the entity (a “Plan Asset Entity”) or any person
investing “plan assets” of any Plan, unless such purchase, holding or disposition is eligible for exemptive relief,
including relief available under PTCEs 96-23, 95-60, 91-38, 90-1, 84-14 or the service provider exemption or such purchase, holding
or disposition is otherwise not prohibited. Any purchaser, including any fiduciary purchasing on behalf of a Plan, transferee or
holder of the securities will be deemed to have represented, in its corporate and its fiduciary capacity, by its purchase and holding
of the securities that either (a) it is not a Plan or a Plan Asset Entity and is not purchasing such securities on behalf of or
with “plan assets” of any Plan or with any assets of a governmental, non-U.S. or church plan that is subject to any
federal, state, local or non-U.S. law that is substantially similar to the provisions of Section 406 of ERISA or Section 4975 of
the Code (“Similar Law”) or (b) its purchase, holding and disposition are eligible for exemptive relief or such purchase,
holding and disposition are not prohibited by ERISA or Section 4975 of the Code or any Similar Law.
Due to the complexity of these rules and the penalties that may
be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries or other
persons considering purchasing the securities on behalf of or with “plan assets” of any Plan consult with their counsel
regarding the availability of exemptive relief.
The securities are contractual financial instruments. The financial
exposure provided by the securities is not a substitute or proxy for, and is not intended as a substitute or proxy for, individualized
investment management or advice for the benefit of any purchaser or holder of the securities. The securities have not been designed
and will not be administered in a manner intended to reflect the individualized needs and objectives of any purchaser or holder
of the securities.
Each purchaser or holder of any securities acknowledges and agrees
that:
|
|
(i)
|
the purchaser or holder or its fiduciary has made and shall make all investment decisions for the purchaser or holder and the purchaser or holder has not relied and shall not rely in any way upon us or our affiliates to act as a fiduciary or adviser of the purchaser or holder with respect to (A) the design and terms of the securities, (B) the purchaser or holder’s investment in the securities, or (C) the exercise of or failure to exercise any rights we have under or with respect to the securities;
|
|
(ii)
|
we and our affiliates have acted and will act solely for our own account in connection with (A) all transactions relating to the securities and (B) all hedging transactions in connection with our
|
Morgan
Stanley Finance LLC
Contingent Income Securities due May 30, 2031
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
|
obligations under the securities;
|
|
(iii)
|
any and all assets and positions relating to hedging transactions by us or our affiliates are assets and positions of those entities and are not assets and positions held for the benefit of the purchaser or holder;
|
|
(iv)
|
our interests are adverse to the interests of the purchaser or holder; and
|
|
(v)
|
neither we nor any of our affiliates is a fiduciary or adviser of the purchaser or holder in connection with any such assets, positions or transactions, and any information that we or any of our affiliates may provide is not intended to be impartial investment advice.
|
|
Each purchaser and holder of the securities has exclusive responsibility
for ensuring that its purchase, holding and disposition of the securities do not violate the prohibited transaction rules of ERISA
or the Code or any Similar Law. The sale of any securities to any Plan or plan subject to Similar Law is in no respect a representation
by us or any of our affiliates or representatives that such an investment meets all relevant legal requirements with respect to
investments by plans generally or any particular plan, or that such an investment is appropriate for plans generally or any particular
plan.
However, individual retirement accounts, individual retirement
annuities and Keogh plans, as well as employee benefit plans that permit participants to direct the investment of their accounts,
will not be permitted to purchase or hold the securities if the account, plan or annuity is for the benefit of an employee of Morgan
Stanley or Morgan Stanley Wealth Management or a family member and the employee receives any compensation (such as, for example,
an addition to bonus) based on the purchase of the securities by the account, plan or annuity.
|
Additional considerations:
|
Client accounts over which Morgan Stanley, Morgan Stanley Wealth Management or any of their respective subsidiaries have investment discretion are not permitted to purchase the securities, either directly or indirectly.
|
Supplemental information regarding plan of distribution; conflicts of interest:
|
MS & Co. will act as the agent for this offering. The agent,
acting as principal for its own account, has agreed to purchase, and we have agreed to sell, the aggregate principal amount of
securities set forth on the cover of this pricing supplement. The agent proposes initially to offer the securities directly to
the public at the public offering price set forth on the cover page of this pricing supplement. Selected dealers, which may include
our affiliates, and their financial advisors will collectively receive from the agent, a fixed sales commission of $35 for each
security they sell;
provided
that dealers selling to investors purchasing the securities in fee-based advisory accounts
will receive a sales commission of $5 per security.
MS & Co. is an affiliate of MSFL and a wholly owned subsidiary
of Morgan Stanley, and it and other affiliates of ours expect to make a profit by selling, structuring and, when applicable, hedging
the securities.
MS & Co. will conduct this offering in compliance with the
requirements of FINRA Rule 5121 of the Financial Industry Regulatory Authority, Inc., which is commonly referred to as FINRA, regarding
a FINRA member firm’s distribution of the securities of an affiliate and related conflicts of interest. MS & Co. or any
of our other affiliates may not make sales in this offering to any discretionary account.
In order to facilitate the offering of the securities, the agent
may engage in transactions that stabilize, maintain or otherwise affect the price of the securities. Specifically, the agent may
sell more securities than it is obligated to purchase in connection with the offering, creating a naked short position in the securities,
for its own account. The agent must close out any naked short position by purchasing the securities in the open market. A naked
short position is more likely to be created if the agent is concerned that there may be downward pressure on the price of the securities
in the open market after pricing that could adversely affect investors who purchase in the offering. As an additional means of
facilitating the offering, the agent may bid for, and purchase, the securities or the securities underlying the underlying index
in the open market to stabilize the price of the securities. Any of these activities may raise or maintain the market price of
the securities above independent market levels or prevent or retard a decline in the market price of the securities. The agent
is not required to engage in these activities, and may end any of these activities at any time. An affiliate of the agent has entered
into a hedging transaction with us in connection with this offering of securities. See “Plan of Distribution (Conflicts of
Interest)” in the accompanying prospectus supplement and “Use of Proceeds and Hedging” above.
|
Validity of the securities:
|
In the opinion of Davis Polk & Wardwell LLP, as special counsel to MSFL and Morgan Stanley, when the securities offered by this pricing supplement have been executed and issued by MSFL, authenticated by the trustee pursuant to the MSFL Senior Debt Indenture (as defined in the accompanying prospectus) and delivered against payment as contemplated herein, such securities will be valid and binding obligations of MSFL and the related guarantee will be a valid and binding obligation of Morgan Stanley, enforceable in
|
Morgan
Stanley Finance LLC
Contingent Income Securities due May 30, 2031
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
|
accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, concepts of reasonableness and equitable principles of general applicability (including, without limitation, concepts of good faith, fair dealing and the lack of bad faith),
provided
that such counsel expresses no opinion as to (i) the effect of fraudulent conveyance, fraudulent transfer or similar provision of applicable law on the conclusions expressed above and (ii) any provision of the MSFL Senior Debt Indenture that purports to avoid the effect of fraudulent conveyance, fraudulent transfer or similar provision of applicable law by limiting the amount of Morgan Stanley’s obligation under the related guarantee. This opinion is given as of the date hereof and is limited to the laws of the State of New York, the General Corporation Law of the State of Delaware and the Delaware Limited Liability Company Act. In addition, this opinion is subject to customary assumptions about the trustee’s authorization, execution and delivery of the MSFL Senior Debt Indenture and its authentication of the securities and the validity, binding nature and enforceability of the MSFL Senior Debt Indenture with respect to the trustee, all as stated in the letter of such counsel dated February 16, 2016, which is Exhibit 5-a to Post-Effective Amendment No. 1 to the Registration Statement on Form S-3 filed by Morgan Stanley on February 16, 2016.
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Selling restrictions:
|
General
No action has been or will be taken by us, the agent or any dealer
that would permit a public offering of the securities or possession or distribution of this pricing supplement or the accompanying
prospectus supplement, index supplement or prospectus in any jurisdiction, other than the United States, where action for that
purpose is required. No offers, sales or deliveries of the securities, or distribution of this pricing supplement or the accompanying
prospectus supplement, index supplement or prospectus or any other offering material relating to the securities, may be made in
or from any jurisdiction except in circumstances which will result in compliance with any applicable laws and regulations and will
not impose any obligations on us, the agent or any dealer.
The agent has represented and agreed, and each dealer through
which we may offer the securities has represented and agreed, that it (i) will comply with all applicable laws and regulations
in force in each non-U.S. jurisdiction in which it purchases, offers, sells or delivers the securities or possesses or distributes
this pricing supplement and the accompanying prospectus supplement, index supplement and prospectus and (ii) will obtain any consent,
approval or permission required by it for the purchase, offer or sale by it of the securities under the laws and regulations in
force in each non-U.S. jurisdiction to which it is subject or in which it makes purchases, offers or sales of the securities. We
shall not have responsibility for the agent’s or any dealer’s compliance with the applicable laws and regulations or
obtaining any required consent, approval or permission.
In addition to the selling restrictions set forth in “Plan
of Distribution (Conflicts of Interest)” in the accompanying prospectus supplement, the following selling restrictions also
apply to the securities:
Brazil
The securities have not been and will not be registered with
the Comissão de Valores Mobiliários (The Brazilian Securities Commission). The securities may not be offered or sold
in the Federative Republic of Brazil except in circumstances which do not constitute a public offering or distribution under Brazilian
laws and regulations.
Chile
The securities have not been registered with the Superintendencia
de Valores y Seguros in Chile and may not be offered or sold publicly in Chile. No offer, sales or deliveries of the securities
or distribution of this pricing supplement or the accompanying prospectus supplement, index supplement or prospectus, may be made
in or from Chile except in circumstances which will result in compliance with any applicable Chilean laws and regulations.
Mexico
The securities have not been registered with the National Registry
of Securities maintained by the Mexican National Banking and Securities Commission and may not be offered or sold publicly in Mexico.
This pricing supplement, the accompanying prospectus supplement, the accompanying index supplement and the accompanying prospectus
may not be publicly distributed in Mexico.
|
Where you can find more information:
|
MSFL and Morgan Stanley have filed a registration statement (including
a prospectus, as supplemented by the prospectus supplement and the index supplement) with the Securities and Exchange Commission,
or SEC, for the offering to which this communication relates. You should read the prospectus in that registration statement, the
prospectus supplement, the index supplement and any other documents relating to this offering that MSFL and Morgan Stanley have
filed with the SEC for more complete information about MSFL, Morgan Stanley and this offering. You may get these documents without
cost by visiting EDGAR on the SEC web site at
.
www.sec.gov. Alternatively, MSFL, Morgan Stanley,
any underwriter or any dealer participating in
|
Morgan
Stanley Finance LLC
Contingent Income Securities due May 30, 2031
Payments on the Securities Based on the Worst Performing of the Russell 2000
®
Index and the S&P 500
®
Index
Principal at Risk Securities
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