Investment Summary
Dual Directional Trigger Participation Securities
Principal at Risk Securities
The Dual Directional Trigger Participation Securities Based on the Value of the Worst Performing of the Russell 2000® Index and the NASDAQ-100 Index® due May 4, 2023 (the “securities”) can be used:
■To gain exposure to the worst performing of two U.S. equity indices, subject to the maximum upside payment at maturity
■To obtain a positive return for a limited range of negative performance of the worst performing underlying index
■To provide limited protection against a loss of principal in the event of a decline of either underlying index as of the valuation date but only if the final index value of each underlying index is greater than or equal to its respective trigger level
If the final index value of either underlying index is less than its respective trigger level, the securities are exposed on a 1:1 basis to the percentage decline in the worst performing underlying index over the term of the securities. Accordingly, investors may lose their entire investment in the securities.
|
|
Maturity:
|
Approximately 2 years
|
Participation rate:
|
100% (applicable only if the final index value of each underlying index is greater than the respective initial index value)
|
Maximum upside payment at maturity:
|
$1,280 per security (128% of the stated principal amount)
|
Trigger level:
|
With respect to each underlying index, 75% of the respective initial index value
|
Coupon:
|
None
|
Listing:
|
The securities will not be listed on any securities exchange
|
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 $972.30.
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 participation rate, the trigger levels and the maximum upside payment at maturity, we use an internal funding rate, which is likely to be lower than our secondary market credit spreads and therefore advantageous to us. If the issuing, selling, structuring and hedging costs borne by you were lower or if the internal funding rate were higher, one or more of the economic terms of the 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 6 months following the issue date, to the extent that MS & Co. may buy or sell the securities in the secondary market, absent changes in market conditions, including those related to the underlying indices, and to our secondary market credit spreads, it would do so based on values higher than the estimated value. We expect that those higher values will also be reflected in your brokerage account statements.
MS & Co. may, but is not obligated to, make a market in the securities, and, if it once chooses to make a market, may cease doing so at any time.