September 2022
Pricing Supplement No. 6,143
Registration Statement Nos. 333-250103;
333-250103-01
Dated September 30, 2022
Filed pursuant to Rule 424(b)(2)
Morgan
Stanley Finance LLC
Structured
Investments
Opportunities in
U.S. Equities
Market
Linked Securities—Auto-Callable with Contingent Coupon and Contingent Downside
Principal
at Risk Securities Linked to the Lowest Performing of the Energy Select Sector SPDR® Fund, the Technology Select Sector
SPDR® Fund and the Health Care Select Sector SPDR® Fund due September 29, 2025
Fully and
Unconditionally Guaranteed by Morgan Stanley
§
Linked to the lowest performing of the Energy Select Sector SPDR® Fund, the Technology Select Sector SPDR®
Fund and the Health Care Select Sector SPDR® Fund (each referred to as an “underlying” or a “Fund”)
§
The securities are unsecured obligations of Morgan Stanley Finance LLC (“MSFL”) and are fully and unconditionally guaranteed
by Morgan Stanley. Unlike ordinary debt securities, the securities do not guarantee the payment of interest, do not guarantee the repayment
of principal and are subject to potential automatic call prior to the maturity date upon the terms described below. The securities have
the terms described in the accompanying product supplement for principal at risk securities, index supplement and prospectus, as supplemented
or modified by this document.
§
Contingent Coupon. The securities will pay a contingent coupon on a quarterly basis until the earlier of the maturity date or automatic
call if, and only if, the closing price of the lowest performing underlying on the calculation day for that quarter is greater than or
equal to its coupon threshold level. However, if the closing price of the lowest performing underlying on a calculation day is less than
its coupon threshold price, you will not receive any contingent coupon for the relevant quarter. If the closing price of the lowest performing
underlying is less than its coupon threshold price on every calculation day, you will not receive any contingent coupons throughout the
entire term of the securities. The coupon threshold price for each underlying is equal to 70% of its starting price. The contingent coupon
rate is 18% per annum.
§
Automatic Call. Beginning after six months, the securities will be automatically called if the closing price of each underlying
on any of the calculation days (other than the final calculation day) is greater than or equal to its respective starting price for a
cash payment equal to the face amount plus a final contingent coupon payment. No further payments will be made on the securities
once they have been called.
§
Potential Loss of Principal. If the securities are not automatically called, you will receive the face amount at maturity if, and
only if, the closing price of each underlying on the final calculation day is greater than or equal to its respective downside threshold
price. If the closing price of any underlying on the final calculation day is less than its respective downside threshold price, investors
will be fully exposed to the decline in the lowest performing underlying on a 1-to-1 basis, and will receive a maturity payment amount
that is less than 70% of the face amount of the securities and could be zero.
§
Accordingly, investors in the securities must be willing to accept the risk of losing their entire initial investment and also the
risk of not receiving any contingent coupon payments throughout the entire term of the securities.
§
Because all payments on the securities are based on the lowest performing underlying, a decline beyond the respective coupon threshold
price or respective downside threshold price of any underlying will result in no contingent coupon payments or a significant loss of your
investment, as applicable, even if the other underlyings have appreciated or have not declined as much.
§
The securities are for investors who are willing to risk their principal based on the lowest performing of three underlyings and who seek
an opportunity to earn interest at a potentially above-market rate in exchange for the risk of receiving no contingent coupon payments
over the entire term of the securities.
§
Investors will not participate in any appreciation of any underlying.
§
The securities are notes issued as part of MSFL’s Series A Global Medium-Term Notes program
§
All payments are subject to our credit risk. If we default on our obligations, you could lose some or all of your investment
§
These securities are not secured obligations and you will not have any security interest in, or otherwise have any access to, any securities
included in any of the underlyings. |
The
current estimated value of the securities is $943.60 per security. The estimated value of the securities is determined using our own
pricing and valuation models, market inputs and assumptions relating to the underlyings, instruments based on the underlyings, volatility
and other factors including current and expected interest rates, as well as an interest rate related to our secondary market credit spread,
which is the implied interest rate at which our conventional fixed rate debt trades in the secondary market. See “Estimated Value
of the Securities” on page 4.
The
securities have complex features and investing in the securities involves risks not associated with an investment in ordinary debt securities.
See “Risk Factors” beginning on page 11. All payments on the securities are subject to our credit risk.
The
Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if
this document or the accompanying product supplement, index supplement and prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
The
securities are not deposits or savings accounts and are not insured by the Federal Deposit Insurance Corporation or any other governmental
agency or instrumentality, nor are they obligations of, or guaranteed by, a bank.
You
should read this document together with the related product supplement for principal at risk securities, 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.
As
used in this document, “we,” “us” and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and
MSFL collectively, as the context requires.
Commissions
and offering price: |
Price
to public |
Agent’s
commissions(1)(2) |
Proceeds
to us(3) |
Per
security |
$1,000 |
$21.25 |
$978.75 |
Total |
$617,000 |
$13,111.25 |
$603,888.75 |
| (1) | Wells
Fargo Securities, LLC, an agent for this offering, will receive a commission of up to $21.25
for each security it sells. Dealers, including Wells Fargo Advisors (“WFA”),
may receive a selling concession of up to $15.00 per security, and WFA may receive a distribution
expense fee of $0.75 for each security sold by WFA. See “Supplemental information concerning
plan of distribution; conflicts of interest.” |
| (2) | In
respect of certain securities sold in this offering, we may pay a fee of up to $1.00 per
security to selected securities dealers in consideration for marketing and other services
in connection with the distribution of the securities to other securities dealers. |
| (3) | See
“Use of Proceeds and Hedging” in the accompanying product supplement. |
Product
Supplement for Principal at Risk Securities dated June 30, 2022 Index
Supplement dated November 16, 2020
Prospectus
dated November 16, 2020
Morgan Stanley |
Wells Fargo Securities |
Morgan Stanley Finance LLC
Market Linked Securities — Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Energy Select Sector SPDR® Fund, the Technology Select Sector SPDR® Fund and the Health Care Select Sector SPDR® Fund due September 29, 2025
Issuer: |
Morgan
Stanley Finance LLC |
Guarantor: |
Morgan
Stanley |
Maturity
date: |
September
29, 2025, subject to postponement if the final calculation day is postponed |
Underlyings: |
Energy
Select Sector SPDR® Fund (the “XLE Shares”), Technology Select Sector SPDR® Fund (the “XLK
Shares”) and the Health Care Select Sector SPDR® Fund (the “XLV Shares”) |
Share
underlying indices: |
With respect
to the XLE Shares, the S&P® Energy Select Sector Index
With respect
to the XLK Shares, the S&P® Technology Select Sector Index
With respect
to the XLV Shares, the S&P® Health Care Select Sector Index |
Share
underlying index publisher: |
With
respect to each of the underlyings, S&P Dow Jones Indices LLC, or any successor thereof |
Contingent
coupon payment: |
On
each contingent coupon payment date, you will receive a contingent coupon payment at a per annum rate equal to the contingent coupon
rate if, and only if, the closing price of the lowest performing underlying on the related calculation day is greater than
or equal to its coupon threshold price. Each “contingent coupon payment”, if any, will be calculated per security as
follows: ($1,000 × contingent coupon rate)/4. Any contingent coupon payment will be rounded to the nearest cent, with one-half
cent rounded upward.
If
the closing price of the lowest performing underlying on any calculation day is less than its coupon threshold price, you will not
receive any contingent coupon payment on the related contingent coupon payment date. If the closing price of the lowest performing
underlying is less than its coupon threshold price on all quarterly calculation days, you will not receive any contingent coupon
payments over the term of the securities. |
Contingent
coupon payment dates: |
Three
business days after the applicable calculation day; provided that the contingent coupon payment date for the final calculation day
is the maturity date.* |
Contingent
coupon rate: |
The
“contingent coupon rate” is 18% per annum. |
Automatic
call: |
The
securities are not subject to automatic call until approximately six months after the original issue date. Following this 6-month
non-call period, if, on any calculation day (other than the final calculation day), beginning in March 2023, the closing price of
each underlying is greater than or equal to its respective starting price, the securities will be automatically called for a cash
payment per security equal to the face amount plus a final contingent coupon payment on the related call settlement date.
The
securities will not be automatically called on any call settlement date if the closing price of any underlying is below its respective
starting price on the related calculation day.
Any
positive return on the securities will be limited to the contingent coupon payments, if any, even if the closing price of any underlying
on the applicable calculation day significantly exceeds its starting price. You will not participate in any appreciation of any underlying. |
Calculation
days: |
Quarterly,
on the 24th of each March, June, September and December, commencing in December 2022 and ending on the final calculation
day. We also refer to the September 2025 calculation day as the final calculation day.** |
Call
settlement date: |
Three
business days after the applicable calculation day.** |
Maturity payment amount: |
If
the securities are not automatically called, you will be entitled to receive on the maturity date a cash payment per security equal
to the maturity payment amount (in addition to the final contingent coupon payment, if payable). The “maturity payment amount”
per security will equal:
·
if the closing price of each underlying on the final calculation day is greater than or equal to its respective downside
threshold price:
$1,000;
or
·
if the closing price of any underlying on the final calculation day is less than its |
Morgan Stanley Finance LLC
Market Linked Securities — Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Energy Select Sector SPDR® Fund, the Technology Select Sector SPDR® Fund and the Health Care Select Sector SPDR® Fund due September 29, 2025
|
respective
downside threshold price:
$1,000
× performance factor of the lowest performing underlying on the final calculation day
Under
these circumstances, you will lose more than 30%, and possibly all, of your investment. |
Lowest
performing underlying: |
On
any calculation day, the underlying with the lowest performance factor on that calculation day |
Performance
factor: |
With
respect to each underlying, on any calculation day, the closing price on such calculation day divided by the starting price |
Closing
price: |
The
“closing price” for one share of each Fund (or one unit of any other security for which a closing price must be determined)
on any trading day means the product of (i) the official closing price on such day published by the principal United States securities
exchange registered under the Securities Exchange Act of 1934, as amended, on which such Fund (or any such other security) is listed
or admitted to trading, and (ii) the adjustment factor applicable to such Fund on such trading day. |
Starting
price: |
With
respect to the Energy Select Sector SPDR® Fund: $72.02, its closing price on the pricing date.
With
respect to the Technology Select Sector SPDR® Fund: $118.78, its closing price on the pricing date.
With
respect to the Health Care Select Sector SPDR® Fund: $121.11, its closing price on the pricing date. |
Ending
price: |
With
respect to each Fund, the respective closing price on the final calculation day. |
Coupon
threshold price: |
With respect
to the Energy Select Sector SPDR® Fund: $50.414, which is equal to 70% of its starting price.
With respect
to the Technology Select Sector SPDR® Fund: $83.146, which is equal to 70% of its starting price.
With respect
to the Health Care Select Sector SPDR® Fund: $84.777, which is equal to 70% of its starting price. |
Downside
threshold price: |
With respect
to the Energy Select Sector SPDR® Fund: $50.414, which is equal to 70% of its starting price.
With respect
to the Technology Select Sector SPDR® Fund: $83.146, which is equal to 70% of its starting price.
With respect
to the Health Care Select Sector SPDR® Fund: $84.777, which is equal to 70% of its starting price |
Face
amount: |
$1,000
per security. References in this document to a “security” are to a security with a face amount of $1,000. |
Pricing
date: |
September
30, 2022 |
Original
issue date: |
October
5, 2022 (3 business days after the pricing date) |
Adjustment
factor: |
The
“adjustment factor” means, with respect to each Fund, 1.0, subject to adjustment in the event of certain events
affecting such Fund. See “Additional Terms of the Securities—Anti-dilution Adjustments Relating to a Fund; Alternate
Calculation” below. |
CUSIP
/ ISIN: |
61774FFX5
/ US61774FFX50 |
Listing: |
The
securities will not be listed on any securities exchange. |
Agents: |
Morgan
Stanley & Co. LLC (“MS & Co.”), an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley, and Wells
Fargo Securities, LLC (“WFS”). See “Additional Information About the Securities—Supplemental information
regarding plan of distribution; conflicts of interest.” |
* Subject to
postponement pursuant to “General Terms of the Securities—Payment Dates” in the accompany product supplement for
principal at risk securities.
** Subject to
postponement pursuant to “General Terms of the Securities—Consequences of a Market Disruption Event; Postponement of
a Calculation Day” in the accompany product supplement for principal at risk securities. |
Morgan Stanley Finance LLC
Market Linked Securities — Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Energy Select Sector SPDR® Fund, the Technology Select Sector SPDR® Fund and the Health Care Select Sector SPDR® Fund due September 29, 2025
Estimated
Value of the Securities |
The face amount
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 per security.
We estimate that the value of each security on the pricing date is $943.60.
What goes
into the estimated value on the pricing date?
In valuing the
securities on the pricing date, we take into account that the securities comprise both a debt component and a performance-based component
linked to the underlyings. The estimated value of the securities is determined using our own pricing and valuation models, market
inputs and assumptions relating to the underlyings, instruments based on the underlyings, volatility and other factors including
current and expected interest rates, as well as an interest rate related to our secondary market credit spread, which is the implied
interest rate at which our conventional fixed rate debt trades in the secondary market.
What determines
the economic terms of the securities?
In determining
the economic terms of the securities, including the contingent coupon rate, the coupon threshold prices and the downside threshold
prices, we use an internal funding rate which is likely to be lower than our secondary market credit spreads and therefore advantageous
to us. If the issuing, selling, structuring and hedging costs borne by you were lower or if the internal funding rate were higher,
one or more of the economic terms of the securities would be more favorable to you.
What is the
relationship between the estimated value on the pricing date and the secondary market price of the securities?
The price at
which MS & Co. purchases the securities in the secondary market, absent changes in market conditions, including those related
to the underlyings, may vary from, and be lower than, the estimated value on the pricing date, because the secondary market price
takes into account our secondary market credit spread as well as the bid-offer spread that MS & Co. would charge in a secondary
market transaction of this type and other factors. However, because the costs associated with issuing, selling, structuring and hedging
the securities are not fully deducted upon issuance, for a period of up to 3 months following the issue date, to the extent that
MS & Co. may buy or sell the securities in the secondary market, absent changes in market conditions, including those related
to the underlyings, and to our secondary market credit spreads, it would do so based on values higher than the estimated value. We
expect that those higher values will also be reflected in your brokerage account statements.
MS & Co.
may, but is not obligated to, make a market in the securities and, if it once chooses to make a market, may cease doing so at any
time. |
Morgan Stanley Finance LLC
Market Linked Securities — Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Energy Select Sector SPDR® Fund, the Technology Select Sector SPDR® Fund and the Health Care Select Sector SPDR® Fund due September 29, 2025
The Principal
at Risk Securities Linked to the Lowest Performing of the Energy Select Sector SPDR® Fund, the Technology Select Sector
SPDR® Fund and the Health Care Select Sector SPDR® Fund due September 29, 2025 (the “securities”)
may be appropriate for investors who:
§
Seek
an investment with contingent coupon payments at a rate of 18% per annum until the earlier of the maturity date or automatic call,
if, and only if, the closing price of each underlying on the applicable quarterly calculation day is greater than or equal
to 70% of its starting price;
§
Understand that if the closing price of any underlying on the final calculation day has declined by more than 30% from its starting
price, they will be fully exposed to the decline in the lowest performing underlying from its starting price and will lose more than
30%, and possibly all, of the face amount of their securities at maturity;
§
Are willing to accept the risk that they may receive few or no contingent coupon payments over the term of the
securities;
§
Understand that the securities may be automatically called prior to the maturity date and that the term of the securities may be
as short as approximately six months;
§
Understand that the return on the securities will depend solely on the performance of the underlying that is the
lowest performing underlying on each calculation day and that they will not benefit in any way from the performance of the better
performing underlyings;
§
Understand
that the securities are riskier than alternative investments linked to only one of the underlyings or linked to a basket composed
of each underlying;
§
Understand and are willing to accept the full downside risks of each underlying;
§
Are
willing to forgo participation in any appreciation of any underlying, fixed interest payments on the securities and dividends on
the underlyings; and
§
Are
willing to hold the securities until maturity.
The securities
are not designed for, and may not be an appropriate investment for, investors who:
§
Seek
a liquid investment or are unable or unwilling to hold the securities to maturity;
§
Require
full payment of the face amount of the securities at maturity;
§
Seek
a security with a fixed term;
§
Are
unwilling to accept the risk that the closing price of any underlying on the final calculation day may decline by more than 30% from
its respective starting price to its closing price on the final calculation day, in which case they will lose a significant portion
or all of their investment;
§
Seek
current income;
§
Are
unwilling to accept the risk of exposure to each of the underlyings;
§
Seek exposure to a basket composed of each underlying or a similar investment in which the overall return is based
on a blend of the performances of the underlyings, rather than solely on the lowest performing underlying;
§
Seek
exposure to the upside performance of any or each underlying;
§
Are
unwilling to accept our credit risk; or
§
Prefer the lower risk of fixed income investments with comparable maturities issued by companies with comparable credit
ratings. |
The
considerations identified above are not exhaustive. Whether or not the securities are an appropriate investment for you will depend on
your individual circumstances, and you should reach an investment decision only after you and your investment, legal, tax, accounting
and other advisors have carefully considered the appropriateness of an investment in the securities in light of your particular circumstances.
You should also review carefully the “Risk Factors” herein and in the accompanying product supplement for risks related to
an investment in the securities. For more information about the underlyings, please see the sections titled “Energy Select Sector
SPDR® Fund Overview” “Technology Select Sector SPDR® Fund Overview” and “Health
Care Select Sector SPDR® Fund Overview” below.
Morgan Stanley Finance LLC
Market Linked Securities — Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Energy Select Sector SPDR® Fund, the Technology Select Sector SPDR® Fund and the Health Care Select Sector SPDR® Fund due September 29, 2025
Determining
Payment on a Contingent Coupon Payment Date and on the Maturity Date |
If
the securities have not been previously automatically called, on each quarterly contingent coupon payment date, you will either receive
a contingent coupon payment or you will not receive a contingent coupon payment, depending on the closing price of the lowest performing
underlying on the related quarterly calculation day.
Step
1: Determine which underlying is the lowest performing underlying on the relevant determination. The lowest performing underlying
on any calculation day is the underlying with the lowest performance factor on that calculation day. The performance factor of an underlying
on a calculation day is its closing price on that calculation day as a percentage of its starting price (i.e., its closing price on that
calculation day divided by its starting price).
Step
2: Determine whether a contingent coupon payment is paid on the applicable contingent coupon payment date based on the closing price
of the lowest performing underlying on the relevant calculation day, as follows:
Morgan Stanley Finance LLC
Market Linked Securities — Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Energy Select Sector SPDR® Fund, the Technology Select Sector SPDR® Fund and the Health Care Select Sector SPDR® Fund due September 29, 2025
On
the maturity date, if the securities have not been automatically called prior to the maturity date, you will receive (in addition to
the final contingent coupon payment, if any) a cash payment per security (the maturity payment amount) calculated as follows:
Step
1: Determine which underlying is the lowest performing underlying on the final calculation day. The lowest performing underlying
on the final calculation day is the underlying with the lowest performance factor on the final calculation day. The performance factor
of an underlying on the final calculation day is its closing price as a percentage of its starting price (i.e., its closing price on
the final calculation day divided by its starting price).
Step
2: Calculate the maturity payment amount based on the closing price of the lowest performing underlying on the final calculation
day, as follows:
Morgan Stanley Finance LLC
Market Linked Securities — Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Energy Select Sector SPDR® Fund, the Technology Select Sector SPDR® Fund and the Health Care Select Sector SPDR® Fund due September 29, 2025
Scenario
Analysis and Examples of Hypothetical Payments on the Securities |
The
following hypothetical examples illustrate how to determine whether a contingent coupon payment is paid with respect to a calculation
day and how to calculate the payment at maturity, if any, if the securities have not been automatically called. The following examples
are for illustrative purposes only. Whether you receive a contingent coupon payment will be determined by reference to the closing price
of each underlying on each calculation day, and the amount you will receive at maturity, if any, will be determined by reference to the
closing price of each underlying on the final calculation day. The actual starting price, coupon threshold price and downside threshold
price for each underlying and the actual contingent coupon rate are set forth under “Final Terms” above. All payments on
the securities, if any, are subject to our credit risk. The numbers in the hypothetical examples below may have been rounded for the
ease of analysis. The below examples are based on the following terms*:
Contingent
coupon payment:
|
On
each contingent coupon payment date, you will receive a contingent coupon payment at a per annum rate equal to the contingent coupon
rate if, and only if, the closing price of the lowest performing underlying on the related calculation day is greater than
or equal to its coupon threshold price. If payable, the contingent coupon payment will be an amount in cash per face amount corresponding
to a return of 18% per annum for each interest payment period for each applicable calculation day. These hypothetical examples reflect
the contingent quarterly coupon rate of 18% (corresponding to $45 per quarter per security**). |
Hypothetical
starting price: |
With
respect to the XLE Shares: $100 |
|
With
respect to the XLK Shares: $100 |
|
With
respect to the XLV Shares: $100 |
|
|
Hypothetical
coupon threshold price: |
With
respect to the XLE Shares: $70, which is 70% of its hypothetical starting price |
|
With
respect to the XLK Shares: $70, which is 70% of its hypothetical starting price |
|
With
respect to the XLV Shares: $70, which is 70% of its hypothetical starting price |
|
|
Hypothetical
downside threshold price: |
With
respect to the XLE Shares: $70, which is 70% of its hypothetical starting price |
|
With
respect to the XLK Shares: $70, which is 70% of its hypothetical starting price |
|
With
respect to the XLV Shares: $70, which is 70% of its hypothetical starting price |
*
The hypothetical starting price of $100 for the underlyings has been chosen for illustrative purposes only and does not represent
the actual starting price of any underlying. The actual starting prices, coupon threshold prices and downside threshold prices are set
forth on the cover of this pricing supplement. For historical data regarding the actual closing prices of the underlyings, see the historical
information set forth herein.
**The
actual contingent coupon payment will be an amount determined by the calculation agent. The hypothetical contingent quarterly coupon
of $45 is used in these examples for ease of analysis.
Morgan Stanley Finance LLC
Market Linked Securities — Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Energy Select Sector SPDR® Fund, the Technology Select Sector SPDR® Fund and the Health Care Select Sector SPDR® Fund due September 29, 2025
How
to determine whether a contingent coupon payment is payable with respect to a calculation day:
Date |
XLE
Shares Closing Price |
XLK
Shares Closing Price |
XLV
Shares Closing Price |
Contingent
Coupon Payment (per Security) |
Hypothetical
Calculation Day 1 |
$125
(at or above the coupon threshold price) |
$130
(at or above the coupon threshold price) |
$135
(at or above the coupon threshold price) |
$45 |
Hypothetical
Calculation Day 2 |
$50
(below the coupon threshold price) |
$95
(at or above the coupon threshold price) |
$120
(at or above the coupon threshold price) |
$0 |
Hypothetical
Calculation Day 3 |
$50
(below the coupon threshold price) |
$65
(below the coupon threshold price) |
$110
(at or above the coupon threshold price) |
$0 |
Hypothetical
Calculation Day 4 |
$55
(below the coupon threshold price) |
$60
(below the coupon threshold price) |
$65
(below the coupon threshold price) |
$0 |
On hypothetical calculation
day 1, the closing price of each underlying is at or above the respective coupon threshold price. Therefore, a contingent coupon payment
of $45 is paid on the relevant contingent coupon payment date.
On each of hypothetical
calculation days 2 and 3, at least one underlying closes at or above its respective coupon threshold price, but one or both of the other
underlyings close below their respective coupon threshold prices. Therefore, no contingent coupon payment is paid on the relevant contingent
coupon payment date.
On hypothetical calculation
day 4, each underlying closes below its respective coupon threshold price, and, accordingly no contingent quarterly coupon is paid on
the relevant coupon payment date.
If the closing
price of any underlying is less than its respective coupon threshold price on each calculation day, you will not receive any contingent
coupon payments for the entire term of the securities.
How to calculate
the payment investors will receive at maturity (if the securities have not been automatically redeemed):
Starting after six
months, if the closing price of each underlying is greater than or equal to its starting price on any calculation day, the securities
will be automatically called for a cash payment per security equal to the face amount plus a final contingent coupon payment.
The examples below
illustrate how to calculate the payment at maturity if the securities have not been automatically redeemed prior to maturity
|
XLE
Shares Closing Price on Final Calculation Day |
XLK
Shares Closing Price on Final Calculation Day |
XLV
Shares Closing Price on Final Calculation Day |
Maturity
Payment Amount (per Security) |
Example 1: |
$130 (at
or above its downside threshold price and coupon threshold price) |
$140 (at
or above its downside threshold price and coupon threshold price) |
$142 (at
or above its downside threshold price and coupon threshold price) |
$1,045
(the face amount plus the final contingent coupon payment) |
Example 2: |
$115 (at
or above its downside threshold price) |
$40 (below
its downside threshold price) |
$120 (at
or above its downside threshold price) |
$1,000
× ($40 /$100) = $400 |
Example 3: |
$20 (below
its downside threshold price) |
$80 (at
or above its downside threshold price) |
$120 (at
or above its downside threshold price) |
$1,000
× ($20 / $100) = $200 |
Example 4: |
$60 (below
its downside threshold price) |
$50 (below
its downside threshold price) |
$20 (below
its downside threshold price) |
$1,000
× ($20 / $100) = $200 |
Morgan Stanley Finance LLC
Market Linked Securities — Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Energy Select Sector SPDR® Fund, the Technology Select Sector SPDR® Fund and the Health Care Select Sector SPDR® Fund due September 29, 2025
In example 1, the
closing price of each underlying on the final calculation day is at or above its respective downside threshold price and coupon threshold
price. Therefore, investors receive at maturity a cash payment per security equal to the face amount of the securities, in addition to
the final contingent coupon payment. Investors do not participate in any appreciation in any underlying.
In example 2, the
closing prices of two of the underlyings on the final calculation day are at or above their downside threshold prices, but the closing
price of the other underlying on the final calculation day is below its respective downside threshold price. Therefore, investors are
exposed to the downside performance of the lowest performing underlying at maturity. The XLE Shares have increased 15% from their starting
price to their closing price on the final calculation day, the XLK Shares have declined 60% from their starting price to their closing
price on the final calculation day and the XLV Shares have increased 20% from their starting price to their closing price on the final
calculation day. Therefore, investors receive at maturity an amount equal to the face amount times the performance factor of the XLK
Shares, which represent the lowest performing underlying in this example.
In example 3, the
closing prices of two of the underlyings on the final calculation day are at or above their downside threshold prices and the closing
price of the other underlying on the final calculation day is below its respective downside threshold price. Therefore, investors are
exposed to the downside performance of the lowest performing underlying at maturity. The XLE Shares have declined 80% from their starting
price to their closing price on the final calculation day, the XLK Shares have declined 20% from their starting price to their closing
price on the final calculation day and the XLV Shares have increased 20% from their starting price to their closing price on the final
calculation day. Therefore, investors receive at maturity an amount equal to the face amount times the performance factor of the XLE
Shares, which represent the lowest performing underlying in this example.
In example 4, the
closing price of each underlying on the final calculation day is below its respective downside threshold price, and investors receive
at maturity an amount equal to the face amount times the performance factor of the lowest performing underlying. The XLE Shares
have declined 40% from their starting price to their closing price on the final calculation day, the XLK Shares have declined 50% from
their starting price to their closing price on the final calculation day and the XLV Shares have declined 80% from their starting price
to their closing price on the final calculation day. Therefore, investors receive at maturity an amount equal to the face amount times
the performance factor of the XLV Shares, which represent the lowest performing underlying in this example.
If the closing
price of any underlying on the final calculation day is below its respective downside threshold price, you will be exposed to the downside
performance of the lowest performing underlying at maturity, and your maturity payment amount will be less than 70% of the face amount
per security and could be zero.
Morgan Stanley Finance LLC
Market Linked Securities — Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Energy Select Sector SPDR® Fund, the Technology Select Sector SPDR® Fund and the Health Care Select Sector SPDR® Fund due September 29, 2025
This section describes
the material risks relating to the securities. For further discussion of these and other risks, you should read the section entitled
“Risk Factors” in the accompanying product supplement for principal at risk securities, index supplement and prospectus.
We also urge you to consult your investment, legal, tax, accounting and other advisers in connection with your investment in the securities.
Risks
Relating to an Investment in the Securities
| § | The
securities do not guarantee the return of the face amount of your securities at maturity.
The terms of the securities differ from those of ordinary debt securities in that they
do not guarantee the return of the face amount of your securities at maturity. If the securities
have not been automatically called and if the closing price of any underlying on the
final calculation day is less than its respective downside threshold price of 70% of its
starting price, you will be exposed to the decline in the value of the lowest performing
underlying, as compared to its starting price, on a 1-to-1 basis, and you will receive for
each security that you hold at maturity an amount equal to the face amount times the
performance factor of the lowest performing underlying. In this case, you will lose more
than 30%, and possibly all, of the face amount of your securities at maturity. |
| § | The
securities do not provide for the regular payment of interest. The terms of the securities
differ from those of ordinary debt securities in that they do not provide for the regular
payment of interest. Instead, the securities will pay a contingent coupon payment but
only if the closing price of each underlying is at or above its respective coupon threshold
price on the related calculation day. If the closing price of any underlying is lower
than its coupon threshold price on the relevant calculation day for any interest period,
we will pay no contingent coupon payment on the applicable contingent coupon payment date.
It is possible that the closing price of any underlying will be less than its respective
coupon threshold price for extended periods of time or even throughout the entire term of
the securities so that you will receive few or no contingent coupon payments. If you do not
earn sufficient contingent coupon payments over the term of the securities, the overall return
on the securities may be less than the amount that would be paid on a conventional debt security
of ours of comparable maturity. |
| § | The
contingent coupon payment, if any, is based on the value of each underlying on only the related
quarterly calculation day at the end of the related interest period. Whether the contingent
coupon payment will be paid on any contingent coupon payment date will be determined at the
end of the relevant interest period based on the closing price of each underlying on the
relevant quarterly calculation day. As a result, you will not know whether you will receive
the contingent coupon payments on any contingent coupon payment date until near the end of
the relevant interest period. Moreover, because the contingent coupon payment is based solely
on the value of each underlying on the quarterly calculation days, if the closing price of
any underlying on any calculation day date is below the coupon threshold price for such underlying,
you will not receive the contingent coupon payment for the related interest period, even
if the price of such underlying was at or above its respective coupon threshold price on
other days during that interest period, and even if the closing prices(s) of one or both
of the other underlyings are at or above their respective coupon threshold price(s). |
| § | Investors
will not participate in any appreciation in any underlying. Investors will not participate
in any appreciation in any underlying from the starting price for such underlying, and the
return on the securities will be limited to the contingent coupon payments, if any, that
are paid with respect to each calculation day on which the closing price of each underlying
is greater than or equal to its respective coupon threshold price, if any. |
| § | The
market price will be influenced by many unpredictable factors. Several
factors, many of which are beyond our control, will influence the value of the securities
in the secondary market and the price at which MS & Co. may be willing to purchase or
sell the securities in the secondary market. We expect that generally the level of interest
rates available in the market and the value of each underlying on
any day, including in relation to its respective starting price, coupon threshold price and
downside threshold price, 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
trading price and volatility (frequency and magnitude of changes in value) of the underlyings, |
Morgan Stanley Finance LLC
Market Linked Securities — Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Energy Select Sector SPDR® Fund, the Technology Select Sector SPDR® Fund and the Health Care Select Sector SPDR® Fund due September 29, 2025
| o | whether
the closing price of any underlying has been below its respective coupon threshold price
on any calculation day, |
| o | geopolitical
conditions and economic, financial, political, regulatory or judicial events that affect
the underlyings or securities markets generally and which may affect the price of each underlying, |
| o | dividend
rates on the underlyings or stocks composing the underlyings, |
| o | the
time remaining until the securities mature, |
| o | interest
and yield rates in the market, |
| o | the
availability of comparable instruments, |
| o | the
occurrence of certain events affecting the underlyings that may or may not require an adjustment
to an adjustment factor, and |
| o | any
actual or anticipated changes in our credit ratings or credit spreads. |
Generally,
the longer the time remaining to maturity, the more the market price of the securities will be affected by the other factors described
above. Some or all of these factors will influence the price that you will receive if you sell your securities prior to maturity.
In particular, if any underlying has closed near or below its coupon threshold price, and especially
if any underlying has closed near or below its downside threshold price, 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 face amount of your securities.
You
cannot predict the future performance of any underlying based on its historical performance. The price of any underlying may decrease
and be below the respective coupon threshold price for such underlying on each calculation day so that you will receive no return on
your investment, and any or all of the underlyings may close below the respective downside threshold price(s) on the final calculation
day so that you will lose a significant portion or all of your initial investment in the securities. There can be no assurance that the
closing price of each underlying will be at or above the respective coupon threshold price on any calculation day so that you will receive
a coupon payment on the securities for the applicable interest period, or that it will be at or above its respective downside threshold
price on the final calculation day so that you do not suffer a significant loss on your initial investment in the securities. See
“Energy Select Sector SPDR® Fund Overview” “Technology Select Sector
SPDR® Fund Overview” and “Health Care Select Sector SPDR® Fund Overview” 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 upon an automatic call,
on any contingent coupon payment date or at maturity, and therefore you are subject to our
credit risk. If we default on our obligations under the securities, your investment would
be at risk and you could lose some or all of your investment. As a result, the market value
of the securities prior to maturity will be affected by changes in the market’s view
of our creditworthiness. Any actual or anticipated decline in our credit ratings or increase
in the credit spreads charged by the market for taking our credit risk is likely to adversely
affect the market value of the securities. |
| § | 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. |
Morgan Stanley Finance LLC
Market Linked Securities — Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Energy Select Sector SPDR® Fund, the Technology Select Sector SPDR® Fund and the Health Care Select Sector SPDR® Fund due September 29, 2025
| § | Investing
in the securities is not equivalent to investing in the underlyings or the stocks composing
the share underlying indices. Investing in the securities is not equivalent to investing
in the underlyings, the share underlying indices or stocks that constitute the share underlying
indices. Investors in the securities will not participate in any positive performance of
any underlying, and will not have voting rights or rights to receive dividends or other distributions
or any other rights with respect to the stocks that constitute any underlying. |
| § | Reinvestment
risk. The term of your investment in the securities
may be shortened due to the automatic call feature of the securities. If the securities are
called prior to maturity, you will receive no further payments on the securities and may
be forced to invest in a lower interest rate environment and may not be able to reinvest
at comparable terms or returns. However, under no circumstances will the securities
be called within the first six months of the term of the securities. |
| § | 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 face amount reduce the economic terms of the securities,
cause the estimated value of the securities to be less than the face amount 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 face amount, because secondary market prices will exclude the issuing, selling,
structuring and hedging-related costs that are included in the face amount 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 face amount 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 3 months following the issue date, to the extent that MS & Co. may buy or sell the securities in the secondary
market, absent changes in market conditions, including those related to the underlyings, and to our secondary market credit spreads,
it would do so based on values higher than the estimated value, 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. |
| § | The
securities will not be listed on any securities exchange and secondary trading may be limited.
The securities will not be listed on any securities exchange. Therefore, there may be
little or no secondary market for the securities. MS & Co. and WFS may, but are not obligated
to, make a market in the securities and, if either of them once chooses to make a market,
may cease doing so at any time. When they do make a market, they will generally do so for
transactions of routine secondary market size at prices based on their respective estimates
of the current value of the securities, taking into account their respective bid/offer spreads,
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 they will be able to resell the securities. Even if there is a secondary market, it
may not provide enough |
Morgan Stanley Finance LLC
Market Linked Securities — Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Energy Select Sector SPDR® Fund, the Technology Select Sector SPDR® Fund and the Health Care Select Sector SPDR® Fund due September 29, 2025
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. or WFS is willing to transact. If, at any time, MS & Co. and WFS were to cease making a market in the securities, it is
likely that there would be no secondary market for the securities. Accordingly, you should be willing to hold your securities to maturity.
| § | The
calculation agent, which is a subsidiary of Morgan Stanley and an affiliate of MSFL, will
make determinations with respect to the securities. As calculation agent, MS & Co.
will determine the starting prices, the coupon threshold prices and the downside threshold
prices and will calculate the amount of cash you receive at maturity, if any. Moreover, certain
determinations made by MS & Co., in its capacity as calculation agent, may require it
to exercise discretion and make subjective judgments, such as with respect to the occurrence
or non-occurrence of market disruption events and the selection of a successor index or calculation
of a closing price in the event of a market disruption event or certain adjustments to an
adjustment factor. These potentially subjective determinations may adversely affect the payout
to you at maturity, if any. For further information regarding these types of determinations,
see “General Terms of the Securities—Market Disruption Events,” “—Anti-dilution
Adjustments Relating to a Fund; Alternate Calculation,” “General Terms of the
Securities—Consequences of a Market Disruption Event; Postponement of a Calculation
Day,” “—Payment Dates, “—Calculations and Calculation Agent”
and “—Alternate Exchange Calculation in Case of an Event of Default” in
the accompanying product supplement for principal at risk securities. In addition, MS &
Co. has determined the estimated value of the securities on the pricing date. |
| § | 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 expect to carry
out hedging activities related to the securities (and possibly to other instruments linked
to the underlyings or the share underlying indices), including trading in the underlyings
and in other instruments related to the underlyings or share 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 calculation day approaches. Some of our affiliates also trade the underlyings
or the stocks that constitute the share underlying indices and other financial instruments
related to the share underlying indices and other financial instruments related to the underlyings
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 potentially affect the
starting price of an underlying, and, therefore, could increase (i) the price at or above
which such underlying must close on the calculation days so that the securities are called
for a cash payment equal to the face amount plus a final contingent coupon payment (depending
also on the performance of the other underlyings), (ii) the price at or above which such
underlying must close on each calculation day in order for you to earn a contingent coupon
payment (depending also on the performance of the other underlyings) and (iii) the price
at or above which such underlying must close on the final calculation day so that you are
not exposed to the negative performance of the lowest performing underlying at maturity (depending
also on the performance of the other underlyings). Additionally, such hedging or trading
activities during the term of the securities could potentially affect the value of any underlying
on the calculation days, and, accordingly, whether we call the securities prior to maturity,
whether we pay a contingent coupon payment on the securities and the amount of cash you will
receive at maturity, if any. |
| § | The
maturity date may be postponed if the final calculation day is postponed. If the scheduled
final calculation day is not a trading day or if a market disruption event occurs on that
day so that the final calculation day is postponed and falls less than two business days
prior to the maturity date, the maturity date of the securities will be postponed to the
second business day following that final calculation day as postponed. |
| § | Potentially
inconsistent research, opinions or recommendations by Morgan Stanley, MSFL, WFS or our or
their respective affiliates. Morgan Stanley, MSFL, WFS and our or their respective affiliates
may publish research from time to time on financial markets and other matters that may influence
the value of the securities, or express opinions or provide recommendations that are inconsistent
with purchasing or holding the securities. Any research, opinions or recommendations expressed
by Morgan Stanley, MSFL, WFS or our or their respective affiliates may not be consistent
with each other and may be modified from time to time without notice. Investors should make
their own independent investigation of the merits of investing in the securities and the
underlyings to which the securities are linked. |
Morgan Stanley Finance LLC
Market Linked Securities — Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Energy Select Sector SPDR® Fund, the Technology Select Sector SPDR® Fund and the Health Care Select Sector SPDR® Fund due September 29, 2025
| § | The
U.S. federal income tax consequences of an investment in the securities are uncertain. There
is no direct legal authority as to the proper treatment of the securities for U.S. federal
income tax purposes, and, therefore, significant aspects of the tax treatment of the securities
are uncertain. |
Please
read the discussion under “Additional Information About the Securities—Tax considerations” in this document concerning
the U.S. federal income tax consequences of an investment in the securities. We intend to treat a security for U.S. federal income tax
purposes as a single financial contract that provides for a coupon that will be treated as gross income to you at the time received or
accrued, in accordance with your regular method of tax accounting. Under this treatment, the ordinary income treatment of the coupon
payments, in conjunction with the capital loss treatment of any loss recognized upon the sale, exchange or settlement of the securities,
could result in adverse tax consequences to holders of the securities because the deductibility of capital losses is subject to limitations.
We do not plan to request a ruling from the Internal Revenue Service (the “IRS”) regarding the tax treatment of the securities,
and the IRS or a court may not agree with the tax treatment described herein. If the IRS were successful in asserting an alternative
treatment for the securities, the timing and character of income or loss on the securities might differ significantly from the tax treatment
described herein. For example, under one possible treatment, the IRS could seek to recharacterize the securities as debt instruments.
In that event, U.S. Holders (as defined below) would be required to accrue into income original issue discount on the securities every
year at a “comparable yield” determined at the time of issuance (as adjusted based on the difference, if any, between the
actual and the projected amount of any contingent payments on the securities) and recognize all income and gain in respect of the securities
as ordinary income. The risk that financial instruments providing for buffers, triggers or similar downside protection features, such
as the securities, would be recharacterized as debt is greater than the risk of recharacterization for comparable financial instruments
that do not have such features.
Non-U.S.
Holders (as defined below) should note that we currently intend to withhold on any coupon paid to Non-U.S. Holders generally at a rate
of 30%, or at a reduced rate specified by an applicable income tax treaty under an “other income” or similar provision, and
will not be required to pay any additional amounts with respect to amounts withheld.
In
2007, the U.S. Treasury Department and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid
forward contracts” and similar instruments. While it is not clear whether the securities would be viewed as similar to the prepaid
forward contracts described in the notice, it is possible that any Treasury regulations or other guidance promulgated after consideration
of these issues could materially and adversely affect the tax consequences of an investment in the securities, possibly with retroactive
effect. The notice focuses on a number of issues, the most relevant of which for holders of the securities are the character and timing
of income or loss and the degree, if any, to which income realized by non-U.S. investors should be subject to withholding tax. Both U.S.
and Non-U.S. Holders should consult their tax advisers regarding the U.S. federal income tax consequences of an investment in the securities,
including possible alternative treatments, the issues presented by this notice and any tax consequences arising under the laws of any
state, local or non-U.S. taxing jurisdiction.
Risks
Relating to the Underlyings
| § | You
are exposed to the price risk of each underlying. Your
return on the securities is not linked to a basket consisting of each underlying. Rather,
it will be contingent upon the independent performance of each underlying. Unlike an instrument
with a return linked to a basket of underlying assets, in which risk is mitigated and diversified
among all the components of the basket, you will be exposed to the risks related to each
underlying. Poor performance by any underlying over
the term of the securities may negatively affect your return and will not be offset or mitigated
by any positive performance by the other underlyings. To receive any contingent
coupon payments, each underlying must close
at or above its respective coupon threshold price on the applicable calculation day. In addition,
if the securities have not been called and any underlying has
declined to below its respective downside threshold price as of the final calculation day,
you will be fully exposed to the decline in
the lowest performing underlying over the term of the securities on a 1-to-1 basis, even
if the other underlyings have appreciated or have not declined as much. Under this scenario,
the value of any such maturity payment amount will be less than 70% of the face amount of
your securities and could be zero. Accordingly, your investment is subject to the price risk
of each underlying. |
Morgan Stanley Finance LLC
Market Linked Securities — Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Energy Select Sector SPDR® Fund, the Technology Select Sector SPDR® Fund and the Health Care Select Sector SPDR® Fund due September 29, 2025
| § | Because
the securities are linked to the performance of the lowest performing underlying, you are
exposed to greater risks of receiving no contingent coupon payments and sustaining a significant
loss on your investment than if the securities were linked to just one underlying. The
risk that you will not receive any contingent coupon payments, or that you will suffer a
significant loss on your investment, is greater if you invest in the securities as opposed
to substantially similar securities that are linked to the performance of just one underlying.
With three underlyings, it is more likely that any underlying will close below its coupon
threshold price on any calculation day, and below its downside threshold price on the final
calculation day, than if the securities were linked to only one underlying. Therefore, it
is more likely that you will not receive any contingent coupon payments and that you will
suffer a significant loss on your investment. In addition, because each underlying must close
above its starting price on a quarterly calculation day in order for the securities to be
called prior to maturity, the securities are less likely to be called on any call settlement
date than if the securities were linked to just one underlying. |
| § | Investing
in the securities exposes investors to risks associated with investments with a concentration
in the energy sector. The stocks included in the Energy Select Sector Index and that
are generally tracked by the XLE Shares are stocks of companies whose primary business is
directly associated with the energy sector, including the following sub-sectors: (i) oil,
gas and consumable fuels and (ii) energy equipment and services. Because the value of the
securities is linked to the performance of the XLE Shares, an investment in the securities
exposes investors to risks associated with investments in securities with a concentration
in the energy sector. |
Energy
companies develop and produce crude oil and natural gas and/or provide drilling and other energy resources production and distribution
related services. Stock prices for these types of companies are mainly affected by the business, financial and operating condition of
the particular company, as well as changes in prices for oil, gas and other types of fuels, which in turn largely depend on supply and
demand for various energy products and services. Some of the factors that may influence supply and demand for energy products and services
include: general economic conditions and growth rates, weather conditions, the cost of exploring for, producing and delivering oil and
gas, technological advances affecting energy efficiency and energy consumption, the ability of the Organization of the Petroleum Exporting
Countries (OPEC) to set and maintain production levels of oil, currency fluctuations, inflation, natural disasters, civil unrest, acts
of sabotage or terrorism and other regional or global events. The profitability of energy companies may also be adversely affected by
existing and future laws, regulations, government actions and other legal requirements relating to protection of the environment, health
and safety matters and others that may increase the costs of conducting their business or may reduce or delay available business opportunities.
Increased supply or weak demand for energy products and services, as well as various developments leading to higher costs of doing business
or missed business opportunities, would adversely impact the performance of companies in the energy sector. The value of the securities
may be subject to greater volatility and be more adversely affected by a single economic, political or regulatory occurrence affecting
the energy sector or one of the sub-sectors of the energy sector than a different investment linked to securities of a more broadly diversified
group of issuers.
| § | Investing
in the securities exposes investors to risks associated with investments with a concentration
in the technology sector. The stocks included in the
Technology Select Sector Index and that are generally tracked by the Technology Select Sector
SPDR® Fund are stocks of companies whose primary business is directly associated
with the technology sector, including the following sub-sectors: computers and peripherals,
software, diversified telecommunication services, communications equipment, semiconductors
and semiconductor equipment, internet software and services, IT services, electronic equipment,
instruments and components, wireless telecommunication services and office electronics. Because
the value of the securities is linked to the performance of the XLK Shares, an investment
in the securities exposes investors to risks associated with investments in securities with
a concentration in the technology sector. |
| § | Investing
in the securities exposes investors to risks associated with investments in securities with
a concentration in the health care sector. The
stocks included in the Health Care Select Sector Index and that are generally tracked by
the XLV Shares are stocks of companies whose primary business is directly associated with
the health care sector. Because the value of the securities is linked to the performance
of the XLV Shares, an investment in the securities exposes investors to risks associated
with investments in securities with a concentration in the health care sector. |
Morgan Stanley Finance LLC
Market Linked Securities — Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Energy Select Sector SPDR® Fund, the Technology Select Sector SPDR® Fund and the Health Care Select Sector SPDR® Fund due September 29, 2025
Companies
in the health care sector are subject to extensive government regulation and their profitability can be significantly affected by restrictions
on government reimbursement for medical expenses, rising costs of medical products and services, pricing pressure (including price discounting),
limited product lines and an increased emphasis on the delivery of health care through outpatient services. Companies in the health care
sector are heavily dependent on obtaining and defending patents, which may be time consuming and costly, and the expiration of patents
may also adversely affect the profitability of these companies. Health care companies are also subject to extensive litigation based
on product liability and similar claims. In addition, their products can become obsolete due to industry innovation, changes in technologies
or other market developments. Many new products in the health care sector require significant research and development and may be subject
to regulatory approvals, all of which may be time consuming and costly with no guarantee that any product will come to market. These
factors could affect the health care sector and could affect the value of the securities held by the Health Care Select Sector SPDR®
Fund and the value of the Health Care Select Sector SPDR® Fund during the term of the securities, which may adversely
affect the value of the securities.
| § | The
performance and market price of the underlyings, particularly during periods of market volatility,
may not correlate with the performance of the share underlying indices, the performance of
the component securities of the share underlying indices or the net asset value per share
of the underlyings. The underlyings do not fully replicate the share underlying indices
and may hold securities that are different than those included in the share underlying indices.
In addition, the performance of the underlyings will reflect additional transaction costs
and fees that are not included in the calculation of the share underlying indices. All of
these factors may lead to a lack of correlation between the performance of the underlyings
and the share underlying indices. In addition, corporate actions (such as mergers and spin-offs)
with respect to the equity securities constituting the underlyings may impact the variance
between the performances of underlyings and the share underlying indices. Finally, because
the shares of the underlyings are traded on an exchange and are subject to market supply
and investor demand, the market price of one share of the underlyings may differ from the
net asset value per share of the underlyings. In particular, during periods of market volatility,
or unusual trading activity, trading in the securities constituting the underlyings may be
disrupted or limited, or such securities may be unavailable in the secondary market. Under
these circumstances, the liquidity of the underlying may be adversely affected, market participants
may be unable to calculate accurately the net asset value per share of the underlying, and
their ability to create and redeem shares of the underlyings may be disrupted. Under these
circumstances, the market price of shares of the underlyings may vary substantially from
the net asset value per share of the underlyings or the level of the share underlying indices. |
| § | Adjustments
to the underlying shares or the indices tracked by the underlying shares could adversely
affect the value of the securities. The investment advisor to each of the underlying
shares (SSGA Funds Management, Inc.) seeks investment results that correspond generally to
the price and yield performance, before fees and expenses, of the relevant share underlying
indices. Pursuant to its investment strategy or otherwise, the investment advisor may add,
delete or substitute the stocks composing the respective underlying shares. Any of these
actions could adversely affect the price of the respective underlying shares and, consequently,
the value of the securities. The publisher of the share underlying indices is responsible
for calculating and maintaining the share underlying indices. The publisher may add, delete
or substitute the securities constituting the share underlying indices or make other methodological
changes that could change the value of the share underlying indices, and, consequently, the
price of the underlying shares and the value of the securities. The publisher of the share
underlying indices may discontinue or suspend calculation or publication of a share underlying
index at any time. In these circumstances, the calculation agent will have the sole discretion
to substitute a successor index that is comparable to the discontinued share underlying index
and will be permitted to consider indices that are calculated and published by the calculation
agent or any of its affiliates. |
| § | Historical
prices of the underlyings should not be taken as an indication of the future performance
of the underlyings during the term of the securities. No assurance can be given as to
the price of the underlyings at any time, including on the final calculation day, because
historical prices of the underlyings do not provide an indication of future performance of
the underlyings. |
| § | The
anti-dilution adjustments the calculation agent is required to make do not cover every event
that could affect the underlying shares. MS & Co., as calculation agent, will adjust
the adjustment factors for certain |
Morgan Stanley Finance LLC
Market Linked Securities — Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Energy Select Sector SPDR® Fund, the Technology Select Sector SPDR® Fund and the Health Care Select Sector SPDR® Fund due September 29, 2025
events
affecting the underlying shares. However, the calculation agent will not make an adjustment for every event that can affect the underlying
shares. If an event occurs that does not require the calculation agent to adjust an adjustment factor, the market price of the securities
may be materially and adversely affected.
Morgan Stanley Finance LLC
Market Linked Securities — Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Energy Select Sector SPDR® Fund, the Technology Select Sector SPDR® Fund and the Health Care Select Sector SPDR® Fund due September 29, 2025
Energy
Select Sector SPDR® Fund Overview |
The Energy Select
Sector SPDR® Fund is an exchange-traded fund managed by Select Sector SPDR® Trust (the “Trust”),
a registered investment company. The Trust consists of numerous separate investment portfolios, including the Energy Select Sector SPDR®
Fund. The Energy Select Sector SPDR® Fund seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of the Energy Select Sector Index. It is possible that this fund may not fully replicate the performance
of the Energy Select Sector Index due to the temporary unavailability of certain securities in the secondary market or due to other extraordinary
circumstances. Information provided to or filed with the Securities and Exchange Commission (the “Commission”) by the Trust
pursuant to the Securities Act of 1933 and the Investment Company Act of 1940 can be located by reference to Commission file numbers
333-57791 and 811-08837, respectively, through the Commission’s website at www.sec.gov. In addition, information may be obtained
from other publicly available sources. Neither the issuer nor the agent makes any representation that any such publicly available
information regarding the Energy Select Sector SPDR® Fund is accurate or complete.
The following graph
sets forth the daily closing prices of the XLE Shares for the period from January 1, 2017 through September 30, 2022. The closing price
of the XLE Shares on September 30, 2022 was $72.02. We obtained the information in the graph below from Bloomberg Financial Markets without
independent verification. The XLE Shares have at times experienced periods of high volatility. You should not take the historical levels
of the XLE Shares as an indication of its future performance, and no assurance can be given as to the closing price of the XLE Shares
at any time, including on the calculation days.
Shares
of the Energy Select Sector SPDR® Fund – Daily Closing Prices
January
1, 2017 to September 30, 2022 |
|
This document
relates only to the securities referenced hereby and does not relate to the XLE Shares. We have derived all disclosures contained in
this document regarding the Trust from the publicly available documents described above. In connection with the offering of the securities,
neither we nor the agent has participated in the preparation of such documents or made any due diligence inquiry with respect to the
Trust. Neither we nor the agent makes any representation that such publicly available documents or any other publicly available information
regarding the Trust is accurate or complete. Furthermore, we cannot give any assurance that all events occurring prior to the date hereof
(including events that would affect the accuracy or completeness of the publicly available documents described above) that would affect
the trading price of the XLE Shares (and therefore the price of the XLE Shares at the time we priced the securities) have been publicly
disclosed. Subsequent disclosure of any such events or the disclosure of or failure to disclose material future events concerning the
Trust could affect the value received with respect to the securities and therefore the value of the securities.
Neither we nor
any of our affiliates makes any representation to you as to the performance of the XLE Shares.
Morgan Stanley Finance LLC
Market Linked Securities — Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Energy Select Sector SPDR® Fund, the Technology Select Sector SPDR® Fund and the Health Care Select Sector SPDR® Fund due September 29, 2025
We and/or our affiliates
may presently or from time to time engage in business with the Trust. In the course of such business, we and/or our affiliates may acquire
non-public information with respect to the Trust, and neither we nor any of our affiliates undertakes to disclose any such information
to you. In addition, one or more of our affiliates may publish research reports with respect to the XLE Shares. The statements in the
preceding two sentences are not intended to affect the rights of investors in the securities under the securities laws. As a purchaser
of the securities, you should undertake an independent investigation of the Trust as in your judgment is appropriate to make an informed
decision with respect to an investment linked to the XLE Shares.
The securities are
not sponsored, endorsed, sold, or promoted by the Trust. The Trust makes no representations or warranties to the owners of the securities
or any member of the public regarding the advisability of investing in the securities. The Trust has no obligation or liability in connection
with the operation, marketing, trading or sale of the securities.
“Standard
& Poor’s®”, “S&P®”, “S&P 500®”, “SPDR®”,
“Select Sector SPDR” and “Select Sector SPDRs” are trademarks of Standard & Poor’s Financial Services
LLC (“S&P”), an affiliate of S&P Global Inc. The securities are not sponsored, endorsed, sold, or promoted by S&P,
S&P Global Inc. or the Trust. S&P, S&P Global Inc. and the Trust make no representations or warranties to the owners of the
securities or any member of the public regarding the advisability of investing in the securities. S&P, S&P Global Inc. and the
Trust have no obligation or liability in connection with the operation, marketing, trading or sale of the securities.
The Energy Select
Sector Index. The Energy Select Sector Index is calculated and disseminated by S&P and is designed to provide an effective representation
of the energy sector of the S&P 500® Index. The Energy Select Sector Index includes companies in the following
industries: (i) oil, gas and consumable fuels and (ii) energy equipment and services. See “Energy Select Sector Index” in
the accompanying index supplement.
Morgan Stanley Finance LLC
Market Linked Securities — Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Energy Select Sector SPDR® Fund, the Technology Select Sector SPDR® Fund and the Health Care Select Sector SPDR® Fund due September 29, 2025
Technology
Select Sector SPDR® Fund Overview |
The Technology Select
Sector SPDR® Fund is an exchange-traded fund managed by the Trust, a registered investment company. The Trust consists
of numerous separate investment portfolios, including the Technology Select Sector SPDR® Fund. The Technology Select Sector
SPDR® Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses,
of the Technology Select Sector Index. It is possible that this fund may not fully replicate the performance of the Technology Select
Sector Index due to the temporary unavailability of certain securities in the secondary market or due to other extraordinary circumstances.
Information provided to or filed with the Securities and Exchange Commission (the “Commission”) by the Trust pursuant to
the Securities Act of 1933 and the Investment Company Act of 1940 can be located by reference to Commission file numbers 333-57791 and
811-08837, respectively, through the Commission’s website at www.sec.gov. In addition, information may be obtained from other publicly
available sources. Neither the issuer nor the agent makes any representation that any such publicly available information regarding
the Technology Select Sector SPDR® Fund is accurate or complete.
The following graph
sets forth the daily closing prices of the XLK Shares for the period from January 1, 2017 through September 30, 2022. The closing price
of the XLK Shares on September 30, 2022 was $118.78. We obtained the information in the graph below from Bloomberg Financial Markets
without independent verification. The XLK Shares have at times experienced periods of high volatility. You should not take the historical
levels of the XLK Shares as an indication of its future performance, and no assurance can be given as to the closing price of the XLK
Shares at any time, including on the calculation days.
Shares
of the Technology Select Sector SPDR® Fund – Daily Closing Prices
January
1, 2017 to September 30, 2022 |
|
This document
relates only to the securities referenced hereby and does not relate to the XLK Shares. We have derived all disclosures contained
in this document regarding the Trust from the publicly available documents described above. In connection with the offering
of the securities, neither we nor the agent has participated in the preparation of such documents or made any due diligence inquiry with
respect to the Trust. Neither we nor the agent makes any representation that such publicly available documents or any other
publicly available information regarding the Trust is accurate or complete. Furthermore, we cannot give any assurance that
all events occurring prior to the date hereof (including events that would affect the accuracy or completeness of the publicly available
documents described above) that would affect the trading price of the XLK Shares (and therefore the price of the XLK Shares at the time
we priced the securities) have been publicly disclosed. Subsequent disclosure of any such events or the disclosure of or failure
to disclose material future events concerning the Trust could affect the value received with respect to the securities and therefore
the value of the securities.
Neither we nor
any of our affiliates makes any representation to you as to the performance of the XLK Shares.
Morgan Stanley Finance LLC
Market Linked Securities — Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Energy Select Sector SPDR® Fund, the Technology Select Sector SPDR® Fund and the Health Care Select Sector SPDR® Fund due September 29, 2025
We and/or our affiliates
may presently or from time to time engage in business with the Trust. In the course of such business, we and/or our affiliates
may acquire non-public information with respect to the Trust, and neither we nor any of our affiliates undertakes to disclose any such
information to you. In addition, one or more of our affiliates may publish research reports with respect to the XLK Shares. The
statements in the preceding two sentences are not intended to affect the rights of investors in the securities under the securities laws. As
a purchaser of the securities, you should undertake an independent investigation of the Trust as in your judgment is appropriate to make
an informed decision with respect to an investment linked to the XLK Shares.
“Standard
& Poor’s®”, “S&P®”, “S&P 500®”, “SPDR®”,
“Select Sector SPDR” and “Select Sector SPDRs” are trademarks of Standard & Poor’s Financial Services
LLC (“S&P”), an affiliate of S&P Global Inc. The securities are not sponsored, endorsed, sold, or promoted by S&P,
S&P Global Inc. or the Trust. S&P, S&P Global Inc. and the Trust make no representations or warranties to the owners of the
securities or any member of the public regarding the advisability of investing in the securities. S&P, S&P Global Inc. and the
Trust have no obligation or liability in connection with the operation, marketing, trading or sale of the securities.
The
Technology Select Sector Index. The Technology Select Sector Index, which is one of the Select Sector sub-indices of the S&P
500® Index, is a modified market capitalization-based index intended to track the movements of certain public companies
that are components of the S&P 500® Index. The Technology Select Sector Index includes component stocks in the following
industries: computers and peripherals; software; diversified telecommunication services; communications equipment; semiconductor and
semiconductor equipment; internet software and services; IT services; wireless telecommunication services; electronic equipment and instruments;
and office electronics. See “The Technology Select Sector Index” in the accompanying index supplement.
Morgan Stanley Finance LLC
Market Linked Securities — Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Energy Select Sector SPDR® Fund, the Technology Select Sector SPDR® Fund and the Health Care Select Sector SPDR® Fund due September 29, 2025
Health
Care Select Sector SPDR® Fund Overview |
The Health Care Select
Sector SPDR® Fund is an exchange-traded fund managed by the Trust, a registered investment company which seeks investment
results that correspond generally to the price and yield performance, before fees and expenses, of the Health Care Select Sector Index.
Information provided to or filed with the Commission by the Trust pursuant to the Securities Act of 1933 and the Investment Company Act
of 1940 can be located by reference to Commission file numbers 333-57791 and 811-08837, respectively, through the Commission’s
website at.www.sec.gov. In addition, information may be obtained from other publicly available sources. Neither the issuer nor the
agent makes any representation that any such publicly available information regarding the Health Care Select Sector SPDR®
Fund is accurate or complete.
The following graph
sets forth the daily closing prices of the XLV Shares for the period from January 1, 2017 through September 30, 2022. The closing price
of the XLV Shares on September 30, 2022 was $121.11. We obtained the information in the graph below from Bloomberg Financial Markets
without independent verification. The XLV Shares have at times experienced periods of high volatility. You should not take the historical
levels of the XLV Shares as an indication of its future performance, and no assurance can be given as to the closing price of the XLV
Shares at any time, including on the calculation days.
Shares
of the Health Care Select Sector SPDR® Fund – Daily Closing Prices
January
1, 2017 to September 30, 2022 |
|
This document
relates only to the securities referenced hereby and does not relate to the XLV Shares. We have derived all disclosures contained
in this document regarding the Trust from the publicly available documents described above. In connection with the offering
of the securities, neither we nor the agent has participated in the preparation of such documents or made any due diligence inquiry with
respect to the Trust. Neither we nor the agent makes any representation that such publicly available documents or any other
publicly available information regarding the Trust is accurate or complete. Furthermore, we cannot give any assurance that
all events occurring prior to the date hereof (including events that would affect the accuracy or completeness of the publicly available
documents described above) that would affect the trading price of the XLV Shares (and therefore the price of the XLV Shares at the time
we priced the securities) have been publicly disclosed. Subsequent disclosure of any such events or the disclosure of or failure
to disclose material future events concerning the Trust could affect the value received with respect to the securities and therefore
the value of the securities.
Neither we nor
any of our affiliates makes any representation to you as to the performance of the XLV Shares.
We and/or our affiliates
may presently or from time to time engage in business with the Trust. In the course of such business, we and/or our affiliates
may acquire non-public information with respect to the Trust, and neither we nor any of our affiliates undertakes to disclose any such
information to you. In addition, one or more of our affiliates may publish research reports with respect to the XLV Shares. The
statements in the preceding two sentences are not intended to affect the rights of investors in the securities under the securities laws. As
a purchaser of the securities, you should undertake an independent investigation of the Trust as in your judgment is appropriate to make
an informed decision with respect to an investment linked to the XLV Shares.
Morgan Stanley Finance LLC
Market Linked Securities — Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Energy Select Sector SPDR® Fund, the Technology Select Sector SPDR® Fund and the Health Care Select Sector SPDR® Fund due September 29, 2025
“Standard
& Poor’s®”, “S&P®”, “S&P 500®”, “SPDR®”,
“Select Sector SPDR” and “Select Sector SPDRs” are trademarks of Standard & Poor’s Financial Services
LLC (“S&P”), an affiliate of S&P Global Inc. The securities are not sponsored, endorsed, sold, or promoted by S&P,
S&P Global Inc. or the Trust. S&P, S&P Global Inc. and the Trust make no representations or warranties to the owners of the
securities or any member of the public regarding the advisability of investing in the securities. S&P, S&P Global Inc. and the
Trust have no obligation or liability in connection with the operation, marketing, trading or sale of the securities.
The Health Care
Select Sector Index. The Health Care Select Sector Index is calculated and disseminated by S&P and is designed to provide an
effective representation of the financial sector of the S&P 500® Index. The Health Care Select Sector Index includes
companies in the following industries: health care equipment and services; and pharmaceuticals, biotechnology and life sciences. See
“The Health Care Select Sector Index” in the accompanying index supplement.
Morgan Stanley Finance LLC
Market Linked Securities — Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Energy Select Sector SPDR® Fund, the Technology Select Sector SPDR® Fund and the Health Care Select Sector SPDR® Fund due September 29, 2025
Additional
Information About the Securities |
Minimum
ticketing size
$1,000
/ 1 security
Tax
considerations
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.
Tax Consequences
to U.S. Holders
Assuming the treatment
of the securities as set forth above is respected and subject to the discussion in “United States Federal Taxation” in the
accompanying product supplement for principal at risk securities, 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. In general, any such gain
or loss recognized should be short-term capital gain or loss if the U.S. Holder has held the securities for one year or less at the time
of the sale, exchange or settlement, and should be long-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.
As discussed under
“United States Federal Taxation— Possible Alternative Tax Treatments of an Investment in the Securities” in the accompanying
product supplement for principal at risk securities, alternative U.S. federal income tax treatments of the securities are possible that,
if applied, could materially and adversely affect the timing and character of income, gain or loss with respect to the securities.
Tax Consequences
to Non-U.S. Holders
Although significant
aspects of the tax treatment of each security are uncertain, we intend to withhold on any coupon paid to a Non-U.S. Holder generally
at a rate of 30% or at a reduced rate specified by an applicable income tax treaty under an “other income” or similar provision.
We will not be required to pay any additional amounts with respect to amounts withheld. In order to claim an exemption from, or a reduction
in, the 30% withholding tax, a Non-U.S. Holder of the securities must comply with certification requirements to establish that it is
not a U.S. person and is eligible for such an exemption or reduction under an applicable tax treaty. If you are a Non-U.S. Holder, you
should consult your tax adviser regarding the tax treatment of the securities, including the possibility of obtaining a refund of any
withholding tax and the certification requirement described above.
Section 871(m)
Withholding Tax on Dividend Equivalents
Morgan Stanley Finance LLC
Market Linked Securities — Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Energy Select Sector SPDR® Fund, the Technology Select Sector SPDR® Fund and the Health Care Select Sector SPDR® Fund due September 29, 2025
As
discussed in the accompanying product supplement for principal at risk securities, Section 871(m) of the Code and Treasury regulations
promulgated thereunder (“Section 871(m)”) generally impose a 30% (or a lower applicable treaty rate) withholding tax on dividend
equivalents paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments linked to U.S. equities or indices
that include U.S. equities (each, an “Underlying Security”). Subject to certain exceptions, Section 871(m) generally applies
to securities that substantially replicate the economic performance of one or more Underlying Securities, as determined based on tests
set forth in the applicable Treasury regulations (a “Specified Security”). However, pursuant to an IRS notice, Section 871(m)
will not apply to securities issued before January 1, 2025 that do not have a delta of one with respect to any Underlying Security. Based
on our determination that the securities do not have a delta of one with respect to any Underlying Security, our counsel is of the opinion
that the securities should not be Specified Securities and, therefore, should not be subject to Section 871(m).
Our
determination is not binding on the IRS, and the IRS may disagree with this determination. Section 871(m) is complex and its application
may depend on your particular circumstances, including whether you enter into other transactions with respect to an Underlying Security.
If Section 871(m) withholding is required, we will not be required to pay any additional amounts with respect to the amounts so withheld.
You should consult your tax adviser regarding the potential application of Section 871(m) to the securities.
Both
U.S. and non-U.S. investors considering an investment in the securities should read the discussion under “Risk Factors” in
this document and the discussion under “United States Federal Taxation” in the accompanying product supplement for principal
at risk securities and consult their tax advisers regarding all aspects of the U.S. federal income tax consequences of an investment
in the securities, including possible alternative treatments, the issues presented by the 2007 notice described therein and any tax consequences
arising under the laws of any state, local or non-U.S. taxing jurisdiction.
The
discussion in the preceding paragraphs under “Tax considerations” and the discussion contained in the section entitled “United
States Federal Taxation” in the accompanying product supplement for principal at risk securities,
insofar as they purport to describe provisions of U.S. federal income tax laws or legal conclusions with respect thereto, constitute
the full opinion of Davis Polk & Wardwell LLP regarding the material U.S. federal tax consequences of an investment in the securities.
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. and WFS will act as the agents for this offering. WFS will receive a commission of up to $21.25 for each security it sells.
WFS proposes to offer the securities in part directly to the public at the price to public set forth on the cover page of this document
and in part to Wells Fargo Advisors (“WFA”) (the trade name of the retail brokerage business of WFS’s affiliates, Wells
Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC), an affiliate of WFS, or other securities dealers at such
price less a selling concession of up to $15.00 per security. In addition to the selling concession allowed to WFA, WFS may pay $0.75
per security of the commission to WFA as a distribution expense fee for each security sold by WFA.
In
addition, in respect of certain securities sold in this offering, we may pay a fee of up to $1.00 per security to selected securities
dealers in consideration for marketing and other services in connection with the distribution of the securities to other securities dealers.
See
"Plan of Distribution (Conflicts of Interest)" in the accompanying product supplement for principal at risk securities for
information about the distribution arrangements for the securities. References therein to "agent" refer to each of MS &
Co. and WFS, as agents for this offering, except that references to "agent" in the context of offers to certain Morgan Stanley
dealers and compliance with FINRA Rule 5121 do not apply to WFS. MS & Co., WFS or their affiliates may enter into hedging transactions
with us in connection with this offering.
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
Morgan Stanley Finance LLC
Market Linked Securities — Auto-Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Energy Select Sector SPDR® Fund, the Technology Select Sector SPDR® Fund and the Health Care Select Sector SPDR® Fund due September 29, 2025
offering
to any discretionary account. See “Plan of Distribution (Conflicts of Interest)” and “Use of Proceeds and Hedging”
in the accompanying product supplement.
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 accordance with their terms,
subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, concepts of reasonableness
and equitable principles of general applicability (including, without limitation, concepts of good faith, fair dealing and the lack of
bad faith), provided that such counsel expresses no opinion as to (i) the effect of fraudulent conveyance, fraudulent transfer
or similar provision of applicable law on the conclusions expressed above and (ii) any provision of the MSFL Senior Debt Indenture that
purports to avoid the effect of fraudulent conveyance, fraudulent transfer or similar provision of applicable law by limiting the amount
of Morgan Stanley’s obligation under the related guarantee. This opinion is given as of the date hereof and is limited to the laws
of the State of New York, the General Corporation Law of the State of Delaware and the Delaware Limited Liability Company Act. In addition,
this opinion is subject to customary assumptions about the trustee’s authorization, execution and delivery of the MSFL Senior Debt
Indenture and its authentication of the securities and the validity, binding nature and enforceability of the MSFL Senior Debt Indenture
with respect to the trustee, all as stated in the letter of such counsel dated November 16, 2020, which is Exhibit 5-a to the Registration
Statement on Form S-3 filed by Morgan Stanley on November 16, 2020.
Where
you can find more information
Morgan
Stanley and MSFL have filed a registration statement (including a prospectus, as supplemented by the product supplement for principal
at risk securities and the index supplement) with the Securities and Exchange Commission, or SEC, for the offering to which this communication
relates. You should read the prospectus in that registration statement, the product supplement for principal at risk securities, the
index supplement and any other documents relating to this offering that Morgan Stanley and MSFL have filed with the SEC for more complete
information about Morgan Stanley, MSFL and this offering. You may get these documents without cost by visiting EDGAR on the SEC web site
at.www.sec.gov. Alternatively, Morgan Stanley, MSFL, any underwriter or any dealer participating in
the offering will arrange to send you the product supplement for principal at risk securities, index supplement and prospectus if you
so request by calling toll-free 1-(800)-584-6837.
You
may access these documents on the SEC web site at.www.sec.gov as follows:
Product
Supplement for Principal at Risk Securities dated June 30, 2022
Index
Supplement dated November 16, 2020
Prospectus
dated November 16, 2020
Terms
used but not defined in this document are defined in the product supplement for principal at risk securities, in the index supplement
or in the prospectus.
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