CALCULATION
OF REGISTRATION FEE
Title
of Each Class of Securities Offered
|
|
Maximum
Aggregate Offering Price
|
|
Amount
of Registration Fee
|
Trigger Performance Leveraged Upside Securities
due 2021
|
|
$1,000,000
|
|
$129.80
|
PROSPECTUS Dated November 16, 2017
|
Pricing Supplement No. 3,650 to
|
PROSPECTUS SUPPLEMENT
|
Registration Statement Nos. 333-221595; 333-221595-01
|
Dated November 16, 2017
|
Dated March 17, 2020
|
|
Rule 424(b)(2)
|
$1,000,000
Morgan Stanley Finance LLC
GLOBAL MEDIUM-TERM NOTES, SERIES A
Senior Notes
Trigger PLUS due September
21, 2021
Based on the Worst Performing of the
Common Shares of International Paper Company, the Class B Common Stock of United Parcel Service, Inc. and the Common Stock of Wells
Fargo & Company
Fully and Unconditionally Guaranteed
by Morgan Stanley
Principal at Risk Securities
The Trigger PLUS are unsecured obligations of Morgan Stanley
Finance LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley. Unlike ordinary debt securities,
the Trigger PLUS do not pay interest and do not guarantee any return of principal at maturity. Instead, at maturity, you will receive
for each $1,000 stated principal amount of Trigger PLUS that you hold an amount in cash based upon the worst performing of the
common shares of International Paper Company, the class B common stock of United Parcel Service, Inc. and the common stock of Wells
Fargo & Company, which we refer to as International Paper Stock, United Parcel Stock and Wells Fargo Stock, respectively, and
collectively as the “underlying stocks.” At maturity, if the final share price of each underlying stock is greater
than its respective initial share price, you will receive the stated principal amount of your investment plus leveraged upside
performance of the worst performing underlying stock. If the final share price of any underlying stock is less than or
equal to its respective initial share price, but the final share price of each underlying stock is greater than or
equal to 65% of its respective initial share price, which we refer to as the respective trigger level, you will receive the
stated principal amount of your investment. However, if the final share price of any underlying stock is less than its respective
trigger level, you will be negatively exposed to the full amount of the percentage decline in the worst performing underlying stock
and will lose 1% of the stated principal amount for every 1% of decline in the price of the worst performing underlying stock from
its respective initial share price. Under these circumstances, the payment at maturity will be less than the stated principal amount
and will represent a loss of at least 35%, and possibly all, of your investment. Investors may lose their entire initial investment
in the Trigger PLUS. Because the payment at maturity of the Trigger PLUS is based on the worst performing of the underlying
stocks, a decline in any underlying stock to less than its respective trigger level will result in a loss of a significant
portion or all of your investment even if the other underlying stocks have appreciated or have not declined as much. The Trigger
PLUS are for investors who seek a common stock-based return and who are willing to risk their principal, risk exposure to the worst
performing of three underlying stocks and forgo current income in exchange for the leverage feature and the limited protection
against loss that applies only if the final share price of each underlying stock is greater than or equal to its respective trigger
level. The Trigger PLUS 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 Trigger PLUS are not secured obligations and you will
not have any security interest in, or otherwise have any access to, any underlying reference asset or assets.
|
•
|
The stated principal amount and issue price of each Trigger PLUS is $1,000.
|
|
•
|
We will not pay interest on the Trigger PLUS.
|
|
•
|
At maturity, you will receive for each $1,000 stated principal amount of Trigger PLUS that
you hold:
|
|
º
|
If the final share price of each underlying stock is greater than its respective
initial share price: $1,000 + ($1,000 × leverage factor × share percent change of the worst performing underlying stock)
|
|
º
|
If the final share price of any underlying stock is less than or equal to its
respective initial share price but the final share price of each underlying stock is greater than or equal to its
respective trigger level: $1,000
|
|
º
|
If the final share price of any underlying stock is less than its respective
trigger level: ($1,000 × share performance factor of the worst performing underlying stock)
|
Under these circumstances,
the payment at maturity will be less than the stated principal amount and will represent a loss of at least 35%, and possibly all,
of your investment.
|
•
|
The leverage factor is 310%.
|
|
•
|
The trigger level of each underlying stock is equal to 65% of the respective initial share
price and is as follows:
|
|
º
|
With respect to the International Paper Stock, $19.793, which is approximately 65% of its
initial share price
|
|
º
|
With respect to the United Parcel Stock, $58.013, which is approximately 65% of its initial
share price
|
|
º
|
With respect to the Wells Fargo Stock, $18.480, which is approximately 65% of its initial
share price
|
|
•
|
The worst performing underlying stock is the underlying stock with the lowest share percent
change.
|
|
•
|
The share percent change with respect to each underlying stock will be equal to (i) the final
share price minus the initial share price, divided by (ii) the initial share price.
|
|
•
|
The share performance factor with respect to each underlying stock will be equal to (i) the
final share price divided by (ii) the initial share price.
|
|
•
|
The initial share price with respect to each underlying stock is as follows:
|
|
º
|
With respect to the International Paper Stock, $30.45
|
|
º
|
With respect to the United Parcel Stock, $89.25
|
|
º
|
With respect to the Wells Fargo Stock, $28.43
|
|
•
|
The final share price with respect to each underlying stock will equal the closing price of
one share of such underlying stock times the adjustment factor for such underlying stock, each as of September 16, 2021, which
we refer to as the valuation date. The adjustment factor for each underlying stock will be initially set at 1.0 and is subject
to change upon certain corporate events affecting such underlying stock.
|
|
•
|
Investing in the Trigger PLUS is not equivalent to investing in International Paper Stock,
United Parcel Stock or Wells Fargo Stock.
|
|
•
|
The Trigger PLUS will not be listed on any securities exchange.
|
|
•
|
The estimated value of the Trigger PLUS on the pricing date is $877.40 per Trigger PLUS. See
“Summary of Pricing Supplement” beginning on PS-3.
|
|
•
|
The CUSIP number for the Trigger PLUS is 61770FUX2 and the ISIN for the Trigger PLUS is US61770FUX22.
|
You should read the more detailed description of the Trigger
PLUS in this pricing supplement. In particular, you should review and understand the descriptions in “Summary of Pricing
Supplement,” “Final Terms” and “Additional Information about the Trigger PLUS.”
The Trigger PLUS are riskier
than ordinary debt securities. See “Risk Factors” beginning on PS- 13.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these securities, or determined if this pricing supplement is truthful or complete.
Any representation to the contrary is a criminal offense.
PRICE $1,000 PER TRIGGER PLUS
|
Price
to public
|
Agent’s
commissions(1)
|
Proceeds
to us(2)
|
Per Trigger PLUS
|
$1,000
|
$3
|
$997
|
Total
|
$1,000,000
|
$3,000
|
$997,000
|
|
(1)
|
Selected dealers and their financial advisors will
collectively receive from the agent, Morgan Stanley & Co. LLC, a fixed sales commission of $3 for each Trigger PLUS they sell.
See “Additional Information About the Trigger PLUS—Supplemental Information Concerning Plan of Distribution; Conflicts
of Interest.” For additional information, see “Plan of Distribution (Conflicts of Interest)” in the accompanying
prospectus supplement.
|
|
(2)
|
See “Additional Information About the Trigger
PLUS—Use of Proceeds and Hedging” on page PS-41.
|
The agent for this offering, Morgan Stanley & Co. LLC,
is our affiliate. See “Additional Information About the Trigger PLUS—Supplemental Information Concerning Plan of Distribution;
Conflicts of Interest.”
The Trigger PLUS 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.
As used in this document, “we,” “us”
and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
MORGAN STANLEY
For a description of certain restrictions
on offers, sales and deliveries of the Trigger PLUS and on the distribution of this pricing supplement and the accompanying prospectus
supplement and prospectus relating to the Trigger PLUS, see the section of this pricing supplement called “Additional Information
About the Trigger PLUS—Supplemental Information Concerning Plan of Distribution; Conflicts of Interest.”
No action has been or will be taken
by us, the agent or any dealer that would permit a public offering of the Trigger PLUS or possession or distribution of this pricing
supplement or the accompanying prospectus supplement or prospectus in any jurisdiction, other than the United States, where action
for that purpose is required. Neither this pricing supplement nor the accompanying prospectus supplement and prospectus may be
used for the purpose of an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not authorized
or to any person to whom it is unlawful to make such an offer or solicitation.
In addition to the selling restrictions
set forth in “Plan of Distribution (Conflicts of Interest)” in the accompanying prospectus supplement, the following
selling restrictions also apply to the Trigger PLUS:
The Trigger PLUS have not been and will
not be registered with the Comissão de Valores Mobiliários (The Brazilian Securities Commission). The Trigger PLUS
may not be offered or sold in the Federative Republic of Brazil except in circumstances which do not constitute a public offering
or distribution under Brazilian laws and regulations.
The Trigger PLUS have not been registered
with the Superintendencia de Valores y Seguros in Chile and may not be offered or sold publicly in Chile. No offer, sales or deliveries
of the Trigger PLUS or distribution of this pricing supplement or the accompanying prospectus supplement or prospectus, may be
made in or from Chile except in circumstances which will result in compliance with any applicable Chilean laws and regulations.
The Trigger PLUS have not been registered
with the National Registry of Securities maintained by the Mexican National Banking and Securities Commission and may not be offered
or sold publicly in Mexico. This pricing supplement and the accompanying prospectus supplement and prospectus may not be publicly
distributed in Mexico.
ADDITIONAL
INFORMATION ABOUT THE TRIGGER PLUS
Interest Rate
|
|
None
|
Book Entry Note or Certificated Note
|
|
Book Entry. The Trigger PLUS will be issued in the form of one or more fully registered global securities which will be deposited with, or on behalf of, DTC and will be registered in the name of a nominee of DTC. DTC’s nominee will be the only registered holder of the Trigger PLUS. Your beneficial interest in the Trigger PLUS will be evidenced solely by entries on the books of the securities intermediary acting on your behalf as a direct or indirect participant in DTC. In this pricing supplement, all references to actions taken by “you” or to be taken by “you” refer to actions taken or to be taken by DTC and its participants acting on your behalf, and all references to payments or notices to you will mean payments or notices to DTC, as the registered holder of the Trigger PLUS, for distribution to participants in accordance with DTC’s procedures. For more information regarding DTC and book entry notes, please read “Forms of Securities—The Depositary” and “Forms of Securities—Global Securities—Registered Global Securities” in the accompanying prospectus.
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International Paper Stock; Public Information
|
|
International Paper Company is a global producer of renewable fiber-based packaging, pulp and paper products with manufacturing operations in North America, Latin America, Europe, North Africa and Russia. International Paper Stock is registered under the Exchange Act. Companies with securities registered under the Exchange Act are required to file periodically certain financial and other information specified by the Securities and Exchange Commission (the “Commission”). Information provided to or filed with the Commission can be accessed through a website maintained by the Commission. The address of the Commission’s website is.www.sec.gov. Information provided to or filed with the Commission by International Paper Company pursuant to the Exchange Act can be located by reference to Commission file number 001-03157. In addition, information regarding International Paper Company may be obtained from other sources including, but not limited to, press releases, newspaper articles and other publicly disseminated documents. We make no representation or warranty as to the accuracy or completeness of such information.
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This pricing supplement relates
only to the Trigger PLUS referenced hereby and does not relate to International Paper Stock or other securities of International
Paper Company We have derived all disclosures contained in this pricing supplement regarding International Paper Company from the
publicly available documents described in the preceding paragraph. In connection with the offering of the Trigger PLUS, neither
we nor the Agent has participated in the preparation of such documents or made any due diligence inquiry with respect to International
Paper Company in connection with the offering of the Trigger PLUS. Neither we nor the Agent makes any representation that such
publicly available documents are or any other publicly available
information regarding International Paper Company 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 in the preceding paragraph) that would
affect the trading price of International Paper Stock (and therefore the price of International Paper Stock at the time we priced
the Trigger PLUS) have been publicly disclosed. Subsequent disclosure of any such events or the disclosure of or failure to disclose
material future events concerning International Paper Company could affect the value received at maturity with respect to the Trigger
PLUS and therefore the value of the Trigger PLUS.
Neither we nor any of our
affiliates makes any representation to you as to the performance of International Paper Stock.
We and/or our affiliates may
presently or from time to time engage in business with International Paper Company, including extending loans to, or making equity
investments in, International Paper Company or providing advisory services to International Paper Company, including merger and
acquisition advisory services. In the course of such business, we and/or our affiliates may acquire non-public information with
respect to International Paper Company, 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 International Paper Company, and the
reports may or may not recommend that investors buy or hold International Paper Stock. As a purchaser of the Trigger PLUS, you
should undertake an independent investigation of International Paper Company as in your judgment is appropriate to make an informed
decision with respect to an investment linked to International Paper Stock.
United Parcel Stock; Public Information
|
|
United Parcel Service, Inc. is a private messenger and delivery service. United Parcel Stock is registered under the Exchange Act. Companies with securities registered under the Exchange Act are required to file periodically certain financial and other information specified by the Securities and Exchange Commission (the “Commission”). Information provided to or filed with the Commission can be accessed through a website maintained by the Commission. The address of the Commission’s website is.www.sec.gov. Information provided to or filed with the Commission by United Parcel Service, Inc. pursuant to the Exchange Act can be located by reference to Commission file number 001-15451. In addition, information regarding United Parcel Service, Inc. may be obtained from other sources including, but not limited to, press releases, newspaper articles and other publicly disseminated documents. We make no representation or warranty as to the accuracy or completeness of such information.
|
This pricing supplement relates
only to the Trigger PLUS referenced hereby and does not relate to United Parcel Stock or
other securities of United Parcel Service,
Inc. We have derived all disclosures contained in this pricing supplement regarding United Parcel Service, Inc. from the publicly
available documents described in the preceding paragraph. In connection with the offering of the Trigger PLUS, neither we nor the
Agent has participated in the preparation of such documents or made any due diligence inquiry with respect to United Parcel Service,
Inc. in connection with the offering of the Trigger PLUS. Neither we nor the Agent makes any representation that such publicly
available documents are or any other publicly available information regarding United Parcel Service, Inc. 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 in the preceding paragraph) that would affect the trading
price of United Parcel Stock (and therefore the price of United Parcel Stock at the time we priced the Trigger PLUS) have been
publicly disclosed. Subsequent disclosure of any such events or the disclosure of or failure to disclose material future events
concerning United Parcel Service, Inc. could affect the value received at maturity with respect to the Trigger PLUS and therefore
the value of the Trigger PLUS.
Neither we nor any of our
affiliates makes any representation to you as to the performance of United Parcel Stock.
We and/or our affiliates may
presently or from time to time engage in business with United Parcel Service, Inc., including extending loans to, or making equity
investments in, United Parcel Service, Inc. or providing advisory services to United Parcel Service, Inc., including merger and
acquisition advisory services. In the course of such business, we and/or our affiliates may acquire non-public information with
respect to United Parcel Service, Inc., 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 United Parcel Service, Inc., and the
reports may or may not recommend that investors buy or hold United Parcel Stock. As a purchaser of the Trigger PLUS, you should
undertake an independent investigation of United Parcel Service, Inc. as in your judgment is appropriate to make an informed decision
with respect to an investment linked to United Parcel Stock.
Wells Fargo Stock; Public Information
|
|
Wells Fargo & Company provides retail, commercial and corporate banking services. Wells Fargo Stock is registered under the Exchange Act. Companies with securities registered under the Exchange Act are required to file periodically certain financial and other information specified by the Securities and Exchange Commission (the “Commission”). Information provided to or filed with the Commission can be accessed through a website maintained by the Commission. The address of the Commission’s website is.www.sec.gov. Information provided to or filed with the Commission by Wells Fargo & Company pursuant to the Exchange Act can be located by reference to Commission file
|
number 001-02979. In addition, information regarding Wells Fargo & Company may be obtained from other sources including, but not limited to, press releases, newspaper articles and other publicly disseminated documents. We make no representation or warranty as to the accuracy or completeness of such information.
This pricing supplement relates
only to the Trigger PLUS referenced hereby and does not relate to Wells Fargo Stock or other securities of Wells Fargo & Company.
We have derived all disclosures contained in this pricing supplement regarding Wells Fargo & Company from the publicly available
documents described in the preceding paragraph. In connection with the offering of the Trigger PLUS, neither we nor the Agent has
participated in the preparation of such documents or made any due diligence inquiry with respect to Wells Fargo & Company in
connection with the offering of the Trigger PLUS. Neither we nor the Agent makes any representation that such publicly available
documents are or any other publicly available information regarding Wells Fargo & Company 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 in the preceding paragraph) that would affect the trading price of
Wells Fargo Stock (and therefore the price of Wells Fargo Stock at the time we priced the Trigger PLUS) have been publicly disclosed.
Subsequent disclosure of any such events or the disclosure of or failure to disclose material future events concerning Wells Fargo
& Company could affect the value received at maturity with respect to the Trigger PLUS and therefore the value of the Trigger
PLUS.
Neither we nor any of our
affiliates makes any representation to you as to the performance of Wells Fargo Stock.
We and/or our affiliates may
presently or from time to time engage in business with Wells Fargo & Company, including extending loans to, or making equity
investments in, Wells Fargo & Company or providing advisory services to Wells Fargo & Company, including merger and acquisition
advisory services. In the course of such business, we and/or our affiliates may acquire non-public information with respect to
Wells Fargo & Company, 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 Wells Fargo & Company, and the reports may or may
not recommend that investors buy or hold Wells Fargo Stock. As a purchaser of the Trigger PLUS, you should undertake an independent
investigation of Wells Fargo & Company as in your judgment is appropriate to make an informed decision with respect to an investment
linked to Wells Fargo Stock.
Historical Information
|
|
The following tables set forth the published high and low Closing Prices, as well as end-of-quarter Closing Prices, of International Paper Stock, United Parcel Stock and Wells Fargo Stock for each
|
|
|
quarter in the period from January 1, 2017 through March 17, 2020. The graphs following each Underlying Stock’s historical table set forth the historical performance of the respective Underlying Stock for the same period. On March 17, 2020, the Closing Price for the International Paper Stock was $33.49, the Closing Price for the United Parcel Stock was $96.79 and the Closing Price for the Wells Fargo Stock was $29.63. We obtained the information in the tables and graphs below from Bloomberg Financial Markets, without independent verification. The historical prices of the Underlying Stocks should not be taken as an indication of future performance, and no assurance can be given as to the Closing Prices of the Underlying Stocks on the Valuation Date. The price of the Worst Performing Underlying Stock may decrease below its respective Trigger Level so that you will receive a Payment at Maturity that is significantly less than the stated principal amount of the Trigger PLUS.
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|
|
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If the Final Share Price of any Underlying Stock is less than its respective Trigger Level, you will lose a significant portion or all of your investment.
|
International Paper Company
Historical High, Low and Period
End Closing Prices
January 1, 2017 through March
17, 2020
|
|
High ($)
|
Low ($)
|
Period End ($)
|
|
2017
|
|
|
|
|
First Quarter
|
57.99
|
50.27
|
50.78
|
|
Second Quarter
|
56.94
|
49.64
|
56.61
|
|
Third Quarter
|
58.17
|
52.21
|
56.82
|
|
Fourth Quarter
|
58.67
|
53.89
|
57.94
|
|
2018
|
|
|
|
|
First Quarter
|
65.08
|
50.15
|
53.43
|
|
Second Quarter
|
59.01
|
50.18
|
52.08
|
|
Third Quarter
|
54.58
|
49.15
|
49.15
|
|
Fourth Quarter
|
50.30
|
37.56
|
40.36
|
|
2019
|
|
|
|
|
First Quarter
|
47.74
|
40.36
|
46.27
|
|
Second Quarter
|
47.76
|
41.47
|
43.32
|
|
Third Quarter
|
45.99
|
36.74
|
41.82
|
|
Fourth Quarter
|
47.42
|
38.43
|
46.05
|
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2020
|
|
|
|
|
First Quarter (through March 17, 2020)
|
45.75
|
28.62
|
33.49
|
The following graph shows the daily Closing Prices
of International Paper Stock from January 1, 2015 through March 17, 2020. We obtained the information in the graph below from Bloomberg
Financial Markets, without independent verification. The historical Closing Prices should not be taken as an indication of future
performance, and no assurance can be given as to the Closing Price on the Valuation Date.
|
Historical Daily Closing Prices
of International Paper Stock
January 1, 2015 through March
17, 2020
United Parcel
Service, Inc.
Historical High,
Low and Period End Closing Prices
January 1, 2017 through March
17, 2020
|
|
|
High ($)
|
Low ($)
|
Period End ($)
|
|
2017
|
|
|
|
|
First Quarter
|
118.09
|
104.78
|
107.30
|
|
Second Quarter
|
111.01
|
102.87
|
110.59
|
|
Third Quarter
|
120.09
|
107.79
|
120.09
|
|
Fourth Quarter
|
123.72
|
112.55
|
119.15
|
|
2018
|
|
|
|
|
First Quarter
|
134.09
|
101.66
|
104.66
|
|
Second Quarter
|
118.34
|
103.84
|
106.23
|
|
Third Quarter
|
124.66
|
105.76
|
116.75
|
|
Fourth Quarter
|
118.78
|
89.89
|
97.53
|
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2019
|
|
|
|
|
First Quarter
|
112.13
|
94.45
|
111.74
|
|
Second Quarter
|
114.49
|
92.92
|
103.27
|
|
Third Quarter
|
122.85
|
101.62
|
119.82
|
|
Fourth Quarter
|
124.30
|
112.74
|
117.06
|
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2020
|
|
|
|
|
First Quarter (through March 17, 2020)
|
118.61
|
86.17
|
96.79
|
The following graph shows the daily Closing Prices
of United Parcel Stock from January 1, 2015 through March 17, 2020. We obtained the information in the graph below from Bloomberg
Financial Markets, without independent verification. The historical Closing Prices should not be taken as an indication of future
performance, and no assurance can be given as to the Closing Price on the Valuation Date.
|
Historical Daily Closing Prices
of United Parcel Stock
January
1, 2015 through March 17, 2020
|
|
Wells Fargo &
Company
Historical High,
Low and Period End Closing Prices
January 1, 2017 through March
17, 2020
|
|
|
High ($)
|
Low ($)
|
Period End ($)
|
|
2017
|
|
|
|
|
First Quarter
|
59.73
|
53.78
|
55.66
|
|
Second Quarter
|
55.78
|
51.14
|
55.41
|
|
Third Quarter
|
55.78
|
49.58
|
55.15
|
|
Fourth Quarter
|
61.61
|
53.19
|
60.67
|
|
2018
|
|
|
|
|
First Quarter
|
65.93
|
50.98
|
52.41
|
|
Second Quarter
|
56.18
|
50.39
|
55.44
|
|
Third Quarter
|
59.19
|
52.56
|
52.56
|
|
Fourth Quarter
|
54.46
|
43.60
|
46.08
|
|
2019
|
|
|
|
|
First Quarter
|
51.73
|
46.57
|
48.32
|
|
Second Quarter
|
49.17
|
44.37
|
47.32
|
|
Third Quarter
|
50.71
|
43.38
|
50.44
|
|
Fourth Quarter
|
54.46
|
47.82
|
53.80
|
|
2020
|
|
|
|
|
First Quarter (through March 17, 2020)
|
53.75
|
26.50
|
29.63
|
The following graph shows the daily Closing Prices
of Wells Fargo Stock from January 1, 2015 through March 17, 2020. We obtained the information in the graph below from Bloomberg
Financial Markets, without independent verification. The historical Closing Prices should not be taken as an indication of future
performance, and no assurance can be given as to the Closing Price on the Valuation Date.
Historical Daily Closing Prices
of Wells Fargo Stock
January 1, 2015 through March
17, 2020
Use of Proceeds and Hedging
|
|
The proceeds from the sale of the Trigger PLUS will be used by us for general corporate purposes. We will receive, in aggregate, $1,000 per Trigger PLUS issued, because, when we enter into hedging transactions in order to meet our obligations under the Trigger PLUS, our hedging counterparty will reimburse the cost of the Agent’s commissions. The costs of the Trigger PLUS borne by you and described beginning on page PS-3 above comprise the Agent’s commissions and the cost of issuing, structuring and hedging the Trigger PLUS. See also “Use of Proceeds” in the accompanying prospectus.
|
On or prior to the day on which
the Initial Share Price of each Underlying Stock is determined, we expect to hedge our anticipated exposure in connection with
the Trigger PLUS by taking positions in the Underlying Stocks or in options contracts on the Underlying Stocks that are listed
on major securities markets or positions in any other available securities or instruments that we may wish to use in connection
with such hedging. Such purchase activity could potentially increase the Initial Share Price of any Underlying Stock, and therefore
could increase the price at or above which such Underlying Stock must close so that you do not suffer a significant loss on your
initial investment in the Trigger PLUS (depending also on the performance of the other Underlying Stocks). In addition, through
our affiliates, we are likely to modify our hedge position throughout the term of the Trigger PLUS by purchasing and selling the
Underlying Stocks, futures or options contracts on the Underlying Stocks that are listed on major securities markets or positions
in any other available securities or instruments that we may wish to use in connection with such hedging activities, including
by selling any such securities or instruments on the Valuation Date. As a result, these entities may be unwinding or adjusting
hedge positions during the term of the Trigger PLUS, and the hedging strategy may involve greater and more frequent dynamic adjustments
to the hedge as the Valuation Date
approaches. We cannot give any assurance that our hedging activities will not affect the value
of any Underlying Stock and, therefore, adversely affect the value of the Trigger PLUS or the payment you will receive at maturity,
if any (depending also on the performance of the other Underlying Stocks).
Supplemental Information Concerning
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Plan of Distribution; Conflicts of Interest
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Selected dealers, which may include our affiliates, and their financial advisors will collectively receive from the agent a fixed sales commission of $3 for each Trigger PLUS they sell.
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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 Trigger PLUS.
MS & Co. will conduct this
offering in compliance with the requirements of FINRA Rule 5121 of the Financial Industry Regulatory Authority, Inc., which is
commonly referred to as FINRA, regarding a FINRA member firm’s distribution of the securities of an affiliate and related
conflicts of interest. MS & Co. or any of our other affiliates may not make sales in this offering to any discretionary account.
In order to facilitate the offering
of the Trigger PLUS, the Agent may engage in transactions that stabilize, maintain or otherwise affect the price of the Trigger
PLUS. Specifically, the Agent may sell more Trigger PLUS than it is obligated to purchase in connection with the offering, creating
a naked short position in the Trigger PLUS for its own account. The Agent must close out any naked short position by purchasing
the Trigger PLUS in the open market after the offering. A naked short position in the Trigger PLUS is more likely to be created
if the Agent is concerned that there may be downward pressure on the price of the Trigger PLUS in the open market after pricing
that could adversely affect investors who purchase in the offering. As an additional means of facilitating the offering, the Agent
may bid for, and purchase, the Trigger PLUS in the open market to stabilize the price of the Trigger PLUS. Any of these activities
may raise or maintain the market price of the Trigger PLUS above independent market prices or prevent or retard a decline in the
market price of the Trigger PLUS. The Agent is not required to engage in these activities, and may end any of these activities
at any time. An affiliate of the Agent has entered into a hedging transaction in connection with this offering of the Trigger PLUS.
See “—Use of Proceeds and Hedging” above.
General
No action has been or will be
taken by us, the Agent or any dealer that would permit a public offering of the Trigger PLUS or possession or distribution of this
pricing supplement or the accompanying prospectus supplement or prospectus in any jurisdiction, other than the United States, where
action for that purpose is required. No offers, sales or deliveries of the Trigger
PLUS, or distribution of this pricing supplement
or the accompanying prospectus supplement or prospectus or any other offering material relating to the Trigger PLUS, may be made
in or from any jurisdiction except in circumstances which will result in compliance with any applicable laws and regulations and
will not impose any obligations on us, the Agent or any dealer.
The Agent has represented and
agreed, and each dealer through which we may offer the Trigger PLUS has represented and agreed, that it (i) will comply with all
applicable laws and regulations in force in each non-U.S. jurisdiction in which it purchases, offers, sells or delivers the Trigger
PLUS or possesses or distributes this pricing supplement and the accompanying prospectus supplement and prospectus and (ii) will
obtain any consent, approval or permission required by it for the purchase, offer or sale by it of the Trigger PLUS under the laws
and regulations in force in each non-U.S. jurisdiction to which it is subject or in which it makes purchases, offers or sales of
the Trigger PLUS. We shall not have responsibility for the Agent’s or any dealer’s compliance with the applicable laws
and regulations or obtaining any required consent, approval or permission.
In addition to the selling restrictions
set forth in “Plan of Distribution (Conflicts of Interest)” in the accompanying prospectus supplement, the following
selling restrictions also apply to the Trigger PLUS:
Brazil
The Trigger PLUS have not been
and will not be registered with the Comissão de Valores Mobiliários (The Brazilian Securities Commission). The Trigger
PLUS may not be offered or sold in the Federative Republic of Brazil except in circumstances which do not constitute a public offering
or distribution under Brazilian laws and regulations.
Chile
The Trigger PLUS have not been
registered with the Superintendencia de Valores y Seguros in Chile and may not be offered or sold publicly in Chile. No offer,
sales or deliveries of the Trigger PLUS or distribution of this pricing supplement or the accompanying prospectus supplement or
prospectus, may be made in or from Chile except in circumstances which will result in compliance with any applicable Chilean laws
and regulations.
Mexico
The Trigger
PLUS have not been registered with the National Registry of Securities maintained by the Mexican National Banking and Securities
Commission and may not be offered or sold publicly in Mexico. This pricing supplement, the accompanying prospectus supplement and
the accompanying prospectus may not be publicly distributed in Mexico.
Validity of the Trigger PLUS
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In the opinion of Davis Polk & Wardwell LLP, as special counsel to MSFL and Morgan Stanley, when the Trigger PLUS 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 Trigger PLUS 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 Trigger PLUS and the validity, binding nature and enforceability of the MSFL Senior Debt Indenture with respect to the trustee, all as stated in the letter of such counsel dated November 16, 2017, which is Exhibit 5-a to the Registration Statement on Form S-3 filed by Morgan Stanley on November 16, 2017.
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Benefit Plan Investor Considerations
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Each fiduciary of a pension, profit-sharing or other employee benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (a “Plan”), should consider the fiduciary standards of ERISA in the context of the Plan’s particular circumstances before authorizing an investment in the Trigger PLUS. Accordingly, among other factors, the fiduciary should consider whether the investment would satisfy the prudence and diversification requirements of ERISA and would be consistent with the documents and instruments governing the Plan.
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In addition, we and certain of our affiliates, including
MS & Co., may each be considered a “party in interest” within the meaning of ERISA, or a “disqualified person”
within the meaning of the Internal Revenue Code of 1986, as amended (the “Code”), with respect to many Plans, as well
as many individual retirement accounts and Keogh plans (such accounts and plans, together with other plans, accounts and arrangements
subject to Section 4975 of the Code, also “Plans”). ERISA Section 406 and Section 4975 of the Code generally prohibit
transactions between Plans and parties in interest or disqualified persons. Prohibited transactions
within the meaning of ERISA
or the Code would likely arise, for example, if the Trigger PLUS are acquired by or with the assets of a Plan with respect to which
MS & Co. or any of its affiliates is a service provider or other party in interest, unless the Trigger PLUS are acquired pursuant
to an exemption from the “prohibited transaction” rules. A violation of these “prohibited transaction”
rules could result in an excise tax or other liabilities under ERISA and/or Section 4975 of the Code for those persons, unless
exemptive relief is available under an applicable statutory or administrative exemption.
The U.S. Department of Labor has issued five prohibited
transaction class exemptions (“PTCEs”) that may provide exemptive relief for direct or indirect prohibited transactions
resulting from the purchase or holding of the Trigger PLUS. Those class exemptions are PTCE 96-23 (for certain transactions determined
by in-house asset managers), PTCE 95-60 (for certain transactions involving insurance company general accounts), PTCE 91-38 (for
certain transactions involving bank collective investment funds), PTCE 90-1 (for certain transactions involving insurance company
separate accounts) and PTCE 84-14 (for certain transactions determined by independent qualified professional asset managers). In
addition, ERISA Section 408(b)(17) and Section 4975(d)(20) of the Code provide an exemption for the purchase and sale of securities
and the related lending transactions, provided that neither the issuer of the securities nor any of its affiliates has or exercises
any discretionary authority or control or renders any investment advice with respect to the assets of the Plan involved in the
transaction and provided further that the Plan pays no more, and receives no less, than “adequate consideration” in
connection with the transaction (the so-called “service provider” exemption). There can be no assurance that any of
these class or statutory exemptions will be available with respect to transactions involving the Trigger PLUS.
Because we may be considered a party in interest
with respect to many Plans, the Trigger PLUS may not be purchased, held or disposed of by any Plan, any entity whose underlying
assets include “plan assets” by reason of any Plan’s investment in the entity (a “Plan Asset Entity”)
or any person investing “plan assets” of any Plan, unless such purchase, holding or disposition is eligible for exemptive
relief, including relief available under PTCEs 96-23, 95-60, 91-38, 90-1, 84-14 or the service provider exemption or such purchase,
holding or disposition is otherwise not prohibited. Any purchaser, including any fiduciary purchasing on behalf of a Plan, transferee
or holder of the Trigger PLUS will be deemed to have represented, in its corporate and its fiduciary capacity, by its purchase
and holding of the Trigger PLUS that either (a) it is not a Plan or a Plan Asset Entity and is not purchasing such Trigger PLUS
on behalf of or with “plan assets” of any Plan or with any assets of a governmental, non-U.S. or church plan that is
subject to any federal, state, local or non-U.S. law that is substantially similar to the provisions of
Section 406 of ERISA or
Section 4975 of the Code (“Similar Law”) or (b) its purchase, holding and disposition of these Trigger PLUS will not
constitute or result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or violate any
Similar Law.
Due to the complexity of these rules and the penalties
that may be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries
or other persons considering purchasing the Trigger PLUS on behalf of or with “plan assets” of any Plan consult with
their counsel regarding the availability of exemptive relief.
The Trigger PLUS are contractual financial instruments.
The financial exposure provided by the Trigger PLUS is not a substitute or proxy for, and is not intended as a substitute or proxy
for, individualized investment management or advice for the benefit of any purchaser or holder of the Trigger PLUS. The Trigger
PLUS have not been designed and will not be administered in a manner intended to reflect the individualized needs and objectives
of any purchaser or holder of the Trigger PLUS.
Each purchaser or holder of any Trigger PLUS acknowledges
and agrees that:
(i) the
purchaser or holder or its fiduciary has made and shall make all investment decisions for the purchaser or holder and the purchaser
or holder has not relied and shall not rely in any way upon us or our affiliates to act as a fiduciary or adviser of the purchaser
or holder with respect to (A) the design and terms of the Trigger PLUS, (B) the purchaser or holder’s investment in the Trigger
PLUS, or (C) the exercise of or failure to exercise any rights we have under or with respect to the Trigger PLUS;
(ii) we
and our affiliates have acted and will act solely for our own account in connection with (A) all transactions relating to the Trigger
PLUS and (B) all hedging transactions in connection with our obligations under the Trigger PLUS;
(iii) any
and all assets and positions relating to hedging transactions by us or our affiliates are assets and positions of those entities
and are not assets and positions held for the benefit of the purchaser or holder;
(iv) our
interests are adverse to the interests of the purchaser or holder; and
(v) neither
we nor any of our affiliates is a fiduciary or adviser of the purchaser or holder in connection with any such assets, positions
or transactions, and any information that we or any of our affiliates may provide is not intended to be impartial investment advice.
Each purchaser and holder of the Trigger PLUS has
exclusive responsibility for ensuring that its purchase, holding and
disposition of the Trigger PLUS do not violate the prohibited
transaction rules of ERISA or the Code or any Similar Law. The sale of any Trigger PLUS to any Plan or plan subject to Similar
Law is in no respect a representation by us or any of our affiliates or representatives that such an investment meets all relevant
legal requirements with respect to investments by plans generally or any particular plan, or that such an investment is appropriate
for plans generally or any particular plan. In this regard, neither this discussion nor anything provided in this document is or
is intended to be investment advice directed at any potential Plan purchaser or at Plan purchasers generally and such purchasers
of these Trigger PLUS should consult and rely on their own counsel and advisers as to whether an investment in these Trigger PLUS
is suitable.
However, individual retirement accounts, individual
retirement annuities and Keogh plans, as well as employee benefit plans that permit participants to direct the investment of their
accounts, will not be permitted to purchase or hold the Trigger PLUS if the account, plan or annuity is for the benefit of an employee
of Morgan Stanley or Morgan Stanley Wealth Management or a family member and the employee receives any compensation (such as, for
example, an addition to bonus) based on the purchase of the Trigger PLUS by the account, plan or annuity.
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 Trigger PLUS, either directly or indirectly.
United States Federal Taxation
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Prospective investors should note that the discussion under the section called “United States Federal Taxation” in the accompanying prospectus supplement does not apply to the Trigger PLUS issued under this pricing supplement and is superseded by the following discussion.
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The following
is a general discussion of the material U.S. federal income tax consequences and certain estate tax consequences of the ownership
and disposition of the Trigger PLUS. This discussion applies only to investors in the Trigger PLUS who:
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purchase the Trigger PLUS in the original offering; and
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hold the Trigger PLUS as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended
(the “Code”).
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This discussion does not describe
all of the tax consequences that may be relevant to a holder in light of the holder’s particular circumstances or to holders
subject to special rules, such as:
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certain financial institutions;
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certain dealers and traders in securities or commodities;
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investors holding the Trigger PLUS as part of a “straddle,” wash sale, conversion transaction, integrated transaction
or constructive sale transaction;
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U.S. Holders (as defined below) whose functional currency is not the U.S. dollar;
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partnerships or other entities classified as partnerships for U.S. federal income tax purposes;
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regulated investment companies;
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real estate investment trusts; or
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tax-exempt entities, including “individual retirement accounts” or “Roth IRAs” as defined in Section
408 or 408A of the Code, respectively.
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If an entity that is classified
as a partnership for U.S. federal income tax purposes holds the Trigger PLUS, the U.S. federal income tax treatment of a partner
will generally depend on the status of the partner and the activities of the partnership. If you are a partnership holding the
Trigger PLUS or a partner in such a partnership, you should consult your tax adviser as to the particular U.S. federal tax consequences
of holding and disposing of the Trigger PLUS to you.
In addition, we will not attempt
to ascertain whether any issuer of any shares to which a Trigger PLUS relates (such shares hereafter referred to as “Underlying
Shares”) is treated as a “U.S. real property holding corporation” (“USRPHC”) within the meaning of
Section 897 of the Code. If any issuer of Underlying Shares were so treated, certain adverse U.S. federal income tax consequences
might apply to a Non-U.S. Holder (as defined below) upon the sale, exchange or settlement of the Trigger PLUS. You should refer
to information filed with the Securities and Exchange Commission or other governmental authorities by the issuers of the Underlying
Shares and consult your tax adviser regarding the possible consequences to you if any issuer is or becomes a USRPHC.
As the law applicable to the U.S.
federal income taxation of instruments such as the Trigger PLUS is technical and complex, the discussion below necessarily represents
only a general summary. Moreover, the effect of any applicable state, local or non-U.S. tax laws is not discussed, nor are any
alternative minimum tax consequences or consequences resulting from the Medicare tax on investment income.
This discussion is based on the
Code, administrative pronouncements, judicial decisions and final, temporary and proposed Treasury regulations, all as of the date
of this pricing supplement, changes to any of which subsequent to the date hereof may affect the tax consequences described herein.
Persons considering the purchase of the Trigger PLUS should consult their tax advisers with regard to the application of the U.S.
federal income tax laws to their particular situations as well as any tax consequences arising under the laws of any state, local
or non-U.S. taxing jurisdiction.
General
Although there is uncertainty
regarding the U.S. federal income tax consequences of an investment in the Trigger PLUS due to the lack of governing authority,
in the opinion of our counsel, under current law, and based on current market conditions, each Trigger PLUS should be treated as
a single financial contract that is an “open transaction” for U.S. federal income tax purposes.
Due to the absence of statutory,
judicial or administrative authorities that directly address the treatment of the Trigger PLUS or instruments that are similar
to the Trigger PLUS for U.S. federal income tax purposes, no assurance can be given that the Internal Revenue Service (the “IRS”)
or a court will agree with the tax treatment described herein. Accordingly, you should consult your tax adviser regarding all aspects
of the U.S. federal tax consequences of an investment in the Trigger PLUS (including possible alternative treatments of the Trigger
PLUS). Unless otherwise stated, the following discussion is based on the treatment of the Trigger PLUS as described in the previous
paragraph.
Tax Consequences to U.S. Holders
This section applies to you only
if you are a U.S. Holder. As used herein, the term “U.S. Holder” means a beneficial owner of a Trigger PLUS that is,
for U.S. federal income tax purposes:
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a citizen or individual resident of the United States;
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a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any
state thereof or the District of Columbia; or
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an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.
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Tax Treatment of the Trigger
PLUS
Assuming the treatment of the
Trigger PLUS as set forth above is respected, the following U.S. federal income tax consequences should result.
Tax Treatment Prior to Settlement.
A U.S. Holder should not be required to recognize taxable income over the term of the Trigger PLUS prior to settlement, other
than pursuant to a sale or exchange as described below.
Tax Basis. A U.S. Holder’s
tax basis in the Trigger PLUS should equal the amount paid by the U.S. Holder to acquire the Trigger PLUS.
Sale, Exchange or Settlement
of the Trigger PLUS. Upon a sale, exchange or settlement of the Trigger PLUS, 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
Trigger PLUS sold, exchanged or settled. Any gain or loss recognized upon the sale, exchange or settlement of the Trigger PLUS
should be long-term capital gain or loss if the U.S. Holder has held the Trigger PLUS for more than one year at such time, and
short-term capital gain or loss otherwise.
Possible Alternative Tax
Treatments of an Investment in the Trigger PLUS
Due to the absence of authorities
that directly address the proper tax treatment of the Trigger PLUS, no assurance can be given that the IRS will accept, or that
a court will uphold, the treatment described above. In particular, the IRS could seek to analyze the U.S. federal income tax consequences
of owning the Trigger PLUS under Treasury regulations governing contingent payment debt instruments (the “Contingent Debt
Regulations”). If the IRS were successful in asserting that the Contingent Debt Regulations applied to the Trigger PLUS,
the timing and character of income thereon would be significantly affected. Among other things, a U.S. Holder would be required
to accrue into income original issue discount on the Trigger PLUS every year at a “comparable yield” determined at
the time of their issuance, adjusted upward or downward to reflect the difference, if any, between the actual and the projected
amount of the contingent payment on the Trigger PLUS. Furthermore, any gain realized by a U.S. Holder at maturity or upon a sale,
exchange or other disposition of the Trigger PLUS would generally be treated as ordinary income, and any loss realized would be
treated as ordinary loss to the extent of the U.S. Holder’s prior accruals of original issue discount and as capital loss
thereafter. The risk that financial instruments providing for buffers, triggers or similar downside protection features, such as
the Trigger PLUS, would be recharacterized as debt is greater than the risk of recharacterization for comparable financial instruments
that do not have such features.
Other alternative federal income
tax treatments of the Trigger PLUS are also possible, which, if applied, could significantly affect the timing and character of
the income or loss with respect to the Trigger PLUS. In 2007, the U.S. Treasury Department and the IRS released a notice requesting
comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments. The notice
focuses in particular on whether to require holders of these instruments to accrue income over the term of their investment. It
also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments;
whether short-term instruments should be subject to any such accrual regime; the relevance of factors such as the exchange-traded
status of the instruments and the nature of the underlying property to which the instruments are linked; and whether these instruments
are or should be subject to the “constructive ownership” rule, which very generally can operate to recharacterize certain
long-term capital gain as ordinary income and impose an interest charge. While the notice requests comments on appropriate transition
rules and effective dates, 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 Trigger PLUS, possibly with retroactive effect. U.S. Holders
should consult their tax advisers regarding the U.S. federal income tax consequences of an investment in the Trigger PLUS, including
possible alternative treatments and the issues presented by this notice.
Backup Withholding and Information
Reporting
Backup withholding may apply in
respect of the payment on the Trigger PLUS at maturity and the payment of proceeds from a sale, exchange or other disposition of
the Trigger PLUS, unless a U.S. Holder provides proof of an applicable exemption or a correct taxpayer identification number and
otherwise complies with applicable requirements of the backup withholding rules. The amounts withheld under the backup withholding
rules are not an additional tax and may be refunded, or credited against the U.S. Holder’s U.S. federal income tax liability,
provided that the required information is timely furnished to the IRS. In addition, information returns may be filed with the IRS
in connection with the payment on the Trigger PLUS and the payment of proceeds from a sale, exchange or other disposition of the
Trigger PLUS, unless the U.S. Holder provides proof of an applicable exemption from the information reporting rules.
Tax Consequences to Non-U.S.
Holders
This section applies to you only
if you are a Non-U.S. Holder. As used herein, the term “Non-U.S. Holder” means a beneficial owner of a Trigger PLUS
that is, for U.S. federal income tax purposes:
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an individual who is classified as a nonresident alien;
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a foreign corporation; or
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a foreign estate or trust.
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The term “Non-U.S. Holder”
does not include any of the following holders:
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a holder who is an individual present in the United States for 183 days or more in the taxable year of disposition and who
is not otherwise a resident of the United States for U.S. federal income tax purposes;
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certain former citizens or residents of the United States; or
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a holder for whom income or gain in respect of the Trigger PLUS is effectively connected with the conduct of a trade or business
in the United States.
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Such holders should consult their
tax advisers regarding the U.S. federal income tax consequences of an investment in the Trigger PLUS.
Tax Treatment upon Sale,
Exchange or Settlement of the Trigger PLUS
In general. Assuming the
treatment of the Trigger PLUS as set forth above is respected, and subject to the discussions below concerning backup withholding
and the possible application of Section 871(m) of the Code and the discussion above concerning the possible application of Section
897 of the Code, a Non-U.S. Holder of the Trigger PLUS generally will not be subject to U.S. federal income or withholding tax
in respect of amounts paid to the Non-U.S. Holder.
Subject to the discussions regarding
the possible application of Sections 871(m) and 897 of the Code and FATCA, if all or any portion of a Trigger PLUS were recharacterized
as a debt instrument, any payment made to a Non-U.S. Holder with respect to the Trigger PLUS would not be subject to U.S. federal
withholding tax, provided that:
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the Non-U.S. Holder does not own, directly or by attribution, ten percent or more of the total combined voting power of all
classes of Morgan Stanley stock entitled to vote;
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the Non-U.S. Holder is not a controlled foreign corporation related, directly or indirectly, to Morgan Stanley through stock
ownership;
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the Non-U.S. Holder is not a bank receiving interest under Section 881(c)(3)(A) of the Code, and
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the certification requirement described below has been fulfilled with respect to the beneficial owner.
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Certification Requirement.
The certification requirement referred to in the preceding paragraph will be fulfilled if the beneficial owner of a Trigger
PLUS (or a financial institution holding a Trigger PLUS on behalf of the beneficial owner) furnishes to the applicable withholding
agent an IRS Form W-8BEN (or other appropriate form) on which the beneficial owner certifies under penalties of perjury that it
is not a U.S. person.
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. Among the issues addressed in the notice is the degree, if any, to which any income with respect to instruments
such as the Trigger PLUS should be subject to U.S. withholding tax. It is possible that any Treasury regulations or other guidance
promulgated after consideration of this issue could materially and adversely affect the withholding tax consequences of ownership
and disposition of the Trigger PLUS, possibly on a retroactive basis. Non-U.S. Holders should note that we currently do not intend
to withhold on any payment made with respect to the Trigger PLUS to Non-U.S. Holders (subject to compliance by such holders with
the
certification requirement described above and to the discussions below regarding Section 871(m) and FATCA). However, in the
event of a change of law or any formal or informal guidance by the IRS, the U.S. Treasury Department or Congress, we may decide
to withhold on payments made with respect to the Trigger PLUS to Non-U.S. Holders, and we will not be required to pay any additional
amounts with respect to amounts withheld. Accordingly, Non-U.S. Holders should consult their tax advisers regarding all aspects
of the U.S. federal income tax consequences of an investment in the Trigger PLUS, including the possible implications of the notice
referred to above.
Section 871(m) Withholding
Tax on Dividend Equivalents
Section 871(m) of the Code and
Treasury regulations promulgated thereunder (“Section 871(m)”) generally impose a 30% (or a lower applicable treaty
rate) withholding tax on dividend equivalents paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments
linked to U.S. equities or indices that include U.S. equities (each, an “Underlying Security”). Subject to certain
exceptions, Section 871(m) generally applies to securities that substantially replicate the economic performance of one or more
Underlying Securities, as determined based on tests set forth in the applicable Treasury regulations (a “Specified Security”).
However, pursuant to an IRS notice, Section 871(m) will not apply to securities issued before January 1, 2023 that do not have
a delta of one with respect to any Underlying Security. Based on our determination that the Trigger PLUS do not have a delta of
one with respect to any Underlying Security, our counsel is of the opinion that the Trigger PLUS 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 Trigger PLUS.
U.S. Federal Estate Tax
Individual Non-U.S. Holders and
entities the property of which is potentially includible in such an individual’s gross estate for U.S. federal estate tax
purposes (for example, a trust funded by such an individual and with respect to which the individual has retained certain interests
or powers), should note that, absent an applicable treaty exemption, the Trigger PLUS may be treated as U.S. situs property subject
to U.S. federal estate tax. Prospective investors that are non-U.S. individuals, or are entities of the type described above, should
consult their tax advisers regarding the U.S. federal estate tax consequences of an investment in the Trigger PLUS.
Backup Withholding and Information
Reporting
Information returns may be filed
with the IRS in connection with the payment on the Trigger PLUS at maturity as well as in connection with the payment of proceeds
from a sale, exchange or other disposition of the Trigger PLUS. A Non-U.S. Holder may be subject to backup withholding in respect
of amounts paid to the Non-U.S. Holder, unless such Non-U.S. Holder complies with certification procedures to establish that it
is not a U.S. person for U.S. federal income tax purposes or otherwise establishes an exemption. Compliance with the certification
procedures described above under “―Tax Treatment upon Sale, Exchange or Settlement of the Trigger PLUS – Certification
Requirement” will satisfy the certification requirements necessary to avoid backup withholding as well. The amount of any
backup withholding from a payment to a Non-U.S. Holder will be allowed as a credit against the Non-U.S. Holder’s U.S. federal
income tax liability and may entitle the Non-U.S. Holder to a refund, provided that the required information is timely furnished
to the IRS.
FATCA
Legislation
commonly referred to as “FATCA” generally imposes a withholding tax of 30% on payments to certain non-U.S. entities
(including financial intermediaries) with respect to certain financial instruments, unless various U.S. information reporting and
due diligence requirements have been satisfied. An intergovernmental agreement between the United States and the non-U.S. entity’s
jurisdiction may modify these requirements. FATCA generally applies to certain financial instruments that are treated as paying
U.S.-source interest or other U.S.-source “fixed or determinable annual or periodical” income (“FDAP income”).
If the Trigger PLUS were recharacterized as debt instruments, FATCA would apply to any payment of amounts treated as interest and
to payments of gross proceeds of the disposition (including upon retirement) of the Trigger PLUS. However, under recently proposed
regulations (the preamble to which specifies that taxpayers are permitted to rely on them pending finalization), no withholding
will apply on payments of gross proceeds (other than amounts treated as FDAP income). If withholding were to apply to the Trigger
PLUS, we would not be required to pay any additional amounts with respect to amounts withheld. Both U.S. and Non-U.S. Holders should
consult their tax advisers regarding the potential application of FATCA to the Trigger PLUS.
The discussion
in the preceding paragraphs under “United States Federal Taxation,” insofar as it purports to describe provisions of
U.S. federal income tax laws or legal conclusions with respect thereto, constitutes the full opinion of Davis Polk & Wardwell
LLP regarding the material U.S. federal income tax consequences of an investment in the Trigger PLUS.