June 2022
Preliminary Terms No. 5,413
Registration Statement Nos. 333-250103; 333-250103-01
Dated June 9, 2022
Filed pursuant to Rule 433
Morgan Stanley Finance LLC
STRUCTURED INVESTMENTS
Opportunities in International Equities
Trigger PLUS Based on the Value of the Worst Performing of the EURO STOXX 50® Index and the iShares® MSCI EAFE ETF due June 22, 2027
Trigger Performance Leveraged Upside SecuritiesSM
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. The Trigger PLUS will pay no interest, do not guarantee any return of principal at maturity and have the terms described in the accompanying product supplement for PLUS, index supplement and prospectus, as supplemented or modified by this document. The payment at maturity on the Trigger PLUS will be based on the value of the worst performing of the EURO STOXX 50® Index and the iShares® MSCI EAFE ETF. At maturity, if the final level of each underlying is greater than its respective initial level, investors will receive the stated principal amount of their investment plus leveraged upside performance of the worst performing underlying. If the final level of either of the underlyings is less than or equal to its respective initial level but the final level of each underlying is greater than or equal to its respective trigger level, investors will receive the stated principal amount of their investment. However, if the final level of either of the underlyings is less than its respective trigger level, investors will be negatively exposed to the full decline in the worst performing underlying and will lose 1% of the stated principal amount for every 1% of decline in the worst performing underlying, without any buffer. 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 underlyings, a decline in either of the underlyings beyond its respective trigger level will result in a significant loss of your investment even if the other underlying has appreciated or has not declined as much. These long-dated Trigger PLUS are for investors who seek an equity-based return and who are willing to risk their principal, risk exposure to the worst performing of two underlyings and forgo current income in exchange for the upside leverage feature and the limited protection against loss that applies to a limited range of performance of the worst performing underlying, only if the final level of each underlying is greater than or equal to the 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.
SUMMARY TERMS | |||
Issuer: | Morgan Stanley Finance LLC | ||
Guarantor: | Morgan Stanley | ||
Maturity date: | June 22, 2027 | ||
Underlyings: | The EURO STOXX 50® Index (the “SX5E Index”) and the iShares® MSCI EAFE ETF (the “EFA Shares” or the “underlying shares”) | ||
Aggregate principal amount: | $ | ||
Payment at maturity: | If the final level of each underlying is greater than its respective initial level, $1,000 + ($1,000 × leverage factor × underlying percent change of the worst performing underlying) If the final level of either of the underlyings is less than or equal to its respective initial level but the final level of each underlying is greater than or equal to its respective trigger level, $1,000 If the final level of either of the underlyings is less than its respective trigger level, $1,000 × underlying performance factor of the worst performing underlying Under these circumstances, the payment at maturity will be less than the stated principal amount of $1,000, and will represent a loss of at least 35%, and possibly all, of your investment. | ||
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Underlying percent change: | With respect to each underlying, (final level – initial level) / initial level | ||
Worst performing underlying: | The underlying with the lesser underlying percent change | ||
Underlying performance factor: | With respect to each underlying, final level / initial level | ||
Initial level: | With respect to the SX5E Index, , which is the index closing value of such underlying on the pricing date With respect to the EFA Shares, $ , which is the closing price of such underlying on the pricing date | ||
Final level: | With respect to the SX5E Index, the index closing value of such underlying on the valuation date With respect to the EFA Shares, the closing price of such underlying on the valuation date times the relevant adjustment factor on such date | ||
Valuation date: | June 16, 2027, subject to adjustment for non-index business days, non-trading days and certain market disruption events | ||
Leverage factor: | At least 230%. The actual leverage factor will be determined on the pricing date. | ||
Adjustment factor: | With respect to the EFA Shares, 1.0, subject to adjustment in the event of certain events affecting the EFA Shares | ||
Trigger level: | With respect to the SX5E Index, , which is 65% of its initial level With respect to the EFA Shares, $ , which is 65% of its initial level | ||
Stated principal amount: | $1,000 per Trigger PLUS | ||
Issue price: | $1,000 per Trigger PLUS | ||
Pricing date: | June 16, 2022 | ||
Original issue date: | June 22, 2022 (3 business days after the pricing date) | ||
CUSIP / ISIN: | 61774DPT8 / US61774DPT80 | ||
Listing: | The Trigger PLUS will not be listed on any securities exchange. | ||
Agent: | Morgan Stanley & Co. LLC (“MS & Co.”), a wholly owned subsidiary of Morgan Stanley and an affiliate of MSFL. See “Supplemental information regarding plan of distribution; conflicts of interest.” | ||
Estimated value on the pricing date: | Approximately $934.40 per Trigger PLUS, or within $55.00 of that estimate. See “Investment Summary” on page 2. | ||
Commissions and issue price: | Price to public(1) | Agent’s commissions and fees(2) | Proceeds to us(3) |
Per Trigger PLUS | $1,000 | $ | $ |
Total | $ | $ | $ |
(1)The Trigger PLUS will be sold only to investors purchasing the Trigger PLUS in fee-based advisory accounts.
(2)MS & Co. expects to sell all of the Trigger PLUS that it purchases from us to an unaffiliated dealer at a price of $ per Trigger PLUS, for further sale to certain fee-based advisory accounts at the price to public of $1,000 per Trigger PLUS. MS & Co. will not receive a sales commission with respect to the Trigger PLUS. See “Supplemental information regarding plan of distribution; conflicts of interest.” For additional information, see “Plan of Distribution (Conflicts of Interest)” in the accompanying product supplement.
(3)See “Use of proceeds and hedging” on page 20.
The Trigger PLUS involve risks not associated with an investment in ordinary debt securities. See “Risk Factors” beginning on page 7.
The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this document or the accompanying product supplement, index supplement and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
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.
You should read this document together with the related product supplement, index supplement and prospectus, each of which can be accessed via the hyperlinks below. Please also see “Additional Terms of the Trigger PLUS” and “Additional Information About the Trigger PLUS” at the end of this document.
References to “we,” “us” and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Product Supplement for PLUS dated November 16, 2020 Index Supplement dated November 16, 2020
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Worst Performing of the EURO STOXX 50® Index and the iShares® MSCI EAFE ETF due June 22, 2027
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
Investment Summary
Trigger Performance Leveraged Upside Securities
Principal at Risk Securities
The Trigger PLUS Based on the Value of the Worst Performing of the EURO STOXX 50® Index and the iShares® MSCI EAFE ETF due June 22, 2027 (the “Trigger PLUS”) can be used:
■As an alternative to direct exposure to the underlyings that enhances returns for any positive performance of the worst performing of two international equity underlyings
■To potentially outperform the worst performing of the EURO STOXX 50® Index and the iShares® MSCI EAFE ETF by taking advantage of the leverage factor, with no limitation on the appreciation potential
■To provide limited protection against loss of principal in the event of a decline of the underlyings but only if the final level of each underlying is greater than or equal to the respective trigger level
If the final level of either of the underlyings is less than its respective trigger level, investors will be negatively exposed to the full amount of the percent decline in the worst performing underlying and will lose 1% of the stated principal amount for every 1% of decline in the worst performing underlying, without any buffer.
Maturity: | 5 years |
Leverage factor: | At least 230% (applicable only if the final level of each underlying is greater than its respective initial level). The actual leverage factor will be determined on the pricing date. |
Minimum payment at maturity: | None. Investors may lose their entire initial investment in the Trigger PLUS. |
Trigger level: | With respect to each underlying, 65% of the initial level of such underlying |
Coupon: | None |
Listing: | The Trigger PLUS will not be listed on any securities exchange |
The original issue price of each Trigger PLUS is $1,000. This price includes costs associated with issuing, selling, structuring and hedging the Trigger PLUS, which are borne by you, and, consequently, the estimated value of the Trigger PLUS on the pricing date will be less than $1,000. We estimate that the value of each Trigger PLUS on the pricing date will be approximately $934.40, or within $55.00 of that estimate. Our estimate of the value of the Trigger PLUS as determined on the pricing date will be set forth in the final pricing supplement.
What goes into the estimated value on the pricing date?
In valuing the Trigger PLUS on the pricing date, we take into account that the Trigger PLUS comprise both a debt component and a performance-based component linked to the underlyings. The estimated value of the Trigger PLUS 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 Trigger PLUS?
In determining the economic terms of the Trigger PLUS, including the leverage factor and the trigger levels, we use an internal funding rate, which is likely to be lower than our secondary market credit spreads and therefore advantageous to us. If the issuing, selling, structuring and hedging costs borne by you were lower or if the internal funding rate were higher, one or more of the economic terms of the Trigger PLUS 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 Trigger PLUS?
The price at which MS & Co. purchases the Trigger PLUS 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 Trigger PLUS are not fully deducted upon issuance, for a period of up to 6 months following the issue date, to the extent that MS & Co. may buy or sell the Trigger PLUS in the secondary market, absent changes in market
June 2022 Page 2
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Worst Performing of the EURO STOXX 50® Index and the iShares® MSCI EAFE ETF due June 22, 2027
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
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 Trigger PLUS, and, if it once chooses to make a market, may cease doing so at any time.
June 2022 Page 3
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Worst Performing of the EURO STOXX 50® Index and the iShares® MSCI EAFE ETF due June 22, 2027
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
Key Investment Rationale
The Trigger PLUS offer exposure to the worst performing of the underlyings. At maturity, if the final level of each underlying is greater than its respective initial level, investors will receive the stated principal amount of their investment plus leveraged upside performance of the worst performing underlying. If the final level of either of the underlyings is less than or equal to its respective initial level but the final level of each underlying is greater than or equal to its respective trigger level, investors will receive the stated principal amount of their investment. However, if the final level of either of the underlyings is less than its respective trigger level, investors will be negatively exposed to the full decline in the worst performing underlying and will lose 1% of the stated principal amount for every 1% of decline in the worst performing underlying, without any buffer. Investors may lose their entire initial investment in the Trigger PLUS. All payments on the Trigger PLUS are subject to our credit risk.
Leveraged Performance | The Trigger PLUS offer investors an opportunity to receive at least 230% of the positive return of the worst performing of the underlyings if each underlying has appreciated in value. The actual leverage factor will be determined on the pricing date. |
Trigger Feature | At maturity, even if the worst performing underlying has declined over the term of the Trigger PLUS, you will receive your stated principal amount but only if the final level of each underlying is greater than or equal to its respective trigger level. |
Upside Scenario | Each underlying increases in value, and, at maturity, the Trigger PLUS redeem for the stated principal amount of $1,000 plus at least 230% of the underlying percent change of the worst performing underlying. The actual leverage factor will be determined on the pricing date. |
Par Scenario | The final level of either of the underlyings is less than or equal to its respective initial level but the final level of each underlying is greater than or equal to its respective trigger level. In this case, you receive the stated principal amount of $1,000 at maturity even though the worst performing underlying has depreciated. |
Downside Scenario | The final level of either of the underlyings is less than its respective trigger level. In this case, the Trigger PLUS redeem for at least 35% less than the stated principal amount, and this decrease will be by an amount proportionate to the full decline in the value of the worst performing underlying over the term of the Trigger PLUS. Under these circumstances, the payment at maturity will be less than 65% of the stated principal amount per Trigger PLUS. For example, if the final level of the worst performing underlying is 70% less than its initial level, the Trigger PLUS will be redeemed at maturity for a loss of 70% of principal at $300, or 30% of the stated principal amount. There is no minimum payment at maturity on the Trigger PLUS, and you could lose your entire investment. |
Because the payment at maturity of the Trigger PLUS is based on the worst performing of the underlyings, a decline in either of the underlyings beyond its respective trigger level will result in a significant loss of your investment even if the other underlying has appreciated or has not declined as much.
June 2022 Page 4
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Worst Performing of the EURO STOXX 50® Index and the iShares® MSCI EAFE ETF due June 22, 2027
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
Hypothetical Examples
The following hypothetical examples illustrate how to calculate the payment at maturity on the Trigger PLUS. The following examples are for illustrative purposes only. The actual initial level and trigger level for each underlying will be determined on the pricing date. Any payment at maturity on the Trigger PLUS is subject to our credit risk. The below examples are based on the following terms:
Stated principal amount: | $1,000 per Trigger PLUS |
Hypothetical leverage factor: | 230%. The actual leverage factor will be determined on the pricing date. |
Hypothetical initial level: | With respect to the SX5E Index: 3,300 With respect to the EFA Shares: $65.00 |
Hypothetical trigger level: | With respect to the SX5E Index: 2,145 With respect to the EFA Shares: $42.25 |
EXAMPLE 1: The final level of each underlying is greater than its respective initial level.
Final level |
| SX5E Index: 3,630 | |
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| EFA Shares: $84.50 | |
Underlying percent change |
| SX5E Index: (3,630 – 3,300) / 3,300 = 10% EFA Shares: ($84.50 – $65.00) / $65.00 = 30% | |
Payment at maturity | = | $1,000 + ($1,000 × leverage factor × underlying percent change of the worst performing underlying), | |
| = | $1,000 + ($1,000 × 230% × 10%) | |
| = | $1,230 |
In example 1, the final levels of the SX5E Index and the EFA Shares are greater than their initial levels. The SX5E Index has appreciated by 10% while the EFA Shares have appreciated by 30%. Therefore, investors receive at maturity the stated principal amount plus 230% of the appreciation of the worst performing underlying, which is the SX5E Index in this example. Investors receive $1,230 per Trigger PLUS at maturity (assuming a hypothetical leverage factor of 230%). The actual leverage factor will be determined on the pricing date.
EXAMPLE 2: The final level of one underlying is greater than its respective initial level while the final level of the other underlying is less than its respective initial level but greater than its respective trigger level, and investors receive the stated principal amount.
Final level |
| SX5E Index: 4,620 | |
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| EFA Shares: $55.25 | |
Underlying percent change |
| SX5E Index: (4,620 – 3,300) / 3,300 = 40% EFA Shares: ($55.25 – $65.00) / $65.00 = -15% | |
Payment at maturity | = | $1,000 |
In example 2, the final level of the SX5E Index is greater than its respective initial levels, while the final level of the EFA Shares is less than its respective initial level but greater than its respective trigger level. While the SX5E Index has appreciated by 40%, the EFA Shares have declined by 15%. Therefore, investors receive at maturity the stated principal amount of $1,000.
June 2022 Page 5
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Worst Performing of the EURO STOXX 50® Index and the iShares® MSCI EAFE ETF due June 22, 2027
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
EXAMPLE 3: The final level of one underlying is greater than its respective initial level while the final level of the other underlying is less than its respective initial level and trigger level. Investors are therefore exposed to the decline in the worst performing underlying from its initial value.
Final level |
| SX5E Index: 3,630 | |
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| EFA Shares: $26.00 | |
Underlying percent change |
| SX5E Index: (3,630 – 3,300) / 3,300 = 10% EFA Shares: ($26.00 – $65.00) / $65.00 = -60% | |
Underlying performance factor |
| SX5E Index: 3,630 / 3,300 = 110% EFA Shares: $26.00 / $65.00 = 40% | |
Payment at maturity | = | $1,000 × underlying performance factor of the worst performing underlying | |
| = | $1,000 × 40% | |
| = | $400 |
In example 3, the final level of the SX5E Index is greater than its respective initial level, while the final level of the EFA Shares is less than its respective initial level and trigger level. While the SX5E Index has appreciated by 10%, the EFA Shares have declined by 60%. Therefore, investors are exposed to the negative performance of the EFA Shares, which represent the worst performing underlying in this example, and receive a payment at maturity of $400 per Trigger PLUS. In this example, investors are exposed to the negative performance of the worst performing underlying even though the other underlying has appreciated in value by 10%, because the final level of each underlying is not greater than or equal to its respective trigger level.
EXAMPLE 4: The final level of each underlying is less than its respective trigger level.
Final level |
| SX5E Index: 990 | |
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| EFA Shares: $22.75 | |
Underlying percent change |
| SX5E Index: (990 – 3,300) / 3,300 = -70% EFA Shares: ($22.75 – $65.00) / $65.00 = -65% | |
Underlying performance factor |
| SX5E Index: 990 / 3,300 = 30% EFA Shares: $22.75 / $65.00 = 35% | |
Payment at maturity | = | $1,000 × (underlying performance factor of the worst performing underlying) | |
| = | $1,000 × 30% | |
| = | $300 |
In example 4, the final levels of the SX5E Index and the EFA Shares are less than their respective trigger levels. The SX5E Index has declined by 70% while the EFA Shares have declined by 65%. Therefore, investors are exposed to the negative performance of the SX5E Index, which is the worst performing underlying in this example, and receive a payment at maturity of $300 per Trigger PLUS.
Because the payment at maturity of the Trigger PLUS is based on the worst performing of the underlyings, a decline in either of the underlyings beyond its respective trigger level will result in a significant loss of your investment even if the other underlying has appreciated or has not declined as much.
June 2022 Page 6
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Worst Performing of the EURO STOXX 50® Index and the iShares® MSCI EAFE ETF due June 22, 2027
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
Risk Factors
This section describes the material risks relating to the Trigger PLUS. For further discussion of these and other risks, you should read the section entitled “Risk Factors” in the accompanying product supplement for PLUS, 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 Trigger PLUS.
Risks Relating to an Investment in the Trigger PLUS
■The Trigger PLUS do not pay interest or guarantee the return of any principal. The terms of the Trigger PLUS differ from those of ordinary debt securities in that the Trigger PLUS do not pay interest or guarantee the payment of any principal amount at maturity. If the final level of either of the underlyings is less than its respective trigger level, the payment at maturity will be an amount in cash that is at least 35% less than the $1,000 stated principal amount of each Trigger PLUS, and this decrease will be by an amount proportionate to the full amount of the decline in the value of the worst performing underlying over the term of the Trigger PLUS, without any buffer. There is no minimum payment at maturity on the Trigger PLUS, and, accordingly, you could lose your entire initial investment in the Trigger PLUS.
■The market price will be influenced by many unpredictable factors. Several factors will influence the value of the Trigger PLUS in the secondary market and the price at which MS & Co. may be willing to purchase or sell the Trigger PLUS in the secondary market, including the value, volatility and dividend yield of the underlyings, interest and yield rates, time remaining to maturity, geopolitical conditions and economic, financial, political and regulatory or judicial events and 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 Trigger PLUS will be affected by the other factors described above. The levels of the underlyings may be, and have recently been, extremely volatile, and we can give you no assurance that the volatility will lessen. See “EURO STOXX 50® Index Overview” and “iShares® MSCI EAFE ETF Overview” below. You may receive less, and possibly significantly less, than the stated principal amount per Trigger PLUS if you try to sell your Trigger PLUS prior to maturity.
■The Trigger PLUS 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 Trigger PLUS. You are dependent on our ability to pay all amounts due on the Trigger PLUS at maturity and therefore you are subject to our credit risk. If we default on our obligations under the Trigger PLUS, your investment would be at risk and you could lose some or all of your investment. As a result, the market value of the Trigger PLUS 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 Trigger PLUS.
■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.
■The amount payable on the Trigger PLUS is not linked to the values of the underlyings at any time other than the valuation date. The final level of each underlying will be based on the closing level of such underlying on the valuation date, subject to adjustment for non-index business days, non-trading days and certain market disruption events. Even if each underlying appreciates prior to the valuation date but the value of either of the underlyings drops
June 2022 Page 7
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Worst Performing of the EURO STOXX 50® Index and the iShares® MSCI EAFE ETF due June 22, 2027
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
by the valuation date to below its respective trigger level, the payment at maturity will be significantly less than it would have been had the payment at maturity been linked to the values of the underlyings prior to such drop. Although the actual values of the underlyings on the stated maturity date or at other times during the term of the Trigger PLUS may be higher than their respective trigger levels, the payment at maturity will be based solely on the closing levels on the valuation date.
■Investing in the Trigger PLUS is not equivalent to investing in either of the underlyings or the stocks composing the SX5E Index or the MSCI EAFE Index®. Investing in the Trigger PLUS is not equivalent to investing in either of the underlyings or the component stocks of the SX5E Index or the MSCI EAFE Index®. As an investor in the Trigger PLUS, you will not have voting rights or rights to receive dividends or other distributions or any other rights with respect to stocks that constitute the SX5E Index or the MSCI EAFE Index®.
■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 Trigger PLUS in the original issue price reduce the economic terms of the Trigger PLUS, cause the estimated value of the Trigger PLUS to be less than the original issue price and will adversely affect secondary market prices. Assuming no change in market conditions or any other relevant factors, the prices, if any, at which dealers, including MS & Co., may be willing to purchase the Trigger PLUS in secondary market transactions will likely be significantly lower than the original issue price, because secondary market prices will exclude the issuing, selling, structuring and hedging-related costs that are included in the original issue price and borne by you and because the secondary market prices will reflect our secondary market credit spreads and the bid-offer spread that any dealer would charge in a secondary market transaction of this type as well as other factors.
The inclusion of the costs of issuing, selling, structuring and hedging the Trigger PLUS in the original issue price and the lower rate we are willing to pay as issuer make the economic terms of the Trigger PLUS less favorable to you than they otherwise would be.
However, because the costs associated with issuing, selling, structuring and hedging the Trigger PLUS are not fully deducted upon issuance, for a period of up to 6 months following the issue date, to the extent that MS & Co. may buy or sell the Trigger PLUS 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 Trigger PLUS 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 Trigger PLUS than those generated by others, including other dealers in the market, if they attempted to value the Trigger PLUS. 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 Trigger PLUS in the secondary market (if any exists) at any time. The value of your Trigger PLUS 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 Trigger PLUS will not be listed on any securities exchange and secondary trading may be limited. The Trigger PLUS will not be listed on any securities exchange. Therefore, there may be little or no secondary market for the Trigger PLUS. MS & Co. may, but is not obligated to, make a market in the Trigger PLUS and, if it once chooses to make a market, may cease doing so at any time. When it does make a market, it will generally do so for transactions of routine secondary market size at prices based on its estimate of the current value of the Trigger PLUS, taking into account its bid/offer spread, our credit spreads, market volatility, the notional size of the proposed sale, the cost of unwinding any related hedging positions, the time remaining to maturity and the likelihood that it will be able to resell the Trigger PLUS. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the Trigger PLUS easily. Since other broker-dealers may not participate significantly in the secondary market for the
June 2022 Page 8
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Worst Performing of the EURO STOXX 50® Index and the iShares® MSCI EAFE ETF due June 22, 2027
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
Trigger PLUS, the price at which you may be able to trade your Trigger PLUS is likely to depend on the price, if any, at which MS & Co. is willing to transact. If, at any time, MS & Co. were to cease making a market in the Trigger PLUS, it is likely that there would be no secondary market for the Trigger PLUS. Accordingly, you should be willing to hold your Trigger PLUS to maturity.
■Hedging and trading activity by our affiliates could potentially adversely affect the value of the Trigger PLUS. One or more of our affiliates and/or third-party dealers expect to carry out hedging activities related to the Trigger PLUS (and to other instruments linked to any underlying or the MSCI EAFE Index®), including taking positions in stocks constituting the SX5E Index or the MSCI EAFE Index® or taking positions in the the EFA Shares, futures and/or options contracts on the SX5E Index, the EFA Shares or the MSCI EAFE Index® or their component stocks listed on major securities markets. 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. Some of our affiliates also trade the stocks that constitute the underlyings 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 increase the initial level of any underlying index, and, therefore, could increase the value at or above which such underlying index must close on the valuation date so that investors do not suffer a significant loss on their initial investment in the Trigger PLUS (depending also on the performance of the other underlying). Additionally, such hedging or trading activities during the term of the Trigger PLUS, including on the valuation date, could adversely affect the value of any underlying on the valuation date, and, accordingly, the amount of cash an investor will receive at maturity, if any (depending also on the performance of the other underlying).
■The calculation agent, which is a subsidiary of Morgan Stanley and an affiliate of MSFL, will make determinations with respect to the Trigger PLUS. As calculation agent, MS & Co. will determine the initial levels, the trigger levels and the final levels, including whether any underlying index has decreased to below its respective trigger level, 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, whether to make any adjustments to the adjustment factors and the selection of a successor index or calculation of the index closing value of the SX5E Index or the closing price of the EFA Shares, as applicable, in the event of a market disruption event or discontinuance of an underlying. These potentially subjective determinations may adversely affect the payout to you at maturity, if any. For further information regarding these types of determinations, see “Description of PLUS—Postponement of Valuation Date(s),” “—Alternate Exchange Calculation in case of an Event of Default” and “—Calculation Agent and Calculations” in the accompanying product supplement. In addition, MS & Co. has determined the estimated value of the Trigger PLUS on the pricing date.
■The U.S. federal income tax consequences of an investment in the Trigger PLUS are uncertain. Please read the discussion under “Additional Information—Tax considerations” in this document and the discussion under “United States Federal Taxation” in the accompanying product supplement for PLUS (together, the “Tax Disclosure Sections”) concerning the U.S. federal income tax consequences of an investment in the Trigger PLUS. As discussed in the Tax Disclosure Sections, there is a substantial risk that the “constructive ownership” rule could apply, in which case all or a portion of any long-term capital gain recognized by a U.S. Holder could be recharacterized as ordinary income and an interest charge could be imposed. If the Internal Revenue Service (the “IRS”) were successful in asserting an alternative treatment, the timing and character of income on the Trigger PLUS might differ significantly from the tax treatment described in the Tax Disclosure Sections. For example, under one possible treatment, the IRS could seek to recharacterize the Trigger PLUS as debt instruments. In that event, U.S. Holders 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 issuance and recognize all income and gain in respect of the Trigger PLUS as ordinary income. 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. We do not plan to request a ruling from the IRS regarding the tax treatment of the Trigger PLUS, and the IRS or a court may not agree with the tax treatment described in the Tax Disclosure Sections.
June 2022 Page 9
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Worst Performing of the EURO STOXX 50® Index and the iShares® MSCI EAFE ETF due June 22, 2027
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
In 2007, the U.S. Treasury Department and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments. The notice focuses 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; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors should be subject to withholding tax; and whether these instruments are or should be subject to the “constructive ownership” rule, as discussed in this document. 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. 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 Trigger PLUS, including possible alternative treatments, the potential application of the constructive ownership rule, 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 of the underlyings. Your return on the Trigger PLUS it not linked to a basket consisting of each underlying. Rather, it will be based upon the independent performance of each of the underlyings. 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 of the underlyings. Poor performance by either of the underlyings over the term of the securities will negatively affect your return and will not be offset or mitigated by any positive performance by the other underlying. If either of the underlyings declines to below its respective trigger level as of the valuation date, you will be exposed to the negative performance of the worst performing underlying at maturity, and you will lose a significant portion or all of your investment, even if the other underlying has appreciated or has not declined as much. Accordingly, your investment is subject to the price risk of each of the underlyings.
■Because the Trigger PLUS are linked to the performance of the worst performing underlying, you are exposed to greater risk of sustaining a significant loss on your investment than if the Trigger PLUS were linked to just one underlying. The risk that you will suffer a significant loss on your investment is greater if you invest in the Trigger PLUS as opposed to substantially similar securities that are linked to the performance of just one underlying. With two underlyings, it is more likely that either of the underlyings will decline to below its trigger level as of the valuation date than if the Trigger PLUS were linked to only one underlying. Therefore it is more likely that you will suffer a significant loss on your investment.
■There are risks associated with investments in securities, such as the Trigger PLUS, linked to the value of foreign equity securities. The Trigger PLUS are linked to the value of foreign equity securities. Investments in securities linked to the value of foreign equity securities involve risks associated with the securities markets in those countries, including risks of volatility in those markets, governmental intervention in those markets and cross-shareholdings in companies in certain countries. Also, there is generally less publicly available information about foreign companies than about U.S. companies that are subject to the reporting requirements of the United States Securities and Exchange Commission, and foreign companies are subject to accounting, auditing and financial reporting standards and requirements different from those applicable to U.S. reporting companies. The prices of securities issued in foreign markets may be affected by political, economic, financial and social factors in those countries, or global regions, including changes in government, economic and fiscal policies and currency exchange laws. Local securities markets may trade a small number of securities and may be unable to respond effectively to increases in trading volume, potentially making prompt liquidation of holdings difficult or impossible at times. Moreover, the economies in such countries may differ favorably or unfavorably from the economy in the United States in such respects as growth of gross national product, rate of inflation, capital reinvestment, resources, self-sufficiency and balance of payment positions.
June 2022 Page 10
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Worst Performing of the EURO STOXX 50® Index and the iShares® MSCI EAFE ETF due June 22, 2027
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
■The Trigger PLUS are subject to currency exchange risk. Because the price of the EFA Shares tracks the performance of the MSCI EAFE Index®, holders of the Trigger PLUS will be exposed to currency exchange rate risk with respect to the currencies in which such component securities trade. Exchange rate movements for a particular currency are volatile and are the result of numerous factors including the supply of, and the demand for, those currencies, as well as relevant government policy, intervention or actions, but are also influenced significantly from time to time by political or economic developments, and by macroeconomic factors and speculative actions related to the relevant region. An investor’s net exposure will depend on the extent to which the currencies of the component securities strengthen or weaken against the U.S. dollar and the relative weight of each security. If, taking into account such weighting, the dollar strengthens against the currencies of the component securities represented in the MSCI EAFE Index®, the price of the EFA Shares will be adversely affected and the payment at maturity on the Trigger PLUS may be reduced.
Of particular importance to potential currency exchange risk are:
oexisting and expected rates of inflation;
oexisting and expected interest rate levels;
othe balance of payments; and
othe extent of governmental surpluses or deficits in the countries represented in the MSCI EAFE Index® and the United States.
All of these factors are in turn sensitive to the monetary, fiscal and trade policies pursued by the governments of various countries represented in the the MSCI EAFE Index® and the United States and other countries important to international trade and finance.
■Adjustments to the SX5E Index could adversely affect the value of the Trigger PLUS. The publisher of the SX5E Index may add, delete or substitute the stocks constituting the SX5E Index or make other methodological changes that could change the value of the SX5E Index. The publisher of the SX5E Index may discontinue or suspend calculation or publication of the SX5E 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 underlying and will be permitted to consider indices that are calculated and published by the calculation agent or any of its affiliates.
■Adjustments to the EFA Shares or the index tracked by the EFA Shares could adversely affect the value of the Trigger PLUS. The investment adviser to the iShares® MSCI EAFE ETF, BlackRock Fund Advisors (the “Investment Adviser”), seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI EAFE Index®. Pursuant to its investment strategies or otherwise, the Investment Adviser may add, delete or substitute the stocks composing the MSCI EAFE Index®. Any of these actions could adversely affect the price of the EFA Shares and, consequently, the value of the Trigger PLUS. MSCI Inc. (“MSCI”) is responsible for calculating and maintaining the MSCI EAFE Index®. MSCI may add, delete or substitute the stocks constituting the MSCI EAFE Index® or make other methodological changes that could change the level of the MSCI EAFE Index®. MSCI may discontinue or suspend calculation or publication of the MSCI EAFE 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 MSCI EAFE Index® and is permitted to consider indices that are calculated and published by the calculation agent or any of its affiliates. Any of these actions could adversely affect the price of the EFA Shares and, consequently, the value of the Trigger PLUS.
■The performance and market price of the EFA Shares, particularly during periods of market volatility, may not correlate with the performance of the MSCI EAFE Index®, the performance of the component securities of the MSCI EAFE Index® or the net asset value per share of the EFA Shares. The EFA Shares do not fully replicate the MSCI EAFE Index® and may hold securities that are different than those included in the MSCI EAFE Index®. In addition, the performance of the EFA Shares will reflect additional transaction costs and fees that are not included in the calculation of the MSCI EAFE Index®. All of these factors may lead to a lack of correlation between the performance of the EFA Shares and the MSCI EAFE Index®. In addition, corporate actions (such as mergers and spin-offs) with respect to the equity securities underlying the EFA Shares may impact the variance between the performance of the
June 2022 Page 11
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Worst Performing of the EURO STOXX 50® Index and the iShares® MSCI EAFE ETF due June 22, 2027
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
EFA Shares and the MSCI EAFE Index®. Finally, because the shares of the EFA Shares are traded on an exchange and are subject to market supply and investor demand, the market price of one share of the EFA Shares may differ from the net asset value per share of the EFA Shares.
In particular, during periods of market volatility, or unusual trading activity, trading in the securities underlying the EFA Shares may be disrupted or limited, or such securities may be unavailable in the secondary market. Under these circumstances, the liquidity of the EFA Shares may be adversely affected, market participants may be unable to calculate accurately the net asset value per share of the EFA Shares, and their ability to create and redeem shares of the EFA Shares may be disrupted. Under these circumstances, the market price of shares of the EFA Shares may vary substantially from the net asset value per share of the EFA Shares or the level of the MSCI EAFE Index®.
For all of the foregoing reasons, the performance of the EFA Shares may not correlate with the performance of the MSCI EAFE Index®, the performance of the component securities of the MSCI EAFE Index® or the net asset value per share of the EFA Shares. Any of these events could materially and adversely affect the price of the shares of the EFA Shares and, therefore, the value of the Trigger PLUS. Additionally, if market volatility or these events were to occur on the valuation date, the calculation agent would maintain discretion to determine whether such market volatility or events have caused a market disruption event to occur, and such determination may affect the payment on the Trigger PLUS. If the calculation agent determines that no market disruption event has taken place, the payment at maturity would be based on the published closing price per share of the EFA Shares on the valuation date, even if the EFA Shares’ shares are underperforming the MSCI EAFE Index® or the component securities of the MSCI EAFE Index® and/or trading below the net asset value per share of the EFA Shares.
■The antidilution adjustments the calculation agent is required to make do not cover every event that could affect the EFA Shares. MS & Co., as calculation agent, will adjust the adjustment factor for certain events affecting the EFA Shares. However, the calculation agent will not make an adjustment for every event that can affect the EFA Shares. If an event occurs that does not require the calculation agent to adjust the adjustment factor, the market price of the Trigger PLUS may be materially and adversely affected.
June 2022 Page 12
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Worst Performing of the EURO STOXX 50® Index and the iShares® MSCI EAFE ETF due June 22, 2027
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
EURO STOXX 50® Index Overview
The EURO STOXX 50® Index was created by STOXX Limited, a part of Qontigo, which is a wholly owned subsidiary of Deutsche Börse AG. Publication of the EURO STOXX 50® Index began on February 26, 1998 with a base value of 1,000 as of December 31, 1991. The EURO STOXX 50® Index is composed of 50 component stocks of market sector leaders among the 20 STOXX supersectors, which includes stocks selected from the Eurozone. The component stocks have a high degree of liquidity and represent the largest companies across all market sectors. For additional information about the EURO STOXX 50® Index, see the information set forth under “EURO STOXX 50® Index” in the accompanying index supplement.
Information as of market close on June 8, 2022:
Bloomberg Ticker Symbol: | SX5E |
Current Index Value: | 3,788.93 |
52 Weeks Ago: | 4,096.01 |
52 Week High (on 11/16/2021): | 4,401.49 |
52 Week Low (on 3/8/2022): | 3,505.29 |
The following graph sets forth the daily closing values of the SX5E Index for the period from January 1, 2017 through June 8, 2022. The related table sets forth the published high and low closing values, as well as end-of-quarter closing values, of the SX5E Index for each quarter in the same period. The closing value of the SX5E Index on June 8, 2022 was 3,788.93. We obtained the information in the graph and table below from Bloomberg Financial Markets, without independent verification. The SX5E Index has at times experienced periods of high volatility, and you should not take the historical values of the SX5E Index as an indication of its future performance.
SX5E Index Daily Closing Values |
June 2022 Page 13
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Worst Performing of the EURO STOXX 50® Index and the iShares® MSCI EAFE ETF due June 22, 2027
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
EURO STOXX 50® Index | High | Low | Period End |
2017 |
|
|
|
First Quarter | 3,500.93 | 3,230.68 | 3,500.93 |
Second Quarter | 3,658.79 | 3,409.78 | 3,441.88 |
Third Quarter | 3,594.85 | 3,388.22 | 3,594.85 |
Fourth Quarter | 3,697.40 | 3,503.96 | 3,503.96 |
2018 |
|
|
|
First Quarter | 3,672.29 | 3,278.72 | 3,361.50 |
Second Quarter | 3,592.18 | 3,340.35 | 3,395.60 |
Third Quarter | 3,527.18 | 3,293.36 | 3,399.20 |
Fourth Quarter | 3,414.16 | 2,937.36 | 3,001.42 |
2019 |
|
|
|
First Quarter | 3,409.00 | 2,954.66 | 3,351.71 |
Second Quarter | 3,514.62 | 3,280.43 | 3,473.69 |
Third Quarter | 3,571.39 | 3,282.78 | 3,569.45 |
Fourth Quarter | 3,782.27 | 3,413.31 | 3,745.15 |
2020 |
|
|
|
First Quarter | 3,865.18 | 2,385.82 | 2,786.90 |
Second Quarter | 3,384.29 | 2,662.99 | 3,234.07 |
Third Quarter | 3,405.35 | 3,137.06 | 3,193.61 |
Fourth Quarter | 3,581.37 | 2,958.21 | 3,552.64 |
2021 |
|
|
|
First Quarter | 3,926.20 | 3,481.44 | 3,919.21 |
Second Quarter | 4,158.14 | 3,924.80 | 4,064.30 |
Third Quarter | 4,246.13 | 3,928.53 | 4,048.08 |
Fourth Quarter | 4,401.49 | 3,996.41 | 4,298.41 |
2022 |
|
|
|
First Quarter | 4,392.15 | 3,505.29 | 3,902.52 |
Second Quarter (through June 8, 2022) | 3,951.12 | 3,526.86 | 3,788.93 |
“EURO STOXX 50®” and “STOXX®” are trademarks of STOXX Limited. For more information, see “EURO STOXX 50® Index” in the accompanying index supplement.
June 2022 Page 14
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Worst Performing of the EURO STOXX 50® Index and the iShares® MSCI EAFE ETF due June 22, 2027
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
iShares® MSCI EAFE ETF Overview
The iShares® MSCI EAFE ETF is an exchange-traded fund that seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI EAFE Index®. The iShares® MSCI EAFE ETF is managed by iShares Trust (“iShares”), a registered investment company that consists of numerous separate investment portfolios, including the iShares® MSCI EAFE ETF. Information provided to or filed with the Commission by iShares pursuant to the Securities Act of 1933 and the Investment Company Act of 1940 can be located by reference to Commission file numbers 333-92935 and 811-09729, respectively, through the Commission’s website at.www.sec.gov. In addition, information may be obtained from other publicly available sources. We make no representation or warranty as to the accuracy or completeness of such information.
Information as of market close on June 8, 2022:
Bloomberg Ticker Symbol: | EFA UP |
Current Share Price: | $69.21 |
52 Weeks Ago: | $81.91 |
52 Week High (on 9/7/2021): | $82.13 |
52 Week Low (on 5/12/2022): | $65.18 |
The following graph sets forth the daily closing prices of the EFA Shares for the period from January 1, 2017 through June 8, 2022. The related table sets forth the published high and low closing prices, as well as end-of-quarter closing prices, of the EFA Shares for each quarter in the same period. The closing price of the EFA Shares on June 8, 2022 was $69.21. We obtained the information in the graph and table below from Bloomberg Financial Markets, without independent verification. The EFA Shares have at times experienced periods of high volatility, and you should not take the historical values of the EFA Shares as an indication of future performance.
EFA Shares Daily Closing Prices |
June 2022 Page 15
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Worst Performing of the EURO STOXX 50® Index and the iShares® MSCI EAFE ETF due June 22, 2027
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
iShares® MSCI EAFE ETF (CUSIP 464287465) | High ($) | Low ($) | Period End ($) |
2017 |
|
|
|
First Quarter | 62.60 | 58.09 | 62.29 |
Second Quarter | 67.22 | 61.44 | 65.20 |
Third Quarter | 68.48 | 64.83 | 68.48 |
Fourth Quarter | 70.80 | 68.42 | 70.31 |
2018 |
|
|
|
First Quarter | 75.25 | 67.94 | 69.68 |
Second Quarter | 71.90 | 66.35 | 66.97 |
Third Quarter | 68.98 | 65.43 | 67.99 |
Fourth Quarter | 68.07 | 56.89 | 58.78 |
2019 |
|
|
|
First Quarter | 65.61 | 58.13 | 64.86 |
Second Quarter | 66.99 | 63.40 | 65.73 |
Third Quarter | 66.68 | 61.30 | 65.21 |
Fourth Quarter | 69.66 | 63.25 | 69.44 |
2020 |
|
|
|
First Quarter | 70.38 | 46.50 | 53.46 |
Second Quarter | 64.65 | 50.90 | 60.87 |
Third Quarter | 65.92 | 61.10 | 63.65 |
Fourth Quarter | 73.52 | 61.39 | 72.96 |
2021 |
|
|
|
First Quarter | 76.92 | 72.39 | 75.87 |
Second Quarter | 81.95 | 76.86 | 78.88 |
Third Quarter | 82.13 | 76.90 | 78.01 |
Fourth Quarter | 81.83 | 76.40 | 78.68 |
2022 |
|
|
|
First Quarter | 79.66 | 66.84 | 73.60 |
Second Quarter (through June 8, 2022) | 74.59 | 65.18 | 69.21 |
This document relates only to the Trigger PLUS offered hereby and does not relate to the underlying shares. We have derived all disclosures contained in this document regarding iShares from the publicly available documents described above. In connection with the offering of the Trigger PLUS, neither we nor the agent has participated in the preparation of such documents or made any due diligence inquiry with respect to iShares. Neither we nor the agent makes any representation that such publicly available documents or any other publicly available information regarding iShares is accurate or complete. Furthermore, we cannot give any assurance that all events occurring prior to the date hereof (including events that would affect the accuracy or completeness of the publicly available documents described above) that would affect the trading price of the underlying shares (and therefore the price of the underlying shares at the time we price 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 iShares 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 the underlying shares.
We and/or our affiliates may presently or from time to time engage in business with iShares. In the course of such business, we and/or our affiliates may acquire non-public information with respect to iShares, and neither we nor any of our affiliates undertakes to disclose any such information to you. In addition, one or more of our affiliates may publish research reports with respect to the underlying shares. The statements in the preceding two sentences are not intended to affect the rights of investors in the Trigger PLUS under the securities laws. As a prospective purchaser of the Trigger PLUS, you should undertake an independent investigation of iShares as in your judgment is appropriate to make an informed decision with respect to an investment linked to the underlying shares.
“iShares®” is a registered mark of BlackRock Fund Advisors or its affiliates (“BFA”). The securities are not sponsored, endorsed, sold, or promoted by BFA. BFA. makes no representations or warranties to the owners of the Trigger PLUS or
June 2022 Page 16
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Worst Performing of the EURO STOXX 50® Index and the iShares® MSCI EAFE ETF due June 22, 2027
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
any member of the public regarding the advisability of investing in the securities. BFA has no obligation or liability in connection with the operation, marketing, trading or sale of the Trigger PLUS.
The MSCI EAFE Index®. The MSCI EAFE Index® is a stock index calculated, published and disseminated daily by MSCI Inc. (“MSCI”). The index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the United States and Canada, and it consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom. For additional information about the MSCI EAFE Index®, see the information set forth under “MSCI EAFE Index®” and “MSCI Global Investable Market Indices Methodology” in the accompanying index supplement.
June 2022 Page 17
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Worst Performing of the EURO STOXX 50® Index and the iShares® MSCI EAFE ETF due June 22, 2027
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
Additional Terms of the Trigger PLUS
Please read this information in conjunction with the summary terms on the front cover of this document.
Additional Terms: |
|
If the terms described herein are inconsistent with those described in the accompanying product supplement, index supplement or prospectus, the terms described herein shall control. | |
SX5E Index publisher: | STOXX Limited or any successor thereof |
Share underlying index: | With respect to the EFA Shares, the MSCI EAFE Index® |
Share underlying index publisher: | With respect to the EFA Shares, MSCI Inc., or any successor thereof. |
Denominations: | $1,000 per Trigger PLUS and integral multiples thereof |
Postponement of maturity date: | If the scheduled valuation date is not an index business day or a trading day, as applicable with respect to any underlying or if a market disruption event occurs with respect to any underlying on that day so that the valuation date is postponed and falls less than two business days prior to the scheduled maturity date, the maturity date of the Trigger PLUS will be postponed to the second business day following the latest valuation date as postponed with respect to any underlying. |
Trustee: | The Bank of New York Mellon |
Calculation agent: | MS & Co. |
Issuer notice to registered security holders, the trustee and the depositary: | In the event that the maturity date is postponed due to postponement of the valuation date, the issuer shall give notice of such postponement and, once it has been determined, of the date to which the maturity date has been rescheduled (i) to each registered holder of the Trigger PLUS by mailing notice of such postponement by first class mail, postage prepaid, to such registered holder’s last address as it shall appear upon the registry books, (ii) to the trustee by facsimile confirmed by mailing such notice to the trustee by first class mail, postage prepaid, at its New York office and (iii) to The Depository Trust Company (the “depositary”) by telephone or facsimile, confirmed by mailing such notice to the depositary by first class mail, postage prepaid. Any notice that is mailed to a registered holder of the Trigger PLUS in the manner herein provided shall be conclusively presumed to have been duly given to such registered holder, whether or not such registered holder receives the notice. The issuer shall give such notice as promptly as possible, and in no case later than (i) with respect to notice of postponement of the maturity date, the business day immediately preceding the scheduled maturity date, and (ii) with respect to notice of the date to which the maturity date has been rescheduled, the business day immediately following the actual valuation date. The issuer shall, or shall cause the calculation agent to, (i) provide written notice to the trustee, on which notice the trustee may conclusively rely, and to the depositary of the amount of cash, if any, to be delivered with respect to the Trigger PLUS, on or prior to 10:30 a.m. (New York City time) on the business day preceding the maturity date, and (ii) deliver the aggregate cash amount due with respect to the Trigger PLUS, if any, to the trustee for delivery to the depositary, as holder of the Trigger PLUS, on the maturity date. |
June 2022 Page 18
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Worst Performing of the EURO STOXX 50® Index and the iShares® MSCI EAFE ETF due June 22, 2027
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
Additional Information About the Trigger PLUS
Additional Information: |
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Minimum ticketing size: | $1,000 / 1 Trigger PLUS |
Tax considerations: | 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, Davis Polk & Wardwell LLP, under current law, and based on current market conditions, a Trigger PLUS should be treated as a single financial contract that is an “open transaction” for U.S. federal income tax purposes. However, because our counsel’s opinion is based in part on market conditions as of the date of this document, it is subject to confirmation on the pricing date. Assuming this treatment of the Trigger PLUS is respected and subject to the discussion in “United States Federal Taxation” in the accompanying product supplement for PLUS, the following U.S. federal income tax consequences should result based on current law: ■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. ■Upon 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 and the U.S. Holder’s tax basis in the Trigger PLUS. Subject to the discussion below concerning the potential application of the “constructive ownership” rule, such gain or loss should be long-term capital gain or loss if the investor has held the Trigger PLUS for more than one year, and short-term capital gain or loss otherwise. Because the Trigger PLUS are linked to shares of an exchange-traded fund, although the matter is not clear, there is a substantial risk that an investment in the Trigger PLUS will be treated as a “constructive ownership transaction” under Section 1260 of the Internal Revenue Code of 1986, as amended (the “Code”). If this treatment applies, all or a portion of any long-term capital gain of the U.S. Holder in respect of the Trigger PLUS could be recharacterized as ordinary income (in which case an interest charge will be imposed). As a result of certain features of the Trigger PLUS, including the leveraged upside payment and the fact that the Trigger PLUS are linked to an index in addition to an exchange-traded fund, it is unclear how to calculate the amount of gain that would be recharacterized if an investment in the Trigger PLUS were treated as a constructive ownership transaction. Due to the lack of governing authority, our counsel is unable to opine as to whether or how Section 1260 of the Code applies to the Trigger PLUS. U.S. investors should read the section entitled “United States Federal Taxation—Tax Consequences to U.S. Holders—Possible Application of Section 1260 of the Code” in the accompanying product supplement for PLUS for additional information and consult their tax advisers regarding the potential application of the “constructive ownership” rule. In 2007, the U.S. Treasury Department and the Internal Revenue Service (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; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors should be subject to withholding tax; and whether these instruments are or should be subject to the |
June 2022 Page 19
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Worst Performing of the EURO STOXX 50® Index and the iShares® MSCI EAFE ETF due June 22, 2027
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
“constructive ownership” rule, as discussed above. 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. As discussed in the accompanying product supplement for PLUS, 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 the terms of the Trigger PLUS and current market conditions, we expect that the Trigger PLUS will not have a delta of one with respect to any Underlying Security on the pricing date. However, we will provide an updated determination in the final pricing supplement. Assuming 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 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. Both U.S. and non-U.S. investors considering an investment in the Trigger PLUS should read the discussion under “Risk Factors” in this document and the discussion under “United States Federal Taxation” in the accompanying product supplement for PLUS and consult their tax advisers regarding all aspects of the U.S. federal income tax consequences of an investment in the Trigger PLUS, including possible alternative treatments, the potential application of the constructive ownership rule, the issues presented by the aforementioned notice 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 PLUS, 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 Trigger PLUS. | |
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 on page 2 above comprise the agent’s commissions and the cost of issuing, structuring and hedging the Trigger PLUS. On or prior to the pricing date, we expect to hedge our anticipated exposure in |
June 2022 Page 20
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Worst Performing of the EURO STOXX 50® Index and the iShares® MSCI EAFE ETF due June 22, 2027
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
connection with the Trigger PLUS by entering into hedging transactions with our affiliates and/or third-party dealers. We expect our hedging counterparties to take positions in the EFA Shares, in stocks constituting the SX5E Index or the MSCI EAFE Index® and in futures and/or options contracts on the SX5E Index, the EFA Shares or the MSCI EAFE Index® or their component stocks listed on major securities markets, or positions in any other available securities or instruments that they may wish to use in connection with such hedging. Such purchase activity could potentially increase the level of any underlying on the pricing date, and therefore the level at or above which such underlying must close on the valuation date so that investors do not suffer a significant loss on their initial investment in the Trigger PLUS (depending also on the performance of the other underlying). In addition, through our affiliates, we are likely to modify our hedge position throughout the term of the Trigger PLUS, including on the valuation date, by purchasing and selling the EFA Shares, the stocks constituting the SX5E Index or the MSCI EAFE Index®, futures or options contracts on the SX5E Index, the EFA Shares or the MSCI EAFE Index® or their component stocks 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. 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, 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). For further information on our use of proceeds and hedging, see “Use of Proceeds and Hedging” in the accompanying product supplement for PLUS. | |
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 Trigger PLUS, either directly or indirectly. |
Supplemental information regarding plan of distribution; conflicts of interest: | MS & Co. expects to sell all of the Trigger PLUS that it purchases from us to an unaffiliated dealer at a price of $ per Trigger PLUS, for further sale to certain fee-based advisory accounts at the price to public of $1,000 per Trigger PLUS. MS & Co. will not receive a sales commission with respect to the Trigger PLUS. 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. When MS & Co. prices this offering of Trigger PLUS, it will determine the economic terms of the Trigger PLUS, including the leverage factor, such that for each Trigger PLUS the estimated value on the pricing date will be no lower than the minimum level described in “Investment Summary” on page 2. 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. See “Plan of Distribution (Conflicts of Interest)” and “Use of Proceeds and Hedging” in the accompanying product supplement for PLUS. |
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 PLUS 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 PLUS, the index supplement and any other documents |
June 2022 Page 21
Morgan Stanley Finance LLC
Trigger PLUS Based on the Value of the Worst Performing of the EURO STOXX 50® Index and the iShares® MSCI EAFE ETF due June 22, 2027
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
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 or MSFL will arrange to send you the product supplement for PLUS, index supplement and prospectus if you so request by calling toll-free 800-584-6837. You may access these documents on the SEC web site at.www.sec.gov.as follows: Product Supplement for PLUS dated November 16, 2020 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 PLUS, in the index supplement or in the prospectus. “Performance Leveraged Upside SecuritiesSM” and “PLUSSM” are our service marks. |
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