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Name | Symbol | Market | Type |
---|---|---|---|
Morgan Stanley | NYSE:MS-P | NYSE | Preference Share |
Price Change | % Change | Price | High Price | Low Price | Open Price | Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.07 | 0.27% | 26.27 | 26.28 | 26.15 | 26.17 | 33,300 | 21:00:03 |
July 2024
Preliminary Pricing Supplement No. 2,963
Registration Statement Nos. 333-275587; 333-275587-01
Dated July 16, 2024
Filed pursuant to Rule 424(b)(2)
Morgan Stanley Finance LLC
Structured Investments
Opportunities in U.S. Equities
Market Linked Securities—Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the iShares® Russell 2000 Value ETF and the Nasdaq-100® Technology Sector IndexSM due August 3, 2028
Fully and Unconditionally Guaranteed by Morgan Stanley
§ | Linked to the lowest performing of the Dow Jones Industrial AverageSM, the iShares® Russell 2000 Value ETF and the Nasdaq-100® Technology Sector IndexSM (each referred to as an “underlying”) | |
§ | The securities offered are unsecured obligations of Morgan Stanley Finance LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley. Unlike ordinary debt securities, the securities do not pay interest, do not guarantee the repayment of principal and are subject to potential automatic call prior to the maturity date upon the terms described below. The securities have the terms described in the accompanying product supplement for principal at risk securities, index supplement and prospectus, as supplemented or modified by this document. | |
§ | Automatic Call. The securities will be automatically called if the closing level of each underlying on any of the calculation days is greater than or equal to its respective starting level for a call payment equal to the face amount plus a call premium. The call premium applicable to each calculation day will be a percentage of the face amount that increases for each calculation day based on a simple (non-compounding) return of at least 9.25% per annum (to be determined on the pricing date). No further payments will be made on the securities once they have been called. | |
§ | Maturity Payment Amount. If the securities are not automatically called, you will receive at maturity a cash payment per security as follows: | |
o | If the ending level of any underlying is less than its respective starting level but the ending level of each underlying is greater than or equal to 50% of its respective starting level, which we refer to as the respective threshold level, you will receive a maturity payment amount of $1,000 per $1,000 security. | |
o | If the ending level of any underlying is less than its respective threshold level, investors will be exposed to the full decline in the lowest performing underlying on a 1-to-1 basis, and will receive a maturity payment amount that is less than 50% of the face amount of the securities and could be zero. | |
§ | Investors may lose a significant portion, or all, of the face amount of the securities | |
§ | The securities are for investors who are willing to forgo current income and participation in the appreciation of any underlying in exchange for the possibility of receiving a call payment or maturity payment amount greater than the face amount of the securities if each underlying closes at or above the respective starting level on a calculation day or the final calculation day, respectively. | |
§ | Because all payments on the securities are based on the lowest performing underlying, a decline beyond the respective threshold level of any underlying will result in a significant loss of your investment, even if the other underlyings have appreciated or have not declined as much. | |
§ | Investors will not participate in any appreciation of any underlying. | |
§ | The securities are notes issued as part of MSFL’s Series A Global Medium-Term Notes program. | |
§ | The Nasdaq-100® Technology Sector IndexSM measures the performance of companies in the Nasdaq-100 Index® that are classified as technology according to the Industry Classification Benchmark. For more information about the Nasdaq-100 Index®, see the information set forth under “Nasdaq-100 Index®” in the accompanying index supplement. For more information about the Nasdaq-100® Technology Sector IndexSM, see “Annex A — Nasdaq-100® Technology Sector IndexSM” beginning on page 24. | |
§ | All payments are subject to our credit risk. If we default on our obligations, you could lose some or all of your investment | |
§ | These securities are not secured obligations and you will not have any security interest in, or otherwise have any access to, any securities included in any of the underlyings |
The current estimated value of the securities is approximately $955.30 per security, or within $45.00 of that estimate. The estimated value of the securities is determined using our own pricing and valuation models, market inputs and assumptions relating to the underlyings, instruments based on the underlyings, volatility and other factors including current and expected interest rates, as well as an interest rate related to our secondary market credit spread, which is the implied interest rate at which our conventional fixed rate debt trades in the secondary market. See “Estimated Value of the Securities” on page 5.
The securities have complex features and investing in the securities involves risks not associated with an investment in ordinary debt securities. See “Risk Factors” beginning on page 13. All payments on the securities are subject to our credit risk.
The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this document or the accompanying product supplement, index supplement and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The securities are not deposits or savings accounts and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they obligations of, or guaranteed by, a bank.
You should read this document together with the related product supplement for principal at risk securities, index supplement and prospectus, each of which can be accessed via the hyperlinks below. When you read the accompanying product supplement and index supplement, please note that all references in such supplements to the prospectus dated November 16, 2023, or to any sections therein, should refer instead to the accompanying prospectus dated April 12, 2024 or to the corresponding sections of such prospectus, as applicable. Please also see “Additional Information About the Securities” at the end of this document.
As used in this document, “we,” “us” and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Commissions and offering price: | Price to public | Agent’s commissions(1)(2) | Proceeds to us(3) |
Per security | $1,000 | $25.75 | $974.25 |
Total | $ | $ | $ |
(1) | Wells Fargo Securities, LLC, an agent for this offering, will receive a commission of up to $25.75 for each security it sells. Dealers, including Wells Fargo Advisors (“WFA”), may receive a selling concession of up to $20.00 per security, and WFA may receive a distribution expense fee of $0.75 for each security sold by WFA. See “Supplemental information concerning plan of distribution; conflicts of interest.” |
(2) | In respect of certain securities sold in this offering, we may pay a fee of up to $4.00 per security to selected securities dealers in consideration for marketing and other services in connection with the distribution of the securities to other securities dealers. |
(3) | See “Use of Proceeds and Hedging” in the accompanying product supplement. |
Product Supplement for Principal at Risk Securities dated November 16, 2023 | Index Supplement dated November 16, 2023 |
Prospectus dated April 12, 2024
Morgan Stanley | Wells Fargo Securities |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the iShares® Russell 2000 Value ETF and the Nasdaq-100® Technology Sector IndexSM due August 3, 2028
Terms |
Issuer: | Morgan Stanley Finance LLC |
Guarantor: | Morgan Stanley |
Maturity date: | August 3, 2028†, subject to postponement if the final calculation day is postponed |
Underlyings: |
Dow Jones Industrial AverageSM (the “INDU Index”), iShares® Russell 2000 Value ETF (the “IWN Shares”) and the Nasdaq-100® Technology Sector IndexSM (the “NDXT Index”)
The Dow Jones Industrial AverageSM and the Nasdaq-100® Technology Sector IndexSM are sometimes collectively referred to herein as the “Indices” and individually as an “Index,” and the iShares® MSCI Emerging Markets ETF is sometimes individually referred to herein as a “Fund.” |
Fund underlying index: | Russell 2000® Value Index |
Fund underlying index sponsor: | FTSE Russell or any successor thereof |
Aggregate face amount: | $ |
Automatic call: |
If, on any calculation day, beginning on August 1, 2025, the closing level of each underlying is greater than or equal to its respective starting level, the securities will be automatically called for the applicable call payment on the related call settlement date. The last calculation day is the final calculation day, and any payment upon an automatic call on the final calculation day, if applicable, will be made on the maturity date.
The securities will not be automatically called on any call settlement date if the closing level of any underlying is below its respective starting level on the related calculation day.
Any positive return on the securities will be limited to the applicable call premium, even if the closing level of any underlying on the applicable calculation day significantly exceeds its starting level. You will not participate in any appreciation of any underlying. |
Call payment: | The call payment will be an amount in cash per face amount corresponding to a return at a per-annum rate that will be set on the pricing date, as follows: |
· 1st calculation day: | at least $1,092.50 which corresponds to a call premium of at least 9.25% | |
· 2nd calculation day: | at least $1,100.21 which corresponds to a call premium of at least 10.021% | |
· 3rd calculation day: | at least $1,107.92 which corresponds to a call premium of at least 10.792% | |
· 4th calculation day: | at least $1,115.63 which corresponds to a call premium of at least 11.563% | |
· 5th calculation day: | at least $1,123.33 which corresponds to a call premium of at least 12.333% | |
· 6th calculation day: | at least $1,131.04 which corresponds to a call premium of at least 13.104% | |
· 7th calculation day: | at least $1,138.75 which corresponds to a call premium of at least 13.875% | |
· 8th calculation day: | at least $1,146.46 which corresponds to a call premium of at least 14.646% | |
· 9th calculation day: | at least $1,154.17 which corresponds to a call premium of at least 15.417% | |
· 10th calculation day: | at least $1,161.88 which corresponds to a call premium of at least 16.188% | |
· 11th calculation day: | at least $1,169.58 which corresponds to a call premium of at least 16.958% | |
· 12th calculation day: | at least $1,177.29 which corresponds to a call premium of at least 17.729% | |
· 13th calculation day: | at least $1,185.00 which corresponds to a call premium of at least 18.50% | |
· 14th calculation day: | at least $1,192.71 which corresponds to a call premium of at least 19.271% | |
· 15th calculation day: | at least $1,200.42 which corresponds to a call premium of at least 20.042% | |
· 16th calculation day: | at least $1,208.13 which corresponds to a call premium of at least 20.813% | |
· 17th calculation day: | at least $1,215.83 which corresponds to a call premium of at least 21.583% | |
· 18th calculation day: | at least $1,223.54 which corresponds to a call premium of at least 22.354% | |
· 19th calculation day: | at least $1,231.25 which corresponds to a call premium of at least 23.125% | |
· 20th calculation day: | at least $1,238.96 which corresponds to a call premium of at least 23.896% | |
· 21st calculation day: | at least $1,246.67 which corresponds to a call premium of at least 24.667% | |
· 22nd calculation day: | at least $1,254.38 which corresponds to a call premium of at least 25.438% | |
· 23rd calculation day: | at least $1,262.08 which corresponds to a call premium of at least 26.208% | |
· 24th calculation day: | at least $1,269.79 which corresponds to a call premium of at least 26.979% | |
· 25th calculation day: | at least $1,277.50 which corresponds to a call premium of at least 27.75% | |
· 26th calculation day: | at least $1,285.21 which corresponds to a call premium of at least 28.521% | |
· 27th calculation day: | at least $1,292.92 which corresponds to a call premium of at least 29.292% |
July 2024 | Page 2 |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the iShares® Russell 2000 Value ETF and the Nasdaq-100® Technology Sector IndexSM due August 3, 2028
· 28th calculation day: | at least $1,300.63 which corresponds to a call premium of at least 30.063% | |
· 29th calculation day: | at least $1,308.33 which corresponds to a call premium of at least 30.833% | |
· 30th calculation day: | at least $1,316.04 which corresponds to a call premium of at least 31.604% | |
· 31st calculation day: | at least $1,323.75 which corresponds to a call premium of at least 32.375% | |
· 32nd calculation day: | at least $1,331.46 which corresponds to a call premium of at least 33.146% | |
· 33rd calculation day: | at least $1,339.17 which corresponds to a call premium of at least 33.917% | |
· 34th calculation day: | at least $1,346.88 which corresponds to a call premium of at least 34.688% | |
· 35th calculation day: | at least $1,354.58 which corresponds to a call premium of at least 35.458% | |
· 36th calculation day: | at least $1,362.29 which corresponds to a call premium of at least 36.229% | |
· Final calculation day: | at least $1,370.00 which corresponds to a call premium of at least 37.00% | |
The actual call payment and call premium applicable to each calculation day will be determined on the pricing date.
No further payments will be made on the securities once they have been called. |
||
Calculation days: | Monthly, as follows: |
· 1st calculation day: | August 1, 2025†* | |
· 2nd calculation day: | September 2, 2025†* | |
· 3rd calculation day: | October 1, 2025†* | |
· 4th calculation day: | November 3, 2025†* | |
· 5th calculation day: | December 1, 2025†* | |
· 6th calculation day: | January 2, 2026†* | |
· 7th calculation day: | February 2, 2026†* | |
· 8th calculation day: | March 2, 2026†* | |
· 9th calculation day: | April 1, 2026†* | |
· 10th calculation day: | May 1, 2026†* | |
· 11th calculation day: | June 1, 2026†* | |
· 12th calculation day: | July 1, 2026†* | |
· 13th calculation day: | August 3, 2026†* | |
· 14th calculation day: | September 1, 2026†* | |
· 15th calculation day: | October 1, 2026†* | |
· 16th calculation day: | November 2, 2026†* | |
· 17th calculation day: | December 1, 2026†* | |
· 18th calculation day: | January 4, 2027†* | |
· 19th calculation day: | February 1, 2027†* | |
· 20th calculation day: | March 1, 2027†* | |
· 21st calculation day: | April 1, 2027†* | |
· 22nd calculation day: | May 3, 2027†* | |
· 23rd calculation day: | June 1, 2027†* | |
· 24th calculation day: | July 1, 2027†* | |
· 25th calculation day: | August 2, 2027†* | |
· 26th calculation day: | September 1, 2027†* | |
· 27th calculation day: | October 1, 2027†* | |
· 28th calculation day: | November 1, 2027†* | |
· 29th calculation day: | December 1, 2027†* | |
· 30th calculation day: | January 3, 2028†* | |
· 31st calculation day: | February 1, 2028†* | |
· 32nd calculation day: | March 1, 2028†* | |
· 33rd calculation day: | April 3, 2028†* | |
· 34th calculation day: | May 1, 2028†* | |
· 35th calculation day: | June 1, 2028†* | |
· 36th calculation day: | July 3, 2028†* | |
· Final calculation day: | July 31, 2028†* |
July 2024 | Page 3 |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the iShares® Russell 2000 Value ETF and the Nasdaq-100® Technology Sector IndexSM due August 3, 2028
Call settlement date: | Three business days after the applicable calculation day.* |
Maturity payment amount: |
If the securities are not automatically called, you will be entitled to receive on the maturity date a cash payment per security as follows:
§ if the ending level of any underlying is less than its respective starting level but the ending level of each underlying is greater than or equal to its respective threshold level:
$1,000; or
§ if the ending level of any underlying is less than its respective threshold level:
$1,000 × performance factor of the lowest performing underlying
Under these circumstances, you will lose more than 50%, and possibly all, of your investment. |
Lowest performing underlying: | The underlying with the lowest performance factor |
Performance factor: | With respect to each underlying, the ending level divided by the starting level |
Starting level: |
With respect to the Dow Jones Industrial AverageSM: , its closing level on the pricing date.
With respect to the iShares® Russell 2000 Value ETF: $ , its closing price on the pricing date.
With respect to the Nasdaq-100® Technology Sector IndexSM: , its closing level on the pricing date. |
Ending level: |
With respect to each of the INDU Index and the NDXT Index, the closing level on the final calculation day.
With respect to the IWN Shares, the closing price of one IWN Share on the final calculation day multiplied by the adjustment factor on such day. |
Threshold level: |
With respect to the Dow Jones Industrial AverageSM: , which is equal to 50% of its starting level.
With respect to the iShares® Russell 2000 Value ETF: $ , which is equal to 50% of its starting level.
With respect to the Nasdaq-100® Technology Sector IndexSM: , which is equal to 50% of its starting level. |
Face amount: | $1,000 per security. References in this document to a “security” are to a security with a face amount of $1,000. |
Pricing date: | July 29, 2024† |
Original issue date: | August 1, 2024† (3 business days after the pricing date) |
Adjustment factor: | The “adjustment factor” means, 1.0, subject to adjustment in the event of certain events affecting the Fund. See “General Terms of the Securities—Anti-dilution Adjustments Relating to a Fund; Alternate Calculation” in the accompanying product supplement for principal at risk securities. |
CUSIP / ISIN: | 61776MG74 / US61776MG748 |
Listing: | The securities will not be listed on any securities exchange. |
Agents: | Morgan Stanley & Co. LLC (“MS & Co.”), an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley, and Wells Fargo Securities, LLC (“WFS”). See “Additional Information About the Securities—Supplemental information regarding plan of distribution; conflicts of interest.” |
†To the extent we make any change to the pricing date or original issue date, the calculation days and maturity date may also be changed in our discretion to ensure that the term of the securities remains the same.
* Subject to postponement pursuant to “General Terms of the Securities—Consequences of a Market Disruption Event; Postponement of a Calculation Day” in the accompanying product supplement for principal at risk securities.
|
July 2024 | Page 4 |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the iShares® Russell 2000 Value ETF and the Nasdaq-100® Technology Sector IndexSM due August 3, 2028
Estimated Value of the Securities |
The face amount of each security is $1,000. This price includes costs associated with issuing, selling, structuring and hedging the securities, which are borne by you, and, consequently, the estimated value of the securities on the pricing date will be less than $1,000 per security. We estimate that the value of each security on the pricing date will be approximately $955.30, or within $45.00 of that estimate. Our estimate of the value of the securities 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 securities on the pricing date, we take into account that the securities comprise both a debt component and a performance-based component linked to the underlyings. The estimated value of the securities is determined using our own pricing and valuation models, market inputs and assumptions relating to the underlyings, instruments based on the underlyings, volatility and other factors including current and expected interest rates, as well as an interest rate related to our secondary market credit spread, which is the implied interest rate at which our conventional fixed rate debt trades in the secondary market.
What determines the economic terms of the securities?
In determining the economic terms of the securities, including the call payment amounts and the threshold levels, we use an internal funding rate which is likely to be lower than our secondary market credit spreads and therefore advantageous to us. If the issuing, selling, structuring and hedging costs borne by you were lower or if the internal funding rate were higher, one or more of the economic terms of the securities would be more favorable to you.
What is the relationship between the estimated value on the pricing date and the secondary market price of the securities?
The price at which MS & Co. purchases the securities in the secondary market, absent changes in market conditions, including those related to the underlyings, may vary from, and be lower than, the estimated value on the pricing date, because the secondary market price takes into account our secondary market credit spread as well as the bid-offer spread that MS & Co. would charge in a secondary market transaction of this type and other factors. However, because the costs associated with issuing, selling, structuring and hedging the securities are not fully deducted upon issuance, for a period of up to 5 months following the issue date, to the extent that MS & Co. may buy or sell the securities in the secondary market, absent changes in market conditions, including those related to the underlyings, and to our secondary market credit spreads, it would do so based on values higher than the estimated value. We expect that those higher values will also be reflected in your brokerage account statements.
MS & Co. may, but is not obligated to, make a market in the securities and, if it once chooses to make a market, may cease doing so at any time.
July 2024 | Page 5 |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the iShares® Russell 2000 Value ETF and the Nasdaq-100® Technology Sector IndexSM due August 3, 2028
Investor Considerations |
The Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the iShares® Russell 2000 Value ETF and the Nasdaq-100® Technology Sector IndexSM due August 3, 2028 (the “securities”) may be appropriate for investors who:
§ | Seek the potential for a fixed return if each underlying has appreciated at all as of any of the calculation days in lieu of full participation in any potential appreciation of any or all of the underlyings; |
§ | Understand that if the closing level of any underlying is less than its respective starting level on each calculation day, they will not receive any positive return on their investment in the securities, and that if the closing level of any underlying on the final calculation day has declined by more than 50% from its starting level, they will be fully exposed to the decline in the lowest performing underlying from its starting level and will lose more than 50%, and possibly all, of the face amount of their securities at maturity; |
§ | Understand that the term of the securities may be as short as approximately one year, and that they will not receive a higher call payment with respect to a later calculation day if the securities are called on an earlier calculation day; |
§ | Understand that the return on the securities will depend solely on the performance of the underlying that is the lowest performing underlying on each calculation day and that they will not benefit in any way from the performance of the better performing underlyings; |
§ | Understand that the securities are riskier than alternative investments linked to only one of the underlyings or linked to a basket composed of each underlying; |
§ | Understand and are willing to accept the full downside risks of each underlying; |
§ | Are willing to forgo interest payments on the securities and dividends on securities included in the underlyings; and |
§ | Are willing to hold the securities until maturity. |
The securities are not designed for, and may not be an appropriate investment for, investors who:
§ | Seek a liquid investment or are unable or unwilling to hold the securities to maturity; |
§ | Require full payment of the face amount of the securities at maturity; |
§ | Seek a security with a fixed term; |
§ | Are unwilling to accept the risk that, if the closing level of any underlying is less than its respective starting level on each calculation day, they will not receive any positive return on their investment in the securities; |
§ | Are unwilling to accept the risk that the closing level of any underlying on the final calculation day may decline by more than 50% from its respective starting level to its ending level, in which case they will lose a significant portion or all of their investment; |
§ | Seek current income; |
§ | Are unwilling to accept the risk of exposure to each of the underlyings; |
§ | Seek exposure to a basket composed of each underlying or a similar investment in which the overall return is based on a blend of the performances of the underlyings, rather than solely on the lowest performing underlying; |
§ | Seek exposure to the upside performance of any or each underlying beyond the applicable call premiums; |
§ | Are unwilling to accept our credit risk; or |
§ | Prefer the lower risk of fixed income investments with comparable maturities issued by companies with comparable credit ratings. |
The considerations identified above are not exhaustive. Whether or not the securities are an appropriate investment for you will depend on your individual circumstances, and you should reach an investment decision only after you and your investment, legal, tax, accounting and other advisors have carefully considered the appropriateness of an investment in the securities in light of your particular circumstances. You should also review carefully the “Risk Factors” herein and in the accompanying product supplement for risks related to an investment in the securities. For more information about the underlyings, please see the sections titled “Dow Jones Industrial AverageSM Overview,” “iShares® Russell 2000 Value ETF Overview” and “Nasdaq-100® Technology Sector IndexSM Overview” below.
July 2024 | Page 6 |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the iShares® Russell 2000 Value ETF and the Nasdaq-100® Technology Sector IndexSM due August 3, 2028
Determining Timing and Amount of Payment on the Securities |
The timing and amount of the payment you will receive will be determined as follows:
July 2024 | Page 7 |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the iShares® Russell 2000 Value ETF and the Nasdaq-100® Technology Sector IndexSM due August 3, 2028
Hypothetical Payout Profile |
The hypothetical payout profile below illustrates the call payment or maturity payment amount on the securities, as applicable, for a range of hypothetical performances of the lowest performing underlying from its respective starting level to its respective closing level on the applicable calculation day.
July 2024 | Page 8 |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the iShares® Russell 2000 Value ETF and the Nasdaq-100® Technology Sector IndexSM due August 3, 2028
Scenario Analysis and Examples of Hypothetical Payments on the Securities |
The following scenario analysis and examples are provided for illustrative purposes only and are hypothetical. Whether the securities are called will be determined by reference to the closing level of each underlying on the calculation days, and the maturity payment amount, if any, will be determined by reference to the closing level of each underlying on the final calculation day. The actual call payment with respect to each applicable calculation day, starting levels and threshold levels will be determined on the pricing date. Some numbers appearing in the examples below have been rounded for ease of analysis. All payments on the securities are subject to our credit risk. The below examples are based on the following terms*:
Investment term: | Approximately 4 years | |
Hypothetical call payments: | The hypothetical call payment will be an amount in cash per face amount for each calculation day, as follows: | |
Call Payment | ||
1st calculation day: | $1,092.50 | |
2nd calculation day: | $1,100.21 | |
3rd calculation day: | $1,107.92 | |
4th calculation day: | $1,115.63 | |
5th calculation day: | $1,123.33 | |
6th calculation day: | $1,131.04 | |
7th calculation day: | $1,138.75 | |
8th calculation day: | $1,146.46 | |
9th calculation day: | $1,154.17 | |
10th calculation day: | $1,161.88 | |
11th calculation day: | $1,169.58 | |
12th calculation day: | $1,177.29 | |
13th calculation day: | $1,185.00 | |
14th calculation day: | $1,192.71 | |
15th calculation day: | $1,200.42 | |
16th calculation day: | $1,208.13 | |
17th calculation day: | $1,215.83 | |
18th calculation day: | $1,223.54 | |
19th calculation day: | $1,231.25 | |
20th calculation day: | $1,238.96 | |
21st calculation day: | $1,246.67 | |
22nd calculation day: | $1,254.38 | |
23rd calculation day: | $1,262.08 | |
24th calculation day: | $1,269.79 | |
25th calculation day: | $1,277.50 | |
26th calculation day: | $1,285.21 | |
27th calculation day: | $1,292.92 | |
28th calculation day: | $1,300.63 | |
29th calculation day: | $1,308.33 |
July 2024 | Page 9 |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the iShares® Russell 2000 Value ETF and the Nasdaq-100® Technology Sector IndexSM due August 3, 2028
30th calculation day: | $1,316.04 | |
31st calculation day: | $1,323.75 | |
32nd calculation day: | $1,331.46 | |
33rd calculation day: | $1,339.17 | |
34th calculation day: | $1,346.88 | |
35th calculation day: | $1,354.58 | |
36th calculation day: | $1,362.29 | |
Final calculation day: | $1,370.00 | |
Hypothetical starting level: |
With respect to the INDU Index: 100
With respect to the IWN Shares: $100
With respect to the NDXT Index: 100 | |
Hypothetical threshold level: |
With respect to the INDU Index: 50, which is 50% of its hypothetical starting level
With respect to the IWN Shares: $50, which is 50% of its hypothetical starting level
With respect to the NDXT Index: 50, which is 50% of its hypothetical starting level |
* The hypothetical starting level for the underlyings has been chosen for illustrative purposes only and does not represent the actual starting level of any underlying. The actual starting levels and threshold levels will be determined on the pricing date and will be set forth under “Terms” above. For historical data regarding the actual closing levels of the underlyings, see the historical information set forth herein.
July 2024 | Page 10 |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the iShares® Russell 2000 Value ETF and the Nasdaq-100® Technology Sector IndexSM due August 3, 2028
Automatic Call:
Example 1 — the securities are called following the second calculation day
Date | INDU Index Closing Level | IWN Shares Closing Level | NDXT Index Closing Level | Payment (per Security) |
1st Calculation Day | 80 (below the starting level) | $120 (at or above the starting level) | 140 (at or above the starting level) | -- |
2nd Calculation Day | 110 (at or above the starting level) | $125 (at or above the starting level) | 135 (at or above the starting level) | $1,100.21 |
In this example, on the first calculation day, the closing levels of two of the underlyings are at or above their respective starting levels, but the closing level of the other underlying is below its respective starting level. Therefore, the securities are not called. On the second calculation day, the closing level of each underlying is at or above the respective starting level. Therefore, the securities are automatically called on the second call settlement date. Investors will receive a payment of $1,100.21 per security on the related call settlement date. No further payments will be made on the securities once they have been called, and investors do not participate in the appreciation in any underlying.
How to calculate the payment investors will receive at maturity:
In the following examples, one or more of the underlyings close below the respective starting level(s) on each of the calculation days prior to the final calculation day, and, consequently, the securities are not automatically called prior to, and remain outstanding until, maturity.
INDU Index Ending Level | IWN Shares Ending Level | NDXT Index Ending Level |
Maturity Payment Amount
(per Security)
| |
Example 1: | 150 (at or above its starting level) | $140 (at or above its starting level) | 142 (at or above its starting level) | $1,370.00 |
Example 2:
|
80 (below its starting level but at or above its threshold level) | $110 (at or above its starting level and threshold level) | 120 (at or above its starting level and threshold level) | $1,000 |
Example 3: | 125 (at or above its starting level and threshold level) | $40 (below its threshold level) | 120 (at or above its starting level and threshold level) | $1,000 × ($40 / $100) = $400 |
Example 4: | 20 (below its threshold level) | $80 (below its starting level but at or above its threshold level) | 120 (at or above its starting level and threshold level) | $1,000 × (20 / 100) = $200 |
Example 5: | 45 (below its threshold level) | $40 (below its threshold level) | 20 (below its threshold level) | $1,000 × (20 / 100) = $200 |
In example 1, the ending level of each underlying is at or above its respective starting level. Therefore, investors receive at maturity the call payment applicable to the final calculation day. Investors do not participate in any appreciation in any underlying.
In example 2, the ending levels of two of the underlyings are at or above their starting levels and threshold levels, but the ending level of the other underlying is below its starting level and at or above its threshold level. Therefore, investors receive $1,000 per security at maturity. Investors do not participate in any appreciation in any underlying.
In example 3, the ending levels of two of the underlyings are at or above their starting levels and threshold levels, but the ending level of the other underlying is below its respective threshold level. Therefore, investors are exposed to the downside performance of the lowest performing underlying at maturity. Investors receive at maturity an amount equal to the face amount times the performance factor of the IWN Shares, which is the lowest performing underlying in this example.
In example 4, the ending level of one of the underlyings is at or above its starting level and threshold level, the ending level of one of the underlyings is below its starting level and at or above its threshold level, and the ending level of the other underlying is below its respective threshold level. Therefore, investors are exposed to the downside performance of the lowest performing underlying at maturity. Investors receive at maturity an amount equal to the face amount the performance factor of the INDU Index, which is the lowest performing underlying in this example.
July 2024 | Page 11 |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the iShares® Russell 2000 Value ETF and the Nasdaq-100® Technology Sector IndexSM due August 3, 2028
In example 5, the ending level of each underlying is below its respective threshold level, and investors receive at maturity an amount equal to the face amount times the performance factor of the lowest performing underlying. Therefore, the maturity payment amount equals the face amount times the performance factor of the NDXT Index, which is the lowest performing underlying in this example.
If the ending level of any underlying is below its respective threshold level, you will be exposed to the downside performance of the lowest performing underlying at maturity, and your maturity payment amount will be less than 50% of the face amount per security and could be zero.
July 2024 | Page 12 |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the iShares® Russell 2000 Value ETF and the Nasdaq-100® Technology Sector IndexSM due August 3, 2028
Risk Factors |
This section describes the material risks relating to the securities. For further discussion of these and other risks, you should read the section entitled “Risk Factors” in the accompanying product supplement for principal at risk securities, index supplement and prospectus. We also urge you to consult your investment, legal, tax, accounting and other advisers in connection with your investment in the securities.
Risks Relating to an Investment in the Securities
§ | The securities do not pay interest or guarantee the return of the face amount of your securities at maturity. The terms of the securities differ from those of ordinary debt securities in that they do not pay interest or guarantee the return of the face amount of your securities at maturity. If the securities have not been automatically called and if the ending level of any underlying is less than its respective threshold level of 50% of its starting level, you will be exposed to the decline in the value of the lowest performing underlying, as compared to its starting level, on a 1-to-1 basis, and you will receive for each security that you hold at maturity an amount equal to the face amount times the performance factor of the lowest performing underlying. In this case, you will lose more than 50%, and possibly all, of the face amount of your securities at maturity. |
§ | The appreciation potential of the securities is limited by the call payment specified for each calculation day. The appreciation potential of the securities is limited to the call payment specified for each calculation day if each underlying closes at or above its respective starting level on any calculation day. In all cases, you will not participate in any appreciation of any underlying, which could be significant. |
§ | The market price will be influenced by many unpredictable factors. Several factors, many of which are beyond our control, will influence the value of the securities in the secondary market and the price at which MS & Co. may be willing to purchase or sell the securities in the secondary market. We expect that generally the level of interest rates available in the market and the value of each underlying on any day, including in relation to its respective starting level and threshold level, will affect the value of the securities more than any other factors. Other factors that may influence the value of the securities include: |
o | the volatility (frequency and magnitude of changes in value) of the underlyings, |
o | geopolitical conditions and economic, financial, political, regulatory or judicial events that affect the component stocks of the underlyings or securities markets generally and which may affect the value of each underlying, |
o | dividend rates on the securities underlying the underlyings, |
o | the time remaining until the securities mature, |
o | interest and yield rates in the market, |
o | the availability of comparable instruments, |
o | the composition of the underlyings and changes in the constituent stocks of such underlyings, |
o | the occurrence of certain events affecting the Fund that may or may not require an adjustment to the adjustment factor, and |
o | any actual or anticipated changes in our credit ratings or credit spreads. |
Generally, the longer the time remaining to maturity, the more the market price of the securities will be affected by the other factors described above. Some or all of these factors will influence the price that you will receive if you sell your securities prior to maturity. For example, you may have to sell your securities at a substantial discount from the face amount of $1,000 per security if the level of any underlying at the time of sale is near or below its threshold level or if market interest rates rise.
You cannot predict the future performance of any underlying based on its historical performance. The value(s) of one or more of the underlyings may decrease so that you will receive no return on your investment and receive a maturity payment amount that is significantly less than the face amount. See “Dow Jones Industrial AverageSM Overview,” “iShares® Russell 2000 Value ETF Overview” and “Nasdaq-100® Technology Sector IndexSM Overview” below.
§ | The securities are subject to our credit risk, and any actual or anticipated changes to our credit ratings or credit spreads may adversely affect the market value of the securities. You are dependent on our ability to pay all amounts due on the securities upon an automatic call or at maturity, and therefore you are subject to our credit risk. If we default on our obligations under the securities, your investment would be at risk and you could lose some or all of your investment. As a result, the market value of the securities prior to maturity will be affected by changes in the market’s view of our creditworthiness. Any actual or anticipated decline in our credit ratings or increase in the credit spreads charged by the market for taking our credit risk is likely to adversely affect the market value of the securities. |
§ | As a finance subsidiary, MSFL has no independent operations and will have no independent assets. As a finance subsidiary, MSFL has no independent operations beyond the issuance and administration of its securities and will have no independent assets available for distributions to holders of MSFL securities if they make claims in respect of such securities in a |
July 2024 | Page 13 |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the iShares® Russell 2000 Value ETF and the Nasdaq-100® Technology Sector IndexSM due August 3, 2028
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.
§ | Investing in the securities is not equivalent to investing in the underlyings. Investing in the securities is not equivalent to investing in the underlyings or the component stocks or any underlying. Investors in the securities will not participate in any positive performance of any underlying, and will not have voting rights or rights to receive dividends or other distributions or any other rights with respect to the stocks that constitute any underlying. |
§ | Reinvestment risk. The term of your investment in the securities may be shortened due to the automatic call feature of the securities. If the securities are called prior to maturity, you will receive no further payments on the securities and may be forced to invest in a lower interest rate environment and may not be able to reinvest at comparable terms or returns. However, under no circumstances will the securities be called within the first year of the term of the securities. |
§ | The rate we are willing to pay for securities of this type, maturity and issuance size is likely to be lower than the rate implied by our secondary market credit spreads and advantageous to us. Both the lower rate and the inclusion of costs associated with issuing, selling, structuring and hedging the securities in the face amount reduce the economic terms of the securities, cause the estimated value of the securities to be less than the face amount and will adversely affect secondary market prices. Assuming no change in market conditions or any other relevant factors, the prices, if any, at which dealers, including MS & Co., may be willing to purchase the securities in secondary market transactions will likely be significantly lower than the face amount, because secondary market prices will exclude the issuing, selling, structuring and hedging-related costs that are included in the face amount and borne by you and because the secondary market prices will reflect our secondary market credit spreads and the bid-offer spread that any dealer would charge in a secondary market transaction of this type as well as other factors. |
The inclusion of the costs of issuing, selling, structuring and hedging the securities in the face amount and the lower rate we are willing to pay as issuer make the economic terms of the securities less favorable to you than they otherwise would be.
However, because the costs associated with issuing, selling, structuring and hedging the securities are not fully deducted upon issuance, for a period of up to 5 months following the issue date, to the extent that MS & Co. may buy or sell the securities in the secondary market, absent changes in market conditions, including those related to the underlyings, and to our secondary market credit spreads, it would do so based on values higher than the estimated value, and we expect that those higher values will also be reflected in your brokerage account statements.
§ | The estimated value of the securities is determined by reference to our pricing and valuation models, which may differ from those of other dealers and is not a maximum or minimum secondary market price. These pricing and valuation models are proprietary and rely in part on subjective views of certain market inputs and certain assumptions about future events, which may prove to be incorrect. As a result, because there is no market-standard way to value these types of securities, our models may yield a higher estimated value of the securities than those generated by others, including other dealers in the market, if they attempted to value the securities. In addition, the estimated value on the pricing date does not represent a minimum or maximum price at which dealers, including MS & Co., would be willing to purchase your securities in the secondary market (if any exists) at any time. The value of your securities at any time after the date of this document will vary based on many factors that cannot be predicted with accuracy, including our creditworthiness and changes in market conditions. See also “The market price will be influenced by many unpredictable factors” above. |
§ | The securities will not be listed on any securities exchange and secondary trading may be limited. The securities will not be listed on any securities exchange. Therefore, there may be little or no secondary market for the securities. MS & Co. and WFS may, but are not obligated to, make a market in the securities and, if either of them once chooses to make a market, may cease doing so at any time. When they do make a market, they will generally do so for transactions of routine secondary market size at prices based on their respective estimates of the current value of the securities, taking into account their respective bid/offer spreads, our credit spreads, market volatility, the notional size of the proposed sale, the cost of unwinding any related hedging positions, the time remaining to maturity and the likelihood that they will be able to resell the securities. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the securities easily. Since other broker-dealers may not participate significantly in the secondary market for the securities, the price at which you may be able to trade your securities is likely to depend on the price, if any, at which MS & Co. or WFS is willing to transact. If, at any time, MS & Co. and WFS were to cease making a market in the securities, it is likely that there would be no secondary market for the securities. Accordingly, you should be willing to hold your securities to maturity. |
§ | The calculation agent, which is a subsidiary of Morgan Stanley and an affiliate of MSFL, will make determinations with respect to the securities. As calculation agent, MS & Co. will determine the starting levels, the |
July 2024 | Page 14 |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the iShares® Russell 2000 Value ETF and the Nasdaq-100® Technology Sector IndexSM due August 3, 2028
threshold levels and the ending levels and will calculate the amount of cash you receive at maturity, if any. Moreover, certain determinations made by MS & Co., in its capacity as calculation agent, may require it to exercise discretion and make subjective judgments, such as with respect to the occurrence or non-occurrence of market disruption events and the selection of a successor index or calculation of the ending level in the event of a market disruption event or discontinuance of any of the underlyings. These potentially subjective determinations may adversely affect the payout to you at maturity, if any. For further information regarding these types of determinations, see “General Terms of the Securities—Market Disruption Events,” “—Adjustments to an Index,” “—Discontinuance of an Index,” “—Anti-dilution Adjustments Relating to a Fund; Alternate Calculation,” “—Consequences of a Market Disruption Event; Postponement of a Calculation Day” and “Alternate Exchange Calculation in Case of an Event of Default” in the accompanying product supplement for principal at risk securities. In addition, MS & Co. has determined the estimated value of the securities on the pricing date.
§ | Hedging and trading activity by our affiliates could potentially adversely affect the value of the securities. One or more of our affiliates and/or third-party dealers expect to carry out hedging activities related to the securities (and possibly to other instruments linked to the underlyings or the component stocks of the Indices or fund underlying index), including trading in the shares of the Fund or the stocks that constitute the Indices or the fund underlying index as well as in other instruments related to the underlyings. As a result, these entities may be unwinding or adjusting hedge positions during the term of the securities, and the hedging strategy may involve greater and more frequent dynamic adjustments to the hedge as the final calculation day approaches. Some of our affiliates also trade the shares of the Fund or the stocks that constitute the Indices or fund underlying index and other financial instruments related to the underlyings on a regular basis as part of their general broker-dealer and other businesses. Any of these hedging or trading activities on or prior to the pricing date could potentially affect the starting level of an underlying, and, therefore, could increase (i) the level at or above which such underlying must close on the calculation days so that the securities are called for the call payment (depending also on the performance of the other underlyings) and (ii) the threshold level for such underlying, which is the level at or above which such underlying must close on the final calculation day so that you do not suffer a significant loss on your initial investment in the securities. Additionally, such hedging or trading activities during the term of the securities could potentially affect the value of any underlying on the calculation days, and, accordingly, whether we call the securities prior to maturity and the amount of cash you will receive at maturity, if any. |
§ | The maturity date may be postponed if the final calculation day is postponed. If the scheduled final calculation day is not a trading day or if a market disruption event occurs on that day so that the final calculation day is postponed and falls less than three business days prior to the maturity date, the maturity date of the securities will be postponed to the third business day following that final calculation day as postponed. |
§ | Potentially inconsistent research, opinions or recommendations by Morgan Stanley, MSFL, WFS or our or their respective affiliates. Morgan Stanley, MSFL, WFS and our or their respective affiliates may publish research from time to time on financial markets and other matters that may influence the value of the securities, or express opinions or provide recommendations that are inconsistent with purchasing or holding the securities. Any research, opinions or recommendations expressed by Morgan Stanley, MSFL, WFS or our or their respective affiliates may not be consistent with each other and may be modified from time to time without notice. Investors should make their own independent investigation of the merits of investing in the securities and the underlyings to which the securities are linked. |
§ | The U.S. federal income tax consequences of an investment in the securities are uncertain. Please read the discussion under “Additional Information About the Securities—Tax considerations” in this document and the discussion under “United States Federal Taxation” in the accompanying product supplement for principal at risk securities (together, the “Tax Disclosure Sections”) concerning the U.S. federal income tax consequences of an investment in the securities. As discussed in the Tax Disclosure Sections, there is a 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. In addition, there is no direct legal authority regarding the proper U.S. federal tax treatment of the securities, and we do not plan to request a ruling from the Internal Revenue Service (the “IRS”). Consequently, significant aspects of the tax treatment of the securities are uncertain, and the IRS or a court might not agree with the tax treatment of a security as a single financial contract that is an “open transaction” for U.S. federal income tax purposes. If the IRS were successful in asserting an alternative treatment of the securities, the tax consequences of the ownership and disposition of the securities, including the timing and character of income recognized by U.S. Holders and the withholding tax consequences to Non-U.S. Holders, might be materially and adversely affected. Moreover, future legislation, Treasury regulations or IRS guidance could adversely affect the U.S. federal tax treatment of the securities, possibly retroactively. |
Both U.S. and Non-U.S. Holders should consult their tax advisers regarding the U.S. federal income tax consequences of an investment in the securities, including possible alternative treatments, as well as any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
July 2024 | Page 15 |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the iShares® Russell 2000 Value ETF and the Nasdaq-100® Technology Sector IndexSM due August 3, 2028
Risks Relating to the Underlyings
§ | You are exposed to the price risk of each underlying. Your return on the securities is not linked to a basket consisting of each underlying. Rather, it will be contingent upon the independent performance of each underlying. Unlike an instrument with a return linked to a basket of underlying assets, in which risk is mitigated and diversified among all the components of the basket, you will be exposed to the risks related to each underlying. Poor performance by any underlying over the term of the securities may negatively affect your return and will not be offset or mitigated by any positive performance by the other underlyings. To receive the call premium, each underlying must close at or above its respective starting level on the applicable calculation day. In addition, if the securities have not been called and any underlying has declined to below its respective threshold level as of the final calculation day, you will be fully exposed to the decline in the lowest performing underlying over the term of the securities on a 1-to-1 basis, even if the other underlyings have appreciated or have not declined as much. Under this scenario, the value of any such maturity payment amount will be less than 50% of the face amount of your securities and could be zero. Accordingly, your investment is subject to the price risk of each underlying. |
§ | The investment strategy represented by the iShares® Russell 2000 Value ETF may not be successful. The iShares® Russell 2000 Value ETF seeks to track the investment results of the Russell 2000® Value Index. The Russell 2000® Value Index measures the capitalization-weighted price performance of the stocks included in the Russell 2000® Index that are determined by FTSE Russell to be value-oriented, with lower price-to-book ratios and lower forecasted growth values. However, there can be no assurance that the Russell 2000® Value Index will outperform any other index or strategy that tracks stocks selected using other criteria. A “value” investment strategy is premised on the goal of investing in stocks that are deemed to be relatively cheap or “undervalued,” based on the assumption that the values of those stocks will increase over time. However, the value characteristics referenced by the Russell 2000® Value Index may not be accurate predictors of undervalued stocks, and there is in any event no guarantee that undervalued stocks will appreciate or will not depreciate. In addition, the selection methodology of the Russell 2000® Value Index includes an inherent bias against stocks with strong growth characteristics, and stocks with strong growth characteristics may outperform stocks with weak growth characteristics. It is possible that the investment strategy and stock selection methodology of the Russell 2000® Value Index will adversely affect its return and, therefore, the value of the securities. |
§ | The securities are linked to the iShares® Russell 2000 Value ETF and are subject to risks associated with small-capitalization companies. The iShares® Russell 2000 Value ETF tracks the performance of stocks issued by companies with relatively small market capitalization, the securities are linked to the value of small-capitalization companies. These companies often have greater stock price volatility, lower trading volume and less liquidity than large-capitalization companies and therefore the iShares® Russell 2000 Value ETF may be more volatile than indices or funds that consist of stocks issued by large-capitalization companies. Stock prices of small-capitalization companies are also more vulnerable than those of large-capitalization companies to adverse business and economic developments, and the stocks of small-capitalization companies may be thinly traded. In addition, small capitalization companies are typically less well-established and less stable financially than large-capitalization companies and may depend on a small number of key personnel, making them more vulnerable to loss of personnel. Such companies tend to have smaller revenues, less diverse product lines, smaller shares of their product or service markets, fewer financial resources and less competitive strengths than large-capitalization companies and are more susceptible to adverse developments related to their products. |
§ | Investing in the securities exposes investors to risks associated with investments in securities with a concentration in the technology sector. The stocks included in the Nasdaq-100® Technology Sector IndexSM are stocks of companies whose primary business is directly associated with the technology sector, including the following sub-sectors: computers and peripherals, software, diversified telecommunication services, communications equipment, semiconductors and semiconductor equipment, internet software and services, IT services, electronic equipment, instruments and components, wireless telecommunication services and office electronics. Because the value of the securities is linked to the performance of the Nasdaq-100® Technology Sector IndexSM, an investment in the securities exposes investors to risks associated with investments in securities with a concentration in the technology sector. |
The values of stocks of technology companies and companies that rely heavily on technology are particularly vulnerable to rapid changes in technology product cycles, rapid product obsolescence, government regulation and competition, both domestically and internationally, including competition from foreign competitors with lower production costs. Technology companies and companies that rely heavily on technology, especially those of smaller, less-seasoned companies, tend to be more volatile than the overall market. Additionally, companies in the technology sector may face dramatic and often unpredictable changes in growth rates and competition for the services of qualified personnel. All of these factors could have an effect on the price of the Nasdaq-100® Technology Sector IndexSM and, therefore, on the value of the securities.
§ | Adjustments to the Indices could adversely affect the value of the securities. The publisher of any Index may add, delete or substitute the stocks constituting such Index or make other methodological changes that could change the value of such Index. The publisher of such Index may discontinue or suspend calculation or publication of such 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 Index and is permitted to consider indices that are calculated and published by the calculation agent or any of its |
July 2024 | Page 16 |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the iShares® Russell 2000 Value ETF and the Nasdaq-100® Technology Sector IndexSM due August 3, 2028
affiliates. If the calculation agent determines that there is no appropriate successor index on any calculation day, the determination of whether the securities will be called or the amount payable at maturity, if any, will be based on the value of such Index, based on the closing prices of the stocks constituting such Index at the time of such discontinuance, without rebalancing or substitution, computed by MS & Co. as calculation agent in accordance with the formula for calculating such Index last in effect prior to such discontinuance, as compared to the relevant starting level or threshold level, as applicable (depending also on the performance of the other underlyings).
§ | Adjustments to the Fund or to the fund underlying index could adversely affect the value of the securities. The investment adviser to the IWN Shares, BlackRock Fund Advisors (the “Investment Adviser”), seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the fund underlying index. Pursuant to its investment strategy or otherwise, the Investment Adviser may add, delete or substitute the components securities of the Fund. Any of these actions could adversely affect the price of the shares of the Fund and, consequently, the value of the securities. In addition, the fund underlying index sponsor of the Fund is responsible for calculating and maintaining the fund underlying index. The fund underlying index sponsor may add, delete or substitute the stocks constituting the fund underlying index or make other methodological changes that could change the value of the shares of the Fund. The fund underlying index sponsor may also discontinue or suspend calculation or publication of a fund underlying index at any time. If this discontinuance or suspension occurs following the termination of the Fund, the calculation agent will have the sole discretion to substitute a successor index that is comparable to the discontinued fund underlying 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 values of the shares of the Fund and, consequently, the value of the securities. |
§ | The performance and market price of the Fund, particularly during periods of market volatility, may not correlate with the performance of the fund underlying index, the performance of the component stocks of the fund underlying index or the net asset value per share of the Fund. The Fund does not fully replicate the fund underlying index, and may hold securities that are different than those included in the fund underlying index. In addition, the performance of the Fund will reflect additional transaction costs and fees that are not included in the calculation of the fund underlying index. All of these factors may lead to a lack of correlation between the performance of the Fund and the fund underlying index. In addition, corporate actions (such as mergers and spin-offs) with respect to the equity securities constituting the shares of the Fund may impact the variance between the performance of the Fund and the fund underlying index. Finally, because the shares of the Fund are traded on an exchange and are subject to market supply and investor demand, the market price of one share of the Fund may differ from the net asset value per share of the Fund. |
In particular, during periods of market volatility, or unusual trading activity, trading in the securities constituting the Fund may be disrupted or limited, or such securities may be unavailable in the secondary market. Under these circumstances, the liquidity of the Fund may be adversely affected, market participants may be unable to calculate accurately the net asset value per share of the Fund, and their ability to create and redeem shares of the Fund may be disrupted. Under these circumstances, the market price of shares of the Fund may vary substantially from the net asset value per share of Fund or the level of the fund underlying index.
For all of the foregoing reasons, the performance of the Fund may not correlate with the performance of the fund underlying index, the performance of the component stocks of the fund underlying index or the net asset value per share of the Fund. Any of these events could materially and adversely affect the prices of the shares of the Fund and, therefore, the value of the securities. Additionally, if market volatility or these events were to occur on the final calculation day, 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 would affect the payment at maturity of the securities. If the calculation agent determines that no market disruption event has taken place, the payment at maturity would be based solely on the published closing price per share of the Fund on the final calculation day, even if any of the shares of the Fund is underperforming the fund underlying index or the component stocks of the fund underlying index and/or trading below the net asset value per share of the Fund.
§ | The antidilution adjustments the calculation agent is required to make do not cover every event that could affect the Fund. MS & Co., as calculation agent, will adjust the adjustment factor for certain events affecting the Fund. However, the calculation agent will not make an adjustment for every event that could affect the Fund. If an event occurs that does not require the calculation agent to adjust the adjustment factor, the market price of the securities may be materially and adversely affected. |
§ | Historical levels of the underlyings should not be taken as an indication of the future performance of the underlyings during the term of the securities. No assurance can be given as to the level of the underlyings at any time, including on the final calculation day, because historical levels of the underlyings do not provide an indication of future performance of the underlyings. |
July 2024 | Page 17 |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the iShares® Russell 2000 Value ETF and the Nasdaq-100® Technology Sector IndexSM due August 3, 2028
Dow Jones Industrial AverageSM Overview |
The Dow Jones Industrial AverageSM is a price-weighted index composed of 30 common stocks that is published by S&P® Dow Jones Indices LLC, the marketing name and a licensed trademark of CME Group Inc., as representative of the broad market of U.S. industry. For additional information about the Dow Jones Industrial AverageSM, see the information set forth under “Dow Jones Industrial AverageSM” in the accompanying index supplement.
The following graph sets forth the daily closing levels of the INDU Index for the period from January 1, 2019 through July 12, 2024. The closing level of the INDU Index on July 12, 2024 was 40,000.90. We obtained the information in the graph below from Bloomberg Financial Markets without independent verification. The INDU Index has at times experienced periods of high volatility. You should not take the historical levels of the INDU Index as an indication of its future performance, and no assurance can be given as to the closing level of the INDU Index at any time, including on the calculation days.
Dow Jones Industrial AverageSM Daily Closing Levels January 1, 2019 to July 12, 2024 |
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“Dow Jones,” “Dow Jones Industrial Average,” “Dow Jones Indexes” and “DJIA” are service marks of Dow Jones Trademark Holdings LLC. For more information, see “Dow Jones Industrial AverageSM” in the accompanying index supplement.
July 2024 | Page 18 |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the iShares® Russell 2000 Value ETF and the Nasdaq-100® Technology Sector IndexSM due August 3, 2028
iShares® Russell 2000 Value ETF Overview |
The iShares® Russell 2000 Value 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 Russell 2000® Value Index. The iShares® Russell 2000 Value ETF is managed by iShares® Trust (“iShares”), a registered investment company that consists of numerous separate investment portfolios, including the iShares® Russell 2000 Value ETF. Information provided to or filed with the Securities and Exchange Commission (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. Neither the issuer nor the agent makes any representation that any such publicly available information regarding the iShares® Russell 2000 Value ETF is accurate or complete.
The following graph sets forth the daily closing prices of the IWN Shares for the period from January 1, 2019 through July 12, 2024. The closing price of the IWN Shares on July 12, 2024 was $159.96. We obtained the information in the graph below from Bloomberg Financial Markets without independent verification. The IWN Shares has at times experienced periods of high volatility. You should not take the historical levels of the IWN Shares as an indication of its future performance, and no assurance can be given as to the closing price of the IWN Shares at any time, including on the calculation days.
iShares® Russell 2000 Value ETF Daily Closing Prices January 1, 2019 to July 12, 2024 |
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This document relates only to the securities offered hereby and does not relate to the IWN 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 securities, 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 IWN Shares (and therefore the price of the IWN Shares at the time we price the securities) 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 with respect to the securities and therefore the value of the securities.
Neither we nor any of our affiliates makes any representation to you as to the performance of the IWN 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 IWN Shares. The statements in the preceding two sentences are not intended to affect the rights of investors in the securities under the securities laws. As
July 2024 | Page 19 |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the iShares® Russell 2000 Value ETF and the Nasdaq-100® Technology Sector IndexSM due August 3, 2028
a prospective purchaser of the securities, 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 IWN Shares.
“iShares®” is a registered trademark of BlackRock Fund Advisors (“BFA”). The securities are not sponsored, endorsed, sold, or promoted by BFA. BFA makes no representations or warranties to the owners of the securities or any member of the public regarding the advisability of investing in the securities. BFA has no obligation or liability in connection with the operation, marketing, trading or sale of the securities.
Russell 2000® Value Index. The Russell 2000® Value Index is a sub-group of the Russell 2000® Index, which is an index calculated, published and disseminated by FTSE International Limited (“FTSE Russell”), and measures the capitalization-weighted price performance of 2,000 U.S. small-capitalization stocks listed on eligible U.S. exchanges. The Russell 2000® Value Index measures the capitalization-weighted price performance of the stocks included in the Russell 2000® Index that are determined by FTSE Russell to be value oriented, as indicated by lower price-to-book ratios and lower forecasted and historical growth. The Russell 2000® Index is designed to track the performance of the small-capitalization segment of the U.S. equity market. The companies included in the Russell 2000® Index are the middle 2,000 (i.e., those ranked 1,001 through 3,000) of the companies that form the Russell 3000E™ Index. The Russell 2000® Index represents approximately 7% of the U.S. equity market. For additional information about the Russell 2000® Value Index, see the information set forth under “Russell Style Indices—Russell 2000® Value Index” in the accompanying index supplement.
July 2024 | Page 20 |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the iShares® Russell 2000 Value ETF and the Nasdaq-100® Technology Sector IndexSM due August 3, 2028
Nasdaq-100® Technology Sector IndexSM Overview |
The Nasdaq-100® Technology Sector IndexSM, which is calculated, maintained and published by The Nasdaq OMX Group, Inc. (“Nasdaq OMX”), is an equal-weighted index intended to measure the performance of Nasdaq-listed companies that are classified as technology according to the Industry Classification Benchmark. For additional information about the Nasdaq-100® Technology Sector IndexSM, see “Annex A — Nasdaq-100® Technology Sector IndexSM” below.
The following graph sets forth the daily closing levels of the NDXT Index for the period from January 1, 2019 through July 12, 2024. The closing level of the NDXT Index on July 12, 2024 was 11,145.72. We obtained the information in the graph below from Bloomberg Financial Markets without independent verification. The NDXT Index has at times experienced periods of high volatility. You should not take the historical levels of the NDXT Index as an indication of its future performance, and no assurance can be given as to the closing level of the NDXT Index at any time, including on the calculation days.
Nasdaq-100® Technology Sector IndexSM Daily Closing Levels January 1, 2019 to July 12, 2024 |
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“Nasdaq®,” “Nasdaq-100®” and “Nasdaq-100 Index®” are trademarks of Nasdaq, Inc. For more information, see “Annex A — Nasdaq-100® Technology Sector IndexSM” below.
July 2024 | Page 21 |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the iShares® Russell 2000 Value ETF and the Nasdaq-100® Technology Sector IndexSM due August 3, 2028
Additional Information About the Securities |
Minimum ticketing size
$1,000 / 1 security
Tax considerations
Although there is uncertainty regarding the U.S. federal income tax consequences of an investment in the securities 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, it is reasonable to treat a security 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 securities is respected and subject to the discussion in “United States Federal Taxation” in the accompanying product supplement for principal at risk securities, the following U.S. federal income tax consequences should result based on current law:
§ | A U.S. Holder should not be required to recognize taxable income over the term of the securities prior to settlement, other than pursuant to a sale or exchange. |
§ | Upon sale, exchange or settlement of the securities, 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 securities. 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 securities for more than one year, and short-term capital gain or loss otherwise. |
Because the securities are linked to shares of an exchange-traded fund, although the matter is not clear, there is a risk that an investment in the securities 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 securities could be recharacterized as ordinary income (in which case an interest charge will be imposed). As a result of certain features of the securities, including the fact that the securities are linked to indices 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 securities 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 securities. 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 principal at risk securities for additional information and consult their tax advisers regarding the potential application of the “constructive ownership” rule.
We do not plan to request a ruling from the Internal Revenue Service (the “IRS”) regarding the treatment of the securities. An alternative characterization of the securities could materially and adversely affect the tax consequences of ownership and disposition of the securities, including the timing and character of income recognized. In addition, the U.S. Treasury Department and the IRS have requested comments on various issues regarding the U.S. federal income tax treatment of “prepaid forward contracts” and similar financial instruments and have indicated that such transactions may be the subject of future regulations or other guidance. Furthermore, members of Congress have proposed legislative changes to the tax treatment of derivative contracts. Any legislation, Treasury regulations or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment in the securities, possibly with retroactive effect.
As discussed in the accompanying product supplement for principal at risk securities, Section 871(m) of the Code and Treasury regulations promulgated thereunder (“Section 871(m)”) generally impose a 30% (or a lower applicable treaty rate) withholding tax on dividend equivalents paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments linked to U.S. equities or indices that include U.S. equities (each, an “Underlying Security”). Subject to certain exceptions, Section 871(m) generally applies to securities that substantially replicate the economic performance of one or more Underlying Securities, as determined based on tests set forth in the applicable Treasury regulations (a “Specified Security”). However, pursuant to an IRS notice, Section 871(m) will not apply to securities issued before January 1, 2027 that do not have a delta of one with respect to any Underlying Security. Based on the terms of the securities and current market conditions, we expect that the securities 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 securities do not have a delta of one with respect to any Underlying Security, our counsel is of the opinion that the securities should not be Specified Securities and, therefore, should not be subject to Section 871(m).
Our determination is not binding on the IRS, and the IRS may disagree with this determination. Section 871(m) is complex and its application may depend on your particular circumstances, including whether you enter into other transactions with respect to an Underlying Security. If withholding is required, we will not be required to pay any additional amounts with respect to the amounts so withheld. You should consult your tax adviser regarding the potential application of Section 871(m) to the securities.
Both U.S. and non-U.S. investors considering an investment in the securities should read the discussion under “Risk Factors” in this document and the discussion under “United States Federal Taxation” in the accompanying product supplement for principal at risk securities and consult their tax advisers regarding all aspects of the U.S. federal income tax consequences of an investment in the securities, including possible alternative treatments, the potential application of the constructive ownership rule, and any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
July 2024 | Page 22 |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the iShares® Russell 2000 Value ETF and the Nasdaq-100® Technology Sector IndexSM due August 3, 2028
The discussion in the preceding paragraphs under “Tax considerations” and the discussion contained in the section entitled “United States Federal Taxation” in the accompanying product supplement for principal at risk securities, insofar as they purport to describe provisions of U.S. federal income tax laws or legal conclusions with respect thereto, constitute the full opinion of Davis Polk & Wardwell LLP regarding the material U.S. federal tax consequences of an investment in the securities.
Additional considerations
Client accounts over which Morgan Stanley, Morgan Stanley Wealth Management or any of their respective subsidiaries have investment discretion are not permitted to purchase the securities, either directly or indirectly.
Supplemental information regarding plan of distribution; conflicts of interest
MS & Co. and WFS will act as the agents for this offering. WFS will receive a commission of up to $25.75 for each security it sells. WFS proposes to offer the securities in part directly to the public at the price to public set forth on the cover page of this document and in part to Wells Fargo Advisors (“WFA”) (the trade name of the retail brokerage business of WFS’s affiliates, Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC), an affiliate of WFS, or other securities dealers at such price less a selling concession of up to $20.00 per security. In addition to the selling concession allowed to WFA, WFS may pay $0.75 per security of the commission to WFA as a distribution expense fee for each security sold by WFA.
In addition, in respect of certain securities sold in this offering, we may pay a fee of up to $4.00 per security to selected securities dealers in consideration for marketing and other services in connection with the distribution of the securities to other securities dealers.
See "Plan of Distribution (Conflicts of Interest)" in the accompanying product supplement for principal at risk securities for information about the distribution arrangements for the securities. References therein to "agent" refer to each of MS & Co. and WFS, as agents for this offering, except that references to "agent" in the context of offers to certain Morgan Stanley dealers and compliance with FINRA Rule 5121 do not apply to WFS. MS & Co., WFS or their affiliates may enter into hedging transactions with us in connection with this offering.
MS & Co. is an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley, and it and other affiliates of ours expect to make a profit by selling, structuring and, when applicable, hedging the securities. When MS & Co. prices this offering of securities, it will determine the economic terms of the securities such that for each security the estimated value on the pricing date will be no lower than the minimum level described in “Estimated Value of the Securities” beginning on page 5.
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.
Where you can find more information
Morgan Stanley and MSFL have filed a registration statement (including a prospectus, as supplemented by the product supplement for principal at risk securities and the index supplement) with the Securities and Exchange Commission, or SEC, for the offering to which this communication relates. You should read the prospectus in that registration statement, the product supplement for principal at risk securities, the index supplement and any other documents relating to this offering that Morgan Stanley and MSFL have filed with the SEC for more complete information about Morgan Stanley, MSFL and this offering. When you read the accompanying product supplement and index supplement, please note that all references in such supplements to the prospectus dated November 16, 2023, or to any sections therein, should refer instead to the accompanying prospectus dated April 12, 2024 or to the corresponding sections of such prospectus, as applicable. You may get these documents without cost by visiting EDGAR on the SEC web site at www.sec.gov. Alternatively, Morgan Stanley, MSFL, any underwriter or any dealer participating in the offering will arrange to send you the product supplement for principal at risk securities, index supplement and prospectus if you so request by calling toll-free 1-(800)-584-6837.
You may access these documents on the SEC web site at www.sec.gov as follows:
Product Supplement for Principal at Risk Securities dated November 16, 2023
Index Supplement dated November 16, 2023
Prospectus dated April 12, 2024
Terms used but not defined in this document are defined in the product supplement for principal at risk securities, in the index supplement or in the prospectus.
July 2024 | Page 23 |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the iShares® Russell 2000 Value ETF and the Nasdaq-100® Technology Sector IndexSM due August 3, 2028
Annex A — Nasdaq-100® Technology Sector IndexSM
The Nasdaq-100® Technology Sector IndexSM was developed by Nasdaq and is calculated, maintained and published by The Nasdaq OMX Group, Inc. (“Nasdaq OMX”). The underlying index is designed to measure the performance of Nasdaq-listed companies that are classified as technology according to the Industry Classification Benchmark which also meet other eligibility criteria determined by Nasdaq. The underlying index is reported by Bloomberg under the ticker symbol “NDXT.” All information contained in this document regarding the Nasdaq-100® Technology Sector IndexSM has been derived from publicly available information, without independent verification.
The Nasdaq-100® Technology Sector IndexSM is calculated under an equal-weighted methodology. On February 22, 2006, the Nasdaq-100® Technology Sector IndexSM began with a base of 1,000.00. To be eligible for inclusion in the Nasdaq-100® Technology Sector IndexSM, a security and its issuer must meet the following criteria:
· | the security must be included in the Nasdaq-100 Index® |
· | the issuer of the security’s primary U.S. listing must be exclusively on the Nasdaq Global Select Market or the Nasdaq Global Market; |
· | the issuer of the security must be classified as Technology according to the Industry Classification Benchmark (“ICB”); |
· | if the issuer of the security is organized under the laws of a jurisdiction outside the United States, then that security must have listed options on a registered options market in the United States or be eligible for listed-options trading on a registered options market in the United States; |
· | the issuer of the security generally may not currently be in bankruptcy proceedings; |
· | each security must have a minimum average daily trading volume of 200,000 shares (measured over the three calendar months ending with the month that includes the reconstitution reference date); |
· | the issuer of the security generally may not have entered into a definitive agreement or other arrangement that would make it ineligible for index inclusion and where the transaction is imminent as determined by the Nasdaq Index Management Committee; and |
· | the security must have traded for at least three full calendar months, not including the month of initial listing, on an eligible exchange, which includes Nasdaq (Nasdaq Global Select Market, Nasdaq Global Market, or Nasdaq Capital Market), NYSE, NYSE American, or CBOE BZX. Eligibility is determined as of the constituent selection reference date and includes that month. A security that was added as a result of a spin-off will be exempt from the seasoning requirement. |
Index Calculation.
The Nasdaq-100® Technology Sector IndexSM is calculated without regard to ordinary dividends however it does reflect special dividends. The formula is as follows:
PRt = | Index Market Valuet |
PR Index Divisort |
where:
and:
“Index Security” shall mean a security that has been selected for membership in the Nasdaq-100® Technology Sector IndexSM, having met all applicable eligibility requirements.
n = Number of Index Securities in the Nasdaq-100® Technology Sector IndexSM.
qi = Number of shares of Index Security i applied in the Nasdaq-100® Technology Sector IndexSM. The number of shares can be based on any number of items which would be identified in each specific Index Methodology including total shares outstanding (TSO), application of free float, dividend yield, modification due to foreign ownership restrictions, modification due to capping etc. This can also be referred to as Index Shares.
pi = Price in quote currency of Index Security i. Depending on the time of the calculation, the price can be either of the following:
(1) | The Start of Day (SOD) price which is the previous index calculation day’s (t-1) closing price for Index Security i adjusted for corporate action(s) occurring prior to market open on date t, if any, for the SOD calculation only; |
July 2024 | Page 24 |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the iShares® Russell 2000 Value ETF and the Nasdaq-100® Technology Sector IndexSM due August 3, 2028
(2) | The intraday price which reflects the current trading price received from the Index Exchange during the index calculation day; |
(3) | The End of Day (EOD) price refers to the Last Sale Price; or |
(4) | The Volume Weighted Average Price (VWAP) |
t = current index calculation day
t – 1 = previous index calculation day
Index Calendar.
The securities composing the Nasdaq-100® Technology Sector IndexSM are selected once annually each December. Securities currently within the Nasdaq-100® Technology Sector IndexSM must meet the eligibility criteria using market data through the end of October that year and total shares outstanding as of the end of November that year. Index reconstitutions are announced in early December and become effective after the close of trading on the third Friday in December.
The index is rebalanced on a quarterly basis in March, June, September and December. The index rebalance uses the Last Sale Price (“LSP”) of all Index securities as of the third Friday (February, May, August, and November, respectively). Index rebalance changes are announced in early March, June, September and December, and changes become effective after the close of trading on the third Friday in March, June, September and December.
Index Maintenance.
Deletion Policy. If at any time other than an index reconstitution, a component of the Nasdaq-100® Technology Sector IndexSM is removed from the Nasdaq-100 Index® for any reason, it is also removed from the Nasdaq-100® Technology Sector IndexSM at the same time.
This may include:
· | listing on an ineligible index exchange; |
· | a security is not classified under the Technology Subsector according to the ICB; |
· | merger, acquisition, or other major corporate event that would otherwise adversely impact the integrity of the Index; |
· | if a company is organized as a REIT; |
· | if the issuer has an adjusted market capitalization below 0.10% of the aggregate adjusted market capitalization of the Nasdaq-100 Index® for two consecutive month-ends; or |
· | if a security that was added to the Nasdaq-100 Index® as the result of a spin-off event has an adjusted market capitalization below 0.10% of the aggregate adjusted market capitalization of the Nasdaq-100 Index® at the end of its second day of regular way trading as a Nasdaq-100 Index® member. |
In the case of mergers and acquisitions, the effective date for the removal of an Index issuer or security will be largely event-based, with the goal to remove the issuer or security as soon as completion of the acquisition or merger has been deemed highly probable. Notable events include, but are not limited to, completion of various regulatory reviews, the conclusion of material lawsuits and/or shareholder and board approvals.
Securities that are added as a result of a spin-off may be deleted as soon as practicable after being added to the index. This may occur when Nasdaq determines that a security is ineligible for inclusion because of reasons such as ineligible exchange, security type, or industry. Securities that are added as a result of a spin-off may be maintained in the index until a later date and then removed, for example if a spin-off security has liquidity or market capitalization characteristics that diverge materially from the security eligibility criteria and could affect the integrity of the index.
Replacement Policy. When a component of the Nasdaq-100 Index® that is classified as Technology according to ICB is removed from the Nasdaq-100 Index®, it is also removed from the Nasdaq-100® Technology Sector IndexSM. As such, if the replacement company being added to the Nasdaq-100 Index® is classified as Technology according to ICB, it is added to the Nasdaq-100® Technology Sector IndexSM and will assume the weight of the removed company on the Index effective date.
When a component of the Nasdaq-100 Index® that is not classified as Technology according to ICB is removed and the replacement company being added to the Nasdaq-100 Index® is classified as Technology according to ICB, the replacement company is considered for addition to the Nasdaq-100® Technology Sector IndexSM at the next quarterly Rebalance.
When a component of the Nasdaq-100 Index® that is classified as Technology according to ICB is removed from the Nasdaq-100 Index® and the replacement company being added to the Nasdaq-100 Index® is not classified as Technology according to ICB, the company is removed from the Nasdaq-100® Technology Sector IndexSM and the divisor of the Nasdaq-100® Technology Sector IndexSM is adjusted to ensure Index continuity.
Additions Policy. If a security is added to the Nasdaq-100 Index® for any reason, it may be added to the Nasdaq-100® Technology Sector IndexSM at the same time.
July 2024 | Page 25 |
Morgan Stanley Finance LLC
Market Linked Securities— Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the iShares® Russell 2000 Value ETF and the Nasdaq-100® Technology Sector IndexSM due August 3, 2028
Corporate Actions. In the periods between scheduled index reconstitution and rebalancing events, individual Index securities may be the subject to a variety of corporate actions and events that require maintenance and adjustments to the Nasdaq-100® Technology Sector IndexSM.
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The securities are not sponsored, endorsed, sold or promoted by Nasdaq (including its affiliates) (Nasdaq, with its affiliates, are referred to as the “Corporations”). The Corporations have not passed on the legality or suitability of, or the accuracy or adequacy of descriptions and disclosures relating to, the securities. The Corporations make no representation or warranty, express or implied, to the holders of the securities or any member of the public regarding the advisability of investing in securities generally or in the securities particularly, or the ability of the Nasdaq-100 Index® to track general stock market performance. The Nasdaq-100 Index® is determined, composed and calculated by Nasdaq without regard to us or the securities. Nasdaq has no obligation to take our needs or the needs of the owners of the securities into consideration in determining, composing or calculating the Nasdaq-100 Index®. The Corporations are not responsible for and have not participated in the determination of the timing, prices, or quantities of the securities to be issued or in the determination or calculation of the equation by which the securities are to be converted into cash. The Corporations have no liability in connection with the administration, marketing or trading of the securities.
THE CORPORATIONS DO NOT GUARANTEE THE ACCURACY AND/OR UNINTERRUPTED CALCULATION OF THE NASDAQ-100® TECHNOLOGY SECTOR INDEXSM, NASDAQ-100 INDEX® OR ANY DATA INCLUDED THEREIN. THE CORPORATIONS MAKE NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY MORGAN STANLEY, OWNERS OF THE SECURITIES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE NASDAQ-100® TECHNOLOGY SECTOR INDEXSM, NASDAQ-100 INDEX® OR ANY DATA INCLUDED THEREIN. THE CORPORATIONS MAKE NO EXPRESS OR IMPLIED WARRANTIES AND EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE NASDAQ-100 INDEX® OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL THE CORPORATIONS HAVE ANY LIABILITY FOR LOST PROFITS OR SPECIAL, INCIDENTAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES, EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
“Nasdaq®,” “Nasdaq-100®” and “Nasdaq-100 Index®” are trademarks of Nasdaq.
July 2024 | Page 26 |
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