Investment Summary
Market-Linked Notes
The Market-Linked Notes due June 4, 2027 Based on the Value of an Equally Weighted Basket Composed of the S&P 500® Index, the EURO STOXX 50® Index, the MSCI EAFE® Index and the Nikkei 225 Index (the “notes”) offer the potential for a supplemental redemption amount at maturity based on the closing value of a basket of four indices on the determination date. The notes provide investors:
◼an opportunity to gain exposure to the indices comprising the basket
◼the repayment of principal at maturity, subject to our creditworthiness
◼at least 100% (to be determined on the pricing date) participation in any appreciation of the basket over the term of the notes
◼no exposure to any decline of the final basket closing value below the initial basket value if the notes are held to maturity
At maturity, if the basket percent change is less than or equal to zero, you will receive the stated principal amount of $1,000 per note, without any positive return on your investment. All payments on the notes, including the repayment of principal at maturity, are subject to our credit risk.
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Maturity:
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Approximately 5 years
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Participation rate:
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At least 100%. The actual participation rate will be determined on the pricing date.
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Interest:
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None
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The original issue price of each note is $1,000. This price includes costs associated with issuing, selling, structuring and hedging the notes, which are borne by you, and, consequently, the estimated value of the notes on the pricing date will be less than $1,000. We estimate that the value of each note on the pricing date will be approximately $951.10, or within $55.00 of that estimate. Our estimate of the value of the notes 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 notes on the pricing date, we take into account that the notes comprise both a debt component and a performance-based component linked to the underlying indices. The estimated value of the notes is determined using our own pricing and valuation models, market inputs and assumptions relating to the underlying indices, instruments based on the underlying indices, volatility and other factors including current and expected interest rates, as well as an interest rate related to our secondary market credit spread, which is the implied interest rate at which our conventional fixed rate debt trades in the secondary market.
What determines the economic terms of the notes?
In determining the economic terms of the notes, including the participation rate, 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 notes 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 notes?
The price at which MS & Co. purchases the notes in the secondary market, absent changes in market conditions, including those related to the underlying indices, may vary from, and be lower than, the estimated value on the pricing date, because the secondary market price takes into account our secondary market credit spread as well as the bid-offer spread that MS & Co. would charge in a secondary market transaction of this type and other factors. However,