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, index
supplement and prospectus. You should also consult with 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 any
principal. The terms of the securities differ from
those of ordinary debt securities in that the securities do not pay
interest or guarantee the payment of any principal at maturity. At
maturity, you will receive for each $1,000 stated principal amount
of securities that you hold an amount in cash based upon the final
index value of each underlying index. If the final index value
of
any underlying index is less than 70% of its
respective initial index value, you will receive at maturity an
amount in cash that is significantly less than the $1,000 stated
principal amount of each security by an amount proportionate to the
full decline in the final index value of the worst performing
underlying index from its respective initial index value over the
term of the securities, and you will lose a significant portion or
all of your investment.
There is no minimum payment at
maturity on the securities, and, accordingly, you could lose your
entire investment.
￭Appreciation
potential is fixed and limited. Where the final index value of each
underlying index is greater than or equal to its respective initial
index value, the appreciation potential of the securities is
limited to the fixed upside payment of $500 (50% of the stated
principal amount), even if each underlying index has appreciated
substantially.
￭The
amount payable on the securities is not linked to the values of the
underlying indices at any time other than the valuation
date. The final index values will be the index
closing values on the valuation date, subject to postponement for
non-index business days and certain market disruption events. Even
if the value of the worst performing underlying index appreciates
prior to the valuation date but then drops by the valuation date,
the payment at maturity may be significantly less than it would
have been had the payment at maturity been linked to the value of
the worst performing underlying index prior to such
drop. Although the actual value of the worst performing
underlying index on the stated maturity date or at other times
during the term of the securities may be higher than its respective
final index value, the payment at maturity will be based solely on
the index closing value of the worst performing underlying index on
the valuation date.
￭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. Morgan Stanley & Co. LLC, which we
refer to as 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. When it does make a market, it will
generally do so for transactions of routine secondary market size
at prices based on its estimate of the current value of the
securities, taking into account its bid/offer spread, our credit
spreads, market volatility, the notional size of the proposed sale,
the cost of unwinding any related hedging positions, the time
remaining to maturity and the likelihood that it will be able to
resell the 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. is willing to
transact. If, at any time, MS & Co. 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
market price of the securities may 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,
including:
￭the
values of the underlying indices at any time (including in relation
to their initial index values),
￭the
volatility (frequency and magnitude of changes in value) of the
underlying indices,
￭dividend
rates on the securities underlying the underlying
indices,
￭interest
and yield rates in the market,