February 2023

Pricing Supplement No. 7,786
Registration Statement Nos. 333-250103; 333-250103-01
Dated February 1, 2023
Filed pursuant to Rule 424(b)(2)

Morgan Stanley Finance LLC

STRUCTURED INVESTMENTS

Opportunities in U.S. Equities

PLUS Based on the Value of the Worst Performing of the S&P 500® Index, the Russell 2000® Index and the NASDAQ-100 Index® due February 6, 2025

Performance Leveraged Upside SecuritiesSM

Fully and Unconditionally Guaranteed by Morgan Stanley

Principal at Risk Securities

The PLUS are unsecured obligations of Morgan Stanley Finance LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley. The PLUS will pay no interest, do not guarantee any return of principal at maturity and have the terms described in the accompanying product supplement for PLUS, index supplement and prospectus, as supplemented or modified by this document. The payment at maturity on the PLUS will be based on the value of the worst performing of the S&P 500® Index, the Russell 2000® Index and the NASDAQ-100 Index®, which we refer to as the underlying indices. At maturity, if each underlying index has appreciated in value, investors will receive the stated principal amount of their investment plus leveraged upside performance of the worst performing underlying index. However, if the final index value of any underlying index is less than its respective initial index value, investors will lose some or all of their investment, resulting in a loss of 1% for every 1% decline in the worst performing underlying index from its initial index value. Investors may lose their entire initial investment in the PLUS. Because the payment at maturity of the PLUS is based on the worst performing of the underlying indices, a decline in any underlying index below its respective initial index value will result in a loss of your investment, even if the other underlying indices have appreciated. The PLUS are for investors who seek an equity index-based return and who are willing to risk their principal, risk exposure to the worst performing of three underlying indices and forgo current income in exchange for the upside leverage feature that applies only if the final index value of each underlying index is greater than its respective initial index value. The PLUS are notes issued as part of MSFL’s Series A Global Medium-Term Notes program.

All payments are subject to our credit risk. If we default on our obligations, you could lose some or all of your investment. These PLUS are not secured obligations and you will not have any security interest in, or otherwise have any access to, any underlying reference asset or assets.

FINAL TERMS

Issuer:

Morgan Stanley Finance LLC

Guarantor:

Morgan Stanley

Maturity date:

February 6, 2025

Underlying indices:

S&P 500® Index (the “SPX Index”), Russell 2000® Index (the “RTY Index”) and NASDAQ-100 Index® (the “NDX Index”)

Valuation date:

February 3, 2025, subject to postponement for non-index business days and certain market disruption events

Aggregate principal amount:

$1,102,000

Payment at maturity:

If the final index value of each underlying index is greater than its respective initial index value,

$1,000 + leveraged upside payment

If the final index value of any underlying index is less than or equal to its respective initial index value:

$1,000 × index performance factor of the worst performing underlying index

Under these circumstances, the payment at maturity will be less than or equal to the stated principal amount of $1,000.

Leveraged upside payment:

$1,000 × leverage factor × index percent change of the worst performing underlying index

Leverage factor:

163% (applicable only if the final index value of each underlying index is greater than its respective initial index value)

Index percent change:

With respect to each underlying index, (final index value – initial index value) / initial index value

Worst performing underlying index:

The underlying index with the lowest index percent change

Index performance factor

With respect to each underlying index, final index value / initial index value

Initial index value:

With respect to the SPX Index, 4,119.21, which is the index closing value of such index on the pricing date

With respect to the RTY Index, 1,960.814, which is the index closing value of such index on the pricing date

With respect to the NDX Index, 12,363.10, which is the index closing value of such index on the pricing date

Final index value:

With respect to each underlying index, the index closing value of such index on the valuation date

Stated principal amount / Issue price:

$1,000 per PLUS (see “Commissions and issue price” below)

Pricing date:

February 1, 2023

Original issue date:

February 6, 2023 (3 business days after the pricing date)

CUSIP / ISIN:

61774TUQ3 / US61774TUQ39

Listing:

The PLUS will not be listed on any securities exchange.

Agent:

Morgan Stanley & Co. LLC (“MS & Co.”), an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley. See “Supplemental information regarding plan of distribution; conflicts of interest.”

Estimated value on the pricing date:

$974.70 per PLUS. See “Investment Summary” beginning on page 2.

Commissions and issue price:

Price to public(1)

Agent’s commissions and fees(2)

Proceeds to us (3)

Per PLUS

$1,000

$7

$993

Total

$1,102,000

$7,714

$1,094,286

 

(1)The PLUS will be sold only to investors purchasing the PLUS in fee-based advisory accounts.

(2)MS & Co. expects to sell all of the PLUS that it purchases from us to an unaffiliated dealer at a price of $993 per PLUS, for further sale to certain fee-based advisory accounts at the price to public of $1,000 per PLUS. MS & Co. will not receive a sales commission with respect to the PLUS. See “Supplemental information regarding plan of distribution; conflicts of interest.” For additional information, see “Plan of Distribution (Conflicts of Interest)” in the accompanying product supplement for PLUS.

(3)See “Use of proceeds and hedging” on page 18.

 

The PLUS involve risks not associated with an investment in ordinary debt securities. See “Risk Factors” beginning on page 6.

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 PLUS are not deposits or savings accounts and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they obligations of, or guaranteed by, a bank.

You should read this document together with the related product supplement, index supplement and prospectus, each of which can be accessed via the hyperlinks below. Please also see “Additional Terms of the PLUS” and “Additional Information About the PLUS” 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.

 

Product Supplement for PLUS dated November 16, 2020 ​Index Supplement dated November 16, 2020 ​Prospectus dated November 16, 2020

Morgan Stanley Finance LLC

PLUS Based on the Value of Worst Performing of the S&P 500® Index, the Russell 2000® Index and the NASDAQ-100 Index® due February 6, 2025

Performance Leveraged Upside SecuritiesSM

Principal at Risk Securities

 

Investment Summary

Performance Leveraged Upside Securities

The PLUS Based on the Value of the Worst Performing of the S&P 500® Index, the Russell 2000® Index and the NASDAQ-100 Index® due February 6, 2025 (the “PLUS”) can be used:

￭As an alternative to direct exposure to the underlying indices that enhances returns for any positive performance of the worst performing underlying index

￭To potentially outperform the worst performing of the S&P 500® Index, the Russell 2000® Index and the NASDAQ-100 Index® by taking advantage of the leverage factor, with no limitation on the appreciation potential

Maturity:

2 years

Leverage factor:

163% (applicable only if the final index value of each underlying index is greater than its respective initial index value)

Minimum payment at maturity:

None. You could lose your entire initial investment in the PLUS.

Coupon:

None

 

The original issue price of each PLUS is $1,000. This price includes costs associated with issuing, selling, structuring and hedging the PLUS, which are borne by you, and, consequently, the estimated value of the PLUS on the pricing date is less than $1,000. We estimate that the value of each PLUS on the pricing date is $974.70.

What goes into the estimated value on the pricing date?

In valuing the PLUS on the pricing date, we take into account that the PLUS comprise both a debt component and a performance-based component linked to the underlying indices. The estimated value of the PLUS 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 PLUS?

In determining the economic terms of the PLUS, including the leverage factor, 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 PLUS would be more favorable to you.

What is the relationship between the estimated value on the pricing date and the secondary market price of the PLUS?

The price at which MS & Co. purchases the PLUS 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, because the costs associated with issuing, selling, structuring and hedging the PLUS are not fully deducted upon issuance, for a period of up to 6 months following the issue date, to the extent that MS & Co. may buy or sell the PLUS in the secondary market, absent changes in market conditions, including those related to the underlying indices, 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 PLUS, and, if it once chooses to make a market, may cease doing so at any time.

February 2023 Page 2

Morgan Stanley Finance LLC

PLUS Based on the Value of Worst Performing of the S&P 500® Index, the Russell 2000® Index and the NASDAQ-100 Index® due February 6, 2025

Performance Leveraged Upside SecuritiesSM

Principal at Risk Securities

 

Key Investment Rationale

The PLUS offer leveraged upside exposure to the worst performing of the S&P 500® Index, the Russell 2000® Index and the NASDAQ-100 Index®. In exchange for the leverage feature, investors are exposed to the risk of loss of some or all of their investment. At maturity, an investor will receive an amount in cash based upon the closing value of the worst performing underlying index on the valuation date. The PLUS are unsecured obligations of ours, and all payments on the PLUS are subject to our credit risk. Investors may lose their entire initial investment in the PLUS.

Leveraged Performance

The PLUS offer investors an opportunity to receive 163% of the positive return of the worst performing of the underlying indices, if each underlying index has appreciated in value.

Upside Scenario

Each underlying index increases in value and, at maturity, the PLUS redeem for the stated principal amount of $1,000 plus 163% of the index percent change of the worst performing underlying index.

Par Scenario

The final index value of the worst performing index is equal to its respective initial index value. In this case, you receive the stated principal amount of $1,000 at maturity.

Downside Scenario

Any underlying index declines in value. In this case, the PLUS will redeem for less than the stated principal amount, and this decrease will be by an amount proportionate to the full decline in value of the worst performing underlying index over the term of the PLUS.

Because the payment at maturity of the PLUS is based on the worst performing of the underlying indices, a decline in any underlying index below its respective initial index value will result in a loss of your investment, even if the other underlying indices have appreciated.

February 2023 Page 3

Morgan Stanley Finance LLC

PLUS Based on the Value of Worst Performing of the S&P 500® Index, the Russell 2000® Index and the NASDAQ-100 Index® due February 6, 2025

Performance Leveraged Upside SecuritiesSM

Principal at Risk Securities

 

Hypothetical Examples

The following hypothetical examples illustrate how to calculate the payment at maturity on the PLUS. The following examples are for illustrative purposes only. The actual initial index value for each underlying index are set forth on the cover of this document. The payment at maturity on the PLUS is subject to our credit risk. The below examples are based on the following terms:

Stated principal amount:

$1,000 per PLUS

Leverage factor:

163%

Hypothetical initial index value:

With respect to the SPX Index: 3,000

With respect to the RTY Index: 1,500

With respect to the NDX Index: 12,000

 

EXAMPLE 1: Each underlying index appreciates over the term of the PLUS, and investors receive the stated principal amount plus the leveraged upside payment, calculated based on the index percent change of the worst performing underlying index.

 

Final index value

 

SPX Index: 3,300

 

 

RTY Index: 2,100

 

 

NDX Index: 14,400‬

Index percent change

 

SPX Index: (3,300 – 3,000) / 3,000 = 10%

RTY Index: (2,100 – 1,500) / 1,500 = 40%

NDX Index: (14,400‬ – 12,000) / 12,000 = 20%

Payment at maturity

=

$1,000 + leveraged upside payment

 

=

$1,000 + ($1,000 × leverage factor × index percent change of the worst performing underlying index)

 

=

$1,000 + ($1,000 × 163% × 10%)

 

=

$1,163

 

In example 1, the final index value of each of the SPX Index, the RTY Index and the NDX Index is greater than its initial index value. The SPX Index has appreciated by 10%, the RTY Index has appreciated by 40% and the NDX Index has appreciated by 20%. Therefore, investors receive at maturity the stated principal amount plus 163% of the appreciation of the worst performing underlying index, which is the SPX Index in this example. Investors receive $1,163 per PLUS at maturity.

 

EXAMPLE 2: Two underlying indices appreciate while one underlying index declines over the term of the PLUS, and the final index value of the worst performing underlying index is therefore less than its respective initial index value. Investors are therefore exposed to the decline in the worst performing underlying index from its initial index value.

 

Final index value

 

SPX Index: 3,900

 

 

RTY Index: 600

 

 

NDX Index: 12,600‬‬

February 2023 Page 4

Morgan Stanley Finance LLC

PLUS Based on the Value of Worst Performing of the S&P 500® Index, the Russell 2000® Index and the NASDAQ-100 Index® due February 6, 2025

Performance Leveraged Upside SecuritiesSM

Principal at Risk Securities

 

Index percent change

 

SPX Index: (3,900 – 3,000) / 3,000 = 30%

RTY Index: (600 – 1,500) / 1,500 = -60%

NDX Index: (12,600‬‬ – 12,000) / 12,000 = 5%

Payment at maturity

=

$1,000 × (index performance factor of the worst performing index)

 

=

$1,000 × (600 / 1,500)

 

=

$400

 

In example 2, the final index values of the SPX Index and the NDX Index are greater than their respective initial index values, while the final index value of the RTY Index is less than its initial index value. The SPX Index has appreciated by 30%, the NDX Index has appreciated by 5% and the RTY Index has depreciated by 60%. Because the final index value of the RTY Index has declined below its initial index value, investors are exposed to the negative performance of the RTY Index, which is the worst performing underlying index in this example. Investors receive a payment at maturity of $400.

 

EXAMPLE 3: Each underlying index declines below its respective initial index value, and investors are therefore exposed to the decline in the worst performing underlying index from its initial index value.

 

Final index value

 

SPX Index: 900

 

 

RTY Index: 600

 

 

NDX Index: 5,400‬‬

Index percent change

 

SPX Index: (900 – 3,000) / 3,000 = -70%

RTY Index: (600 – 1,500) / 1,500 = -60%

NDX Index: (5,400‬‬ – 12,000) / 12,000 = -55%

Payment at maturity

=

$1,000 × (index performance factor of the worst performing index)

 

=

$1,000 × (900 / 3,000)

 

=

$300

 

In example 3, the final index value of each of the SPX Index, the RTY Index and the NDX Index is less than its respective initial index value. The SPX Index has declined by 70%, the RTY Index has declined by 60% and the NDX Index has declined by 55%. Therefore, investors are exposed to the negative performance of the SPX Index, which is the worst performing underlying index in this example. Investors receive a payment at maturity of $300.

 

Because the payment at maturity of the PLUS is based on the worst performing of the underlying indices, a decline in any underlying index below its respective initial index value will result in a loss of your investment, even if the other underlying indices have appreciated.

February 2023 Page 5

Morgan Stanley Finance LLC

PLUS Based on the Value of Worst Performing of the S&P 500® Index, the Russell 2000® Index and the NASDAQ-100 Index® due February 6, 2025

Performance Leveraged Upside SecuritiesSM

Principal at Risk Securities

 

Risk Factors

This section describes the material risks relating to the PLUS. For further discussion of these and other risks, you should read the section entitled “Risk Factors” in the accompanying product supplement for PLUS, index supplement and prospectus. We also urge you to consult your investment, legal, tax, accounting and other advisers in connection with your investment in the PLUS.

Risks Relating to an Investment in the PLUS

￭The PLUS do not pay interest or guarantee return of any principal. The terms of the PLUS differ from those of ordinary debt securities in that the PLUS do not pay interest or guarantee payment of any principal at maturity. If the final index value of any underlying index is less than its respective initial index value, the payout at maturity will be an amount in cash that is less than the $1,000 stated principal amount of each PLUS, and this decrease will be by an amount proportionate to the full decrease in the value of the worst performing underlying index over the term of the PLUS. There is no minimum payment at maturity on the PLUS, and you could lose your entire investment.

￭The market price will be influenced by many unpredictable factors. Several factors will influence the value of the PLUS in the secondary market and the price at which MS & Co. may be willing to purchase or sell the PLUS in the secondary market, including the value, volatility and dividend yield of the underlying indices, interest and yield rates, time remaining to maturity, geopolitical conditions and economic, financial, political and regulatory or judicial events and any actual or anticipated changes in our credit ratings or credit spreads. Generally, the longer the time remaining to maturity, the more the market price of the PLUS will be affected by the other factors described above. The levels of the underlying indices may be, and have recently been, extremely volatile, and we can give you no assurance that the volatility will lessen.  See “S&P 500® Index Overview,” “Russell 2000® Index Overview” and “NASDAQ-100 Index® Overview” below.  You may receive less, and possibly significantly less, than the stated principal amount per PLUS if you try to sell your PLUS prior to maturity.

￭The PLUS are subject to our credit risk, and any actual or anticipated changes to our credit ratings or credit spreads may adversely affect the market value of the PLUS. You are dependent on our ability to pay all amounts due on the PLUS at maturity and therefore you are subject to our credit risk. If we default on our obligations under the PLUS, your investment would be at risk and you could lose some or all of your investment. As a result, the market value of the PLUS prior to maturity will be affected by changes in the market’s view of our creditworthiness. Any actual or anticipated decline in our credit ratings or increase in the credit spreads charged by the market for taking our credit risk is likely to adversely affect the market value of the PLUS.

￭As a finance subsidiary, MSFL has no independent operations and will have no independent assets. As a finance subsidiary, MSFL has no independent operations beyond the issuance and administration of its securities and will have no independent assets available for distributions to holders of MSFL securities if they make claims in respect of such securities in a bankruptcy, resolution or similar proceeding. Accordingly, any recoveries by such holders will be limited to those available under the related guarantee by Morgan Stanley and that guarantee will rank pari passu with all other unsecured, unsubordinated obligations of Morgan Stanley. Holders will have recourse only to a single claim against Morgan Stanley and its assets under the guarantee. Holders of securities issued by MSFL should accordingly assume that in any such proceedings they would not have any priority over and should be treated pari passu with the claims of other unsecured, unsubordinated creditors of Morgan Stanley, including holders of Morgan Stanley-issued securities.

￭The amount payable on the PLUS is not linked to the values of the underlying indices at any time other than the valuation date. The final index value of each underlying index will be based on the index closing value of such index on the valuation date, subject to adjustment for non-index business days and certain market disruption events. Even if each underlying index appreciates prior to the valuation date but the value of any underlying index drops by the valuation date to below its respective initial index value, the payment at maturity will be less than it would have been had the payment at maturity been linked to the values of the underlying indices prior to such drop. Although the actual values of the underlying indices on the stated maturity date or at other times during the term of

February 2023 Page 6

Morgan Stanley Finance LLC

PLUS Based on the Value of Worst Performing of the S&P 500® Index, the Russell 2000® Index and the NASDAQ-100 Index® due February 6, 2025

Performance Leveraged Upside SecuritiesSM

Principal at Risk Securities

 

the PLUS may be higher than their respective final index values, the payment at maturity will be based solely on the index closing values on the valuation date.

￭Investing in the PLUS is not equivalent to investing in the underlying indices. Investing in the PLUS is not equivalent to investing in any underlying index or the component stocks of any underlying index. Investors in the PLUS will not have voting rights or rights to receive dividends or other distributions or any other rights with respect to stocks that constitute the underlying indices.

￭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 PLUS in the original issue price reduce the economic terms of the PLUS, cause the estimated value of the PLUS to be less than the original issue price and will adversely affect secondary market prices. Assuming no change in market conditions or any other relevant factors, the prices, if any, at which dealers, including MS & Co., may be willing to purchase the PLUS in secondary market transactions will likely be significantly lower than the original issue price, because secondary market prices will exclude the issuing, selling, structuring and hedging-related costs that are included in the original issue price and borne by you and because the secondary market prices will reflect our secondary market credit spreads and the bid-offer spread that any dealer would charge in a secondary market transaction of this type as well as other factors.

The inclusion of the costs of issuing, selling, structuring and hedging the PLUS in the original issue price and the lower rate we are willing to pay as issuer make the economic terms of the PLUS less favorable to you than they otherwise would be.

However, because the costs associated with issuing, selling, structuring and hedging the PLUS are not fully deducted upon issuance, for a period of up to 6 months following the issue date, to the extent that MS & Co. may buy or sell the PLUS in the secondary market, absent changes in market conditions, including those related to the underlying indices, 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 PLUS will not be listed on any securities exchange and secondary trading may be limited. The PLUS will not be listed on any securities exchange. Therefore, there may be little or no secondary market for the PLUS. MS & Co. may, but is not obligated to, make a market in the PLUS. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the PLUS easily. Because we do not expect that other broker-dealers will participate significantly in the secondary market for the PLUS, the price at which you may be able to trade your PLUS is likely to depend on the price, if any, at which MS & Co. is willing to transact. If, at any time, MS & Co. were not to make a market in the PLUS, it is likely that there would be no secondary market for the PLUS. Accordingly, you should be willing to hold your PLUS to maturity.

￭The estimated value of the PLUS is determined by reference to our pricing and valuation models, which may differ from those of other dealers and is not a maximum or minimum secondary market price. These pricing and valuation models are proprietary and rely in part on subjective views of certain market inputs and certain assumptions about future events, which may prove to be incorrect. As a result, because there is no market-standard way to value these types of securities, our models may yield a higher estimated value of the PLUS than those generated by others, including other dealers in the market, if they attempted to value the PLUS. In addition, the estimated value on the pricing date does not represent a minimum or maximum price at which dealers, including MS & Co., would be willing to purchase your PLUS in the secondary market (if any exists) at any time. The value of your PLUS at any time after the date of this document will vary based on many factors that cannot be predicted with accuracy, including our creditworthiness and changes in market conditions. See also “The market price will be influenced by many unpredictable factors” above.

￭Hedging and trading activity by our affiliates could potentially adversely affect the value of the PLUS. One or more of our affiliates and/or third-party dealers expect to carry out hedging activities related to the PLUS (and to other instruments linked to the underlying index or its component stocks), including trading in the stocks that

February 2023 Page 7

Morgan Stanley Finance LLC

PLUS Based on the Value of Worst Performing of the S&P 500® Index, the Russell 2000® Index and the NASDAQ-100 Index® due February 6, 2025

Performance Leveraged Upside SecuritiesSM

Principal at Risk Securities

 

constitute the underlying indices as well as in other instruments related to the underlying indices. As a result, these entities may be unwinding or adjusting hedge positions during the term of the PLUS, and the hedging strategy may involve greater and more frequent dynamic adjustments to the hedge as the valuation date approaches. MS & Co. and some of our other affiliates also trade the stocks that constitute the underlying indices and other financial instruments related to the underlying indices on a regular basis as part of their general broker-dealer and other businesses. Any of these hedging or trading activities on or prior to the pricing date could potentially increase the initial index value of an underlying index, and, therefore, could increase the value at or above which such underlying index must close on the valuation date so that investors do not suffer a loss on their initial investment in the PLUS (depending also on the performance of the other underlying indices). Additionally, such hedging or trading activities during the term of the PLUS, including on the valuation date, could potentially affect whether the value of an underlying index on the valuation date is below the respective initial index value, and, therefore, whether an investor would receive less than the stated principal amount of the PLUS at maturity (depending also on the performance of the other underlying indices).

￭The calculation agent, which is a subsidiary of Morgan Stanley and an affiliate of MSFL, will make determinations with respect to the PLUS. As calculation agent, MS & Co. will determine the initial index values and the final index values, and will calculate the amount of cash, if any, you will receive at maturity. 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 final index value in the event of a market disruption event or discontinuance of the underlying indices. These potentially subjective determinations may adversely affect the payout to you at maturity, if any. For further information regarding these types of determinations, see “Description of PLUS—Postponement of Valuation Date(s)” and “—Calculation Agent and Calculations” and related definitions in the accompanying product supplement. In addition, MS & Co. has determined the estimated value of the PLUS on the pricing date.

￭The U.S. federal income tax consequences of an investment in the PLUS are uncertain. Please read the discussion under “Additional Information—Tax considerations” in this document and the discussion under “United States Federal Taxation” in the accompanying product supplement for PLUS (together, the “Tax Disclosure Sections”) concerning the U.S. federal income tax consequences of an investment in the PLUS. If the Internal Revenue Service (the “IRS”) were successful in asserting an alternative treatment, the timing and character of income on the PLUS might differ significantly from the tax treatment described in the Tax Disclosure Sections. For example, under one possible treatment, the IRS could seek to recharacterize the PLUS as debt instruments. In that event, U.S. Holders would be required to accrue into income original issue discount on the PLUS every year at a “comparable yield” determined at the time of issuance and recognize all income and gain in respect of the PLUS as ordinary income. We do not plan to request a ruling from the IRS regarding the tax treatment of the PLUS, and the IRS or a court may not agree with the tax treatment described in the Tax Disclosure Sections.

In 2007, the U.S. Treasury Department and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments. The notice focuses in particular on whether to require holders of these instruments to accrue income over the term of their investment. It also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments; whether short-term instruments should be subject to any such accrual regime; the relevance of factors such as the exchange-traded status of the instruments and the nature of the underlying property to which the instruments are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors should be subject to withholding tax; and whether these instruments are or should be subject to the “constructive ownership” rule, which very generally can operate to recharacterize certain long-term capital gain as ordinary income and impose an interest charge. While the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment in the PLUS, possibly with retroactive effect. Both U.S. and Non-U.S. Holders should consult their tax advisers regarding the U.S. federal income tax consequences of an investment in the PLUS, including possible alternative treatments, the issues

February 2023 Page 8

Morgan Stanley Finance LLC

PLUS Based on the Value of Worst Performing of the S&P 500® Index, the Russell 2000® Index and the NASDAQ-100 Index® due February 6, 2025

Performance Leveraged Upside SecuritiesSM

Principal at Risk Securities

 

presented by this notice and any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.

Risks Relating to the Underlying Indices

￭You are exposed to the price risk of each underlying index. Your return on the PLUS it not linked to a basket consisting of each underlying index. Rather, it will be based upon the independent performance of each underlying index. 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 index. Poor performance by any underlying index over the term of the PLUS will negatively affect your return and will not be offset or mitigated by any positive performance by the other underlying indices. If any underlying index declines to below its respective initial index value as of the valuation date, you will be exposed to the negative performance of the worst performing underlying index at maturity, even if the other underlying indices have appreciated or have not declined as much, and you will lose some or all of your investment. Accordingly, your investment is subject to the price risk of each underlying index.

￭Because the PLUS are linked to the performance of the worst performing underlying index, you are exposed to greater risk of sustaining a loss on your investment than if the PLUS were linked to just one underlying index. The risk that you will suffer a loss on your investment is greater if you invest in the PLUS as opposed to substantially similar securities that are linked to just the performance of one underlying index. With three underlying indices, it is more likely that any underlying index will decline to below its respective initial index value as of the valuation date, than if the PLUS were linked to only one underlying index. Therefore it is more likely that you will suffer a loss on your investment.

￭The PLUS are linked to the Russell 2000® Index and are subject to risks associated with small-capitalization companies. As the Russell 2000® Index is one of the underlying indices, and the Russell 2000® Index consists of stocks issued by companies with relatively small market capitalization, the PLUS 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 Russell 2000® Index may be more volatile than indices 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.

￭Adjustments to the underlying indices could adversely affect the value of the PLUS. The publisher of each underlying index may add, delete or substitute the stocks constituting such underlying index or make other methodological changes that could change the value of such underlying index. The publisher of each underlying index may discontinue or suspend calculation or publication of such underlying index at any time. In these circumstances, the calculation agent will have the sole discretion to substitute a successor index that is comparable to the discontinued underlying index and will be permitted to consider indices that are calculated and published by the calculation agent or any of its affiliates.

 

February 2023 Page 9

Morgan Stanley Finance LLC

PLUS Based on the Value of Worst Performing of the S&P 500® Index, the Russell 2000® Index and the NASDAQ-100 Index® due February 6, 2025

Performance Leveraged Upside SecuritiesSM

Principal at Risk Securities

 

S&P 500® Index Overview

The S&P 500® Index, which is calculated, maintained and published by S&P Dow Jones Indices LLC (“S&P”), consists of 500 component stocks selected to provide a performance benchmark for the U.S. equity markets. The calculation of the S&P 500® Index is based on the relative value of the float adjusted aggregate market capitalization of the 500 component companies as of a particular time as compared to the aggregate average market capitalization of 500 similar companies during the base period of the years 1941 through 1943. For additional information about the S&P 500® Index, see the information set forth under “S&P 500® Index” in the accompanying index supplement.

Information as of market close on February 1, 2023:

Bloomberg Ticker Symbol:

SPX

Current Index Value:

4,119.21

52 Weeks Ago:

4,546.54

52 Week High (on 3/29/2022):

4,631.60

52 Week Low (on 10/12/2022):

3,577.03

The following graph sets forth the daily closing values of the SPX Index for the period from January 1, 2018 through February 1, 2023. The related table sets forth the published high and low closing values, as well as end-of-quarter closing values, of the SPX Index for each quarter in the same period. The closing value of the SPX Index on February 1, 2023 was 4,119.21. We obtained the information in the graph and table below from Bloomberg Financial Markets, without independent verification. The SPX Index has at times experienced periods of high volatility, and you should not take the historical values of the SPX Index as an indication of its future performance.

SPX Index Daily Closing Values
January 1, 2018 to February 1, 2023

 

February 2023 Page 10

Morgan Stanley Finance LLC

PLUS Based on the Value of Worst Performing of the S&P 500® Index, the Russell 2000® Index and the NASDAQ-100 Index® due February 6, 2025

Performance Leveraged Upside SecuritiesSM

Principal at Risk Securities

 

S&P 500® Index

High

Low

Period End

2018

 

 

 

First Quarter

2,872.87

2,581.00

2,640.87

Second Quarter

2,786.85

2,581.88

2,718.37

Third Quarter

2,930.75

2,713.22

2,913.98

Fourth Quarter

2,925.51

2,351.10

2,506.85

2019

 

 

 

First Quarter

2,854.88

2,447.89

2,834.40

Second Quarter

2,954.18

2,744.45

2,941.76

Third Quarter

3,025.86

2,840.60

2,976.74

Fourth Quarter

3,240.02

2,887.61

3,230.78

2020

 

 

 

First Quarter

3,386.15

2,237.40

2,584.59

Second Quarter

3,232.39

2,470.50

3,100.29

Third Quarter

3,580.84

3,115.86

3,363.00

Fourth Quarter

3,756.07

3,269.96

3,756.07

2021

 

 

 

First Quarter

3,974.54

3,700.65

3,972.89

Second Quarter

4,297.50

4,019.87

4,297.50

Third Quarter

4,536.95

4,258.49

4,307.54

Fourth Quarter

4,793.06

4,300.46

4,766.18

2022

 

 

 

First Quarter

4,796.56

4,170.70

4,530.41

Second Quarter

4,582.64

3,666.77

3,785.38

Third Quarter

4,305.20

3,585.62

3,585.62

Fourth Quarter

4,080.11

3,577.03

3,839.50

2023

 

 

 

First Quarter (through February 1, 2023)

4,119.21

3,808.10

4,119.21

“Standard & Poor’s®,” “S&P®,” “S&P 500®,” “Standard & Poor’s 500” and “500” are trademarks of Standard and Poor’s Financial Services LLC. See “S&P 500® Index” in the accompanying index supplement.

February 2023 Page 11

Morgan Stanley Finance LLC

PLUS Based on the Value of Worst Performing of the S&P 500® Index, the Russell 2000® Index and the NASDAQ-100 Index® due February 6, 2025

Performance Leveraged Upside SecuritiesSM

Principal at Risk Securities

 

Russell 2000® Index Overview

The Russell 2000® Index is an index calculated, published and disseminated by FTSE Russell, and measures the composite price performance of stocks of 2,000 companies incorporated in the U.S. and its territories. All 2,000 stocks are traded on a major U.S. exchange and are the 2,000 smallest securities that form the Russell 3000® Index. The Russell 3000® Index is composed of the 3,000 largest U.S. companies as determined by market capitalization and represents approximately 98% of the U.S. equity market. The Russell 2000® Index consists of the smallest 2,000 companies included in the Russell 3000® Index and represents a small portion of the total market capitalization of the Russell 3000® Index. The Russell 2000® Index is designed to track the performance of the small capitalization segment of the U.S. equity market. For additional information about the Russell 2000® Index, see the information set forth under “Russell 2000® Index” in the accompanying index supplement.

Information as of market close on February 1, 2023:

Bloomberg Ticker Symbol:

RTY

Current Index Value:

1,960.814

52 Weeks Ago:

2,050.740

52 Week High (on 3/29/2022):

2,133.096

52 Week Low (on 6/16/2022):

1,649.836

The following graph sets forth the daily closing values of the RTY Index for the period from January 1, 2018 through February 1, 2023. The related table sets forth the published high and low closing values, as well as end-of-quarter closing values, of the RTY Index for each quarter in the same period. The closing value of the RTY Index on February 1, 2023 was 1,960.814. We obtained the information in the graph and table below from Bloomberg Financial Markets, without independent verification. The RTY Index has at times experienced periods of high volatility, and you should not take the historical values of the RTY Index as an indication of its future performance.

RTY Index Daily Closing Values
January 1, 2018 to February 1, 2023

 

 

 

 

 

 

February 2023 Page 12

Morgan Stanley Finance LLC

PLUS Based on the Value of Worst Performing of the S&P 500® Index, the Russell 2000® Index and the NASDAQ-100 Index® due February 6, 2025

Performance Leveraged Upside SecuritiesSM

Principal at Risk Securities

 

Russell 2000® Index

High

Low

Period End

2018

 

 

 

First Quarter

1,610.706

1,463.793

1,529.427

Second Quarter

1,706.985

1,492.531

1,643.069

Third Quarter

1,740.753

1,653.132

1,696.571

Fourth Quarter

1,672.992

1,266.925

1,348.559

2019

 

 

 

First Quarter

1,590.062

1,330.831

1,539.739

Second Quarter

1,614.976

1,465.487

1,566.572

Third Quarter

1,585.599

1,456.039

1,523.373

Fourth Quarter

1,678.010

1,472.598

1,668.469

2020

 

 

 

First Quarter

1,705.215

991.160

1,153.103

Second Quarter

1,536.895

1,052.053

1,441.365

Third Quarter

1,592.287

1,398.920

1,507.692

Fourth Quarter

2,007.104

1,531.202

1,974.855

2021

 

 

 

First Quarter

2,360.168

1,945.914

2,220.519

Second Quarter

2,343.758

2,135.139

2,310.549

Third Quarter

2,329.359

2,130.680

2,204.372

Fourth Quarter

2,442.742

2,139.875

2,245.313

2022

 

 

 

First Quarter

2,272.557

1,931.288

2,070.125

Second Quarter

2,095.440

1,649.836

1,707.990

Third Quarter

2,021.346

1,655.882

1,664.716

Fourth Quarter

1,892.839

1,682.403

1,761.246

2023

 

 

 

First Quarter (through February 1, 2023)

1,960.814

1,750.734

1,960.814

The “Russell 2000® Index” is a trademark of FTSE Russell. For more information, see “Russell 2000® Index” in the accompanying index supplement.

February 2023 Page 13

Morgan Stanley Finance LLC

PLUS Based on the Value of Worst Performing of the S&P 500® Index, the Russell 2000® Index and the NASDAQ-100 Index® due February 6, 2025

Performance Leveraged Upside SecuritiesSM

Principal at Risk Securities

 

NASDAQ-100 Index® Overview

The NASDAQ-100 Index®, which is calculated, maintained and published by Nasdaq, Inc., is a modified capitalization-weighted index of 100 of the largest and most actively traded equity securities of non-financial companies listed on The NASDAQ Stock Market LLC. The NASDAQ-100 Index® includes companies across a variety of major industry groups. At any moment in time, the value of the NASDAQ-100 Index® equals the aggregate value of the then-current NASDAQ-100 Index® share weights of each of the NASDAQ-100 Index® component securities, which are based on the total shares outstanding of each such NASDAQ-100 Index® component security, multiplied by each such security’s respective last sale price on NASDAQ (which may be the official closing price published by NASDAQ), and divided by a scaling factor, which becomes the basis for the reported NASDAQ-100 Index® value. For additional information about the NASDAQ-100 Index®, see the information set forth under “NASDAQ-100 Index®” in the accompanying index supplement.

Information as of market close on February 1, 2023:

Bloomberg Ticker Symbol:

NDX

Current Index Value:

12,363.10

52 Weeks Ago:

15,019.68

52 Week High (on 3/29/2022):

15,239.32

52 Week Low (on 12/28/2022):

10,679.34

The following graph sets forth the daily closing values of the NDX Index for the period from January 1, 2018 through February 1, 2023. The related table sets forth the published high and low closing values, as well as end-of-quarter closing values, of the NDX Index for each quarter in the same period. The closing value of the NDX Index on February 1, 2023 was 12,363.10. We obtained the information in the graph and table below from Bloomberg Financial Markets, without independent verification. The NDX Index has at times experienced periods of high volatility, and you should not take the historical values of the NDX Index as an indication of its future performance.

 

NDX Index Daily Closing Values
January 1, 2018 to February 1, 2023

 

February 2023 Page 14

Morgan Stanley Finance LLC

PLUS Based on the Value of Worst Performing of the S&P 500® Index, the Russell 2000® Index and the NASDAQ-100 Index® due February 6, 2025

Performance Leveraged Upside SecuritiesSM

Principal at Risk Securities

 

NASDAQ-100 Index®

High

Low

Period End

2018

 

 

 

First Quarter

7,131.12

6,306.10

6,581.13

Second Quarter

7,280.71

6,390.84

7,040.80

Third Quarter

7,660.18

7,014.55

7,627.65

Fourth Quarter

7,645.45

5,899.35

6,329.96

2019

 

 

 

First Quarter

7,493.27

6,147.13

7,378.77

Second Quarter

7,845.73

6,978.02

7,671.08

Third Quarter

8,016.95

7,415.69

7,749.45

Fourth Quarter

8,778.31

7,550.79

8,733.07

2020

 

 

 

First Quarter

9,718.73

6,994.29

7,813.50

Second Quarter

10,209.82

7,486.29

10,156.85

Third Quarter

12,420.54

10,279.25

11,418.06

Fourth Quarter

12,888.28

11,052.95

12,888.28

2021

 

 

 

First Quarter

13,807.70

12,299.08

13,091.44

Second Quarter

14,572.75

13,001.63

14,554.80

Third Quarter

15,675.76

14,549.09

14,689.62

Fourth Quarter

16,573.34

14,472.12

16,320.08

2022

 

 

 

First Quarter

16,501.77

13,046.64

14,838.49

Second Quarter

15,159.58

11,127.57

11,503.72

Third Quarter

13,667.18

10,971.22

10,971.22

Fourth Quarter

12,041.89

10,679.34

10,939.76

2023

 

 

 

First Quarter (through February 1, 2023)

12,363.10

10,741.22

12,363.10

“Nasdaq®,” “NASDAQ-100®” and “NASDAQ-100 Index®” are trademarks of Nasdaq, Inc. For more information, see “NASDAQ-100 Index®” in the accompanying index supplement.

February 2023 Page 15

Morgan Stanley Finance LLC

PLUS Based on the Value of Worst Performing of the S&P 500® Index, the Russell 2000® Index and the NASDAQ-100 Index® due February 6, 2025

Performance Leveraged Upside SecuritiesSM

Principal at Risk Securities

 

Additional Terms of the PLUS

Please read this information in conjunction with the summary terms on the front cover of this document.

Additional Terms:

 

If the terms described herein are inconsistent with those described in the accompanying product supplement, index supplement or prospectus, the terms described herein shall control.

Underlying index publisher:

With respect to the SPX Index, S&P Dow Jones Indices LLC, or any successor thereof.

With respect to the RTY Index, FTSE Russell, or any successor thereof.

With respect to the NDX Index, Nasdaq, Inc., or any successor thereof.

Denominations:

$1,000 per PLUS and integral multiples thereof

Interest:

None

Trustee:

The Bank of New York Mellon

Calculation agent:

MS & Co.

Bull market or bear market PLUS:

Bull market PLUS

Index closing value:

With respect to each of the SPX Index and the NDX Index, the index closing value on any index business day shall be determined by the calculation agent and shall equal the official closing value of such underlying index, or any successor index, published at the regular official weekday close of trading on such index business day by the underlying index publisher for such underlying index. In certain circumstances, the index closing value for the SPX Index or the NDX Index will be based on the alternate calculation of such underlying index as described under “Discontinuance of Any Underlying Index or Basket Index; Alteration of Method of Calculation” in the accompanying product supplement.

With respect to the RTY Index, the index closing value on any index business day shall be determined by the calculation agent and shall equal the closing value of the RTY Index, or any successor index reported by Bloomberg Financial Services, or any successor reporting service the calculation agent may select, on such index business day. In certain circumstances, the index closing value for the RTY Index will be based on the alternate calculation of the RTY Index as described under “Discontinuance of Any Underlying Index or Basket Index; Alteration of Method of Calculation” in the accompanying product supplement.

Postponement of maturity date:

If the scheduled valuation date is not an index business day with respect to an underlying index or if a market disruption event occurs with respect to an underlying index on that day so that the valuation date is postponed and falls less than two business days prior to the scheduled maturity date, the maturity date of the PLUS will be postponed to the second business day following the latest valuation date as postponed with respect to such underlying index.

Issuer notice to registered security holders, the trustee and the depositary:

In the event that the maturity date is postponed due to postponement of the valuation date, the issuer shall give notice of such postponement and, once it has been determined, of the date to which the maturity date has been rescheduled (i) to each registered holder of the PLUS by mailing notice of such postponement by first class mail, postage prepaid, to such registered holder’s last address as it shall appear upon the registry books, (ii) to the trustee by facsimile confirmed by mailing such notice to the trustee by first class mail, postage prepaid, at its New York office and (iii) to The Depository Trust Company (the “depositary”) by telephone or facsimile, confirmed by mailing such notice to the depositary by first class mail, postage prepaid. Any notice that is mailed to a registered holder of the PLUS in the manner herein provided shall be conclusively presumed to have been duly given to such registered holder, whether or not such registered holder receives the notice. The issuer shall give such notice as promptly as possible, and in no case later than (i) with respect to notice of postponement of the maturity date, the business day immediately preceding the scheduled maturity date, and (ii) with respect to notice of the date to which the maturity date has been rescheduled, the business day immediately following the actual valuation date.

The issuer shall, or shall cause the calculation agent to, (i) provide written notice to the trustee, on which notice the trustee may conclusively rely, and to the depositary of the amount of cash, if any, to be delivered with respect to the PLUS, on or prior to 10:30 a.m. (New York City time) on the business day preceding the maturity date, and (ii) deliver the aggregate cash amount due with respect to the PLUS, if any, to the trustee for delivery to the depositary, as holder of the PLUS, on the maturity date.

February 2023 Page 16

Morgan Stanley Finance LLC

PLUS Based on the Value of Worst Performing of the S&P 500® Index, the Russell 2000® Index and the NASDAQ-100 Index® due February 6, 2025

Performance Leveraged Upside SecuritiesSM

Principal at Risk Securities

 

Additional Information About the PLUS

Additional Information:

 

Minimum ticketing size:

$1,000 / 1 PLUS

Tax considerations:

Although there is uncertainty regarding the U.S. federal income tax consequences of an investment in the PLUS due to the lack of governing authority, in the opinion of our counsel, Davis Polk & Wardwell LLP, under current law, and based on current market conditions, a PLUS should be treated as a single financial contract that is an “open transaction” for U.S. federal income tax purposes.

Assuming this treatment of the PLUS is respected and subject to the discussion in “United States Federal Taxation” in the accompanying product supplement for PLUS, the following U.S. federal income tax consequences should result based on current law:

￭A U.S. Holder should not be required to recognize taxable income over the term of the PLUS prior to settlement, other than pursuant to a sale or exchange.

￭Upon sale, exchange or settlement of the PLUS, a U.S. Holder should recognize gain or loss equal to the difference between the amount realized and the U.S. Holder’s tax basis in the PLUS. Such gain or loss should be long-term capital gain or loss if the investor has held the PLUS for more than one year, and short-term capital gain or loss otherwise.

In 2007, the U.S. Treasury Department and the Internal Revenue Service (the “IRS”) released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments. The notice focuses in particular on whether to require holders of these instruments to accrue income over the term of their investment. It also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments; whether short-term instruments should be subject to any such accrual regime; the relevance of factors such as the exchange-traded status of the instruments and the nature of the underlying property to which the instruments are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors should be subject to withholding tax; and whether these instruments are or should be subject to the “constructive ownership” rule, which very generally can operate to recharacterize certain long-term capital gain as ordinary income and impose an interest charge. While the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment in the PLUS, possibly with retroactive effect.

As discussed in the accompanying product supplement for PLUS, Section 871(m) of the Internal Revenue Code of 1986, as amended, 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, 2025 that do not have a delta of one with respect to any Underlying Security. Based on our determination that the PLUS do not have a delta of one with respect to any Underlying Security, our counsel is of the opinion that the PLUS should not be Specified Securities and, therefore, should not be subject to Section 871(m).

Our determination is not binding on the IRS, and the IRS may disagree with this determination. Section 871(m) is complex and its application may depend on your particular circumstances, including whether you enter into other transactions with respect to an Underlying Security. If withholding is required, we will not be required to pay any additional amounts with respect to the amounts so withheld. You should consult your tax adviser regarding the potential application of Section 871(m) to the PLUS.

Both U.S. and non-U.S. investors considering an investment in the PLUS should read the discussion under “Risk Factors” in this document and the discussion under “United States Federal Taxation” in the accompanying product supplement for PLUS and consult their tax advisers regarding all aspects of the U.S. federal income tax

February 2023 Page 17

Morgan Stanley Finance LLC

PLUS Based on the Value of Worst Performing of the S&P 500® Index, the Russell 2000® Index and the NASDAQ-100 Index® due February 6, 2025

Performance Leveraged Upside SecuritiesSM

Principal at Risk Securities

 

consequences of an investment in the PLUS, including possible alternative treatments, the issues presented by the aforementioned notice and any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.

The discussion in the preceding paragraphs under “Tax considerations” and the discussion contained in the section entitled “United States Federal Taxation” in the accompanying product supplement for PLUS, insofar as they purport to describe provisions of U.S. federal income tax laws or legal conclusions with respect thereto, constitute the full opinion of Davis Polk & Wardwell LLP regarding the material U.S. federal tax consequences of an investment in the PLUS.

 

 

 

 

Use of proceeds and hedging:

The net proceeds from the sale of the PLUS will be used by us for general corporate purposes and, in part, in connection with hedging our obligations under the PLUS through one or more of our affiliates.

On or prior to the pricing date, we, through our affiliates or others, will hedge our anticipated exposure in connection with the PLUS by taking positions in stocks of the underlying indices, futures and/or options contracts on the underlying indices, any component stocks of the underlying indices listed on major securities markets or positions in any other available securities or instruments that we may wish to use in connection with such hedging. Such purchase activity could potentially increase the value of an underlying index on the pricing date, and therefore could increase the value at or above which such underlying index must close on the valuation date so that investors do not suffer a loss on their initial investment in the PLUS (depending also on the performance of the other underlying indices). In addition, through our affiliates, we are likely to modify our hedge position throughout the term of the PLUS, including on the valuation date, by purchasing and selling the stocks constituting the underlying indices, futures or options contracts on the underlying indices or its component stocks listed on major securities markets or positions in any other available securities or instruments that we may wish to use in connection with such hedging activities. As a result, these entities may be unwinding or adjusting hedge positions during the term of the PLUS, and the hedging strategy may involve greater and more frequent adjustments to the hedge as the valuation date approaches. We cannot give any assurance that our hedging activities will not affect the value of an underlying index and, therefore, adversely affect the value of the PLUS or the payment you will receive at maturity, if any (depending also on the performance of the other underlying indices). For further information on our use of proceeds and hedging, see “Use of Proceeds and Hedging” in the accompanying product supplement for PLUS.

Additional considerations:

Client accounts over which Morgan Stanley, Morgan Stanley Wealth Management or any of their respective subsidiaries have investment discretion are not permitted to purchase the PLUS, either directly or indirectly.

Supplemental information regarding plan of distribution; conflicts of interest:

MS & Co. expects to sell all of the PLUS that it purchases from us to an unaffiliated dealer at a price of $993 per PLUS, for further sale to certain fee-based advisory accounts at the price to public of $1,000 per PLUS. MS & Co. will not receive a sales commission with respect to the PLUS.

MS & Co. is an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley, and it and other affiliates of ours expect to make a profit by selling, structuring and, when applicable, hedging the PLUS.

MS & Co. will conduct this offering in compliance with the requirements of FINRA Rule 5121 of the Financial Industry Regulatory Authority, Inc., which is commonly referred to as FINRA, regarding a FINRA member firm’s distribution of the securities of an affiliate and related conflicts of interest. MS & Co. or any of our other affiliates may not make sales in this offering to any discretionary account. See “Plan of Distribution (Conflicts of Interest)” and “Use of Proceeds and Hedging” in the accompanying product supplement for PLUS.

Validity of the PLUS:

In the opinion of Davis Polk & Wardwell LLP, as special counsel to MSFL and Morgan Stanley, when the PLUS offered by this pricing supplement have been executed and issued by MSFL, authenticated by the trustee pursuant to the MSFL Senior Debt Indenture (as defined in the accompanying prospectus) and delivered against payment as contemplated herein, such PLUS will be valid and binding obligations of MSFL and the related guarantee will be a valid and binding obligation of Morgan Stanley, enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, concepts of reasonableness and equitable principles of general applicability (including, without limitation, concepts of good faith, fair dealing and the lack of bad faith),

February 2023 Page 18

Morgan Stanley Finance LLC

PLUS Based on the Value of Worst Performing of the S&P 500® Index, the Russell 2000® Index and the NASDAQ-100 Index® due February 6, 2025

Performance Leveraged Upside SecuritiesSM

Principal at Risk Securities

 

provided that such counsel expresses no opinion as to (i) the effect of fraudulent conveyance, fraudulent transfer or similar provision of applicable law on the conclusions expressed above and (ii) any provision of the MSFL Senior Debt Indenture that purports to avoid the effect of fraudulent conveyance, fraudulent transfer or similar provision of applicable law by limiting the amount of Morgan Stanley’s obligation under the related guarantee. This opinion is given as of the date hereof and is limited to the laws of the State of New York, the General Corporation Law of the State of Delaware and the Delaware Limited Liability Company Act. In addition, this opinion is subject to customary assumptions about the trustee’s authorization, execution and delivery of the MSFL Senior Debt Indenture and its authentication of the PLUS and the validity, binding nature and enforceability of the MSFL Senior Debt Indenture with respect to the trustee, all as stated in the letter of such counsel dated November 16, 2020, which is Exhibit 5-a to the Registration Statement on Form S-3 filed by Morgan Stanley on November 16, 2020.

Where you can find more information:

MSFL and Morgan Stanley have filed a registration statement (including a prospectus, as supplemented by the product supplement for PLUS and index supplement) with the Securities and Exchange Commission, or SEC, for the offering to which this communication relates. You should read the prospectus in that registration statement, the product supplement for PLUS, the index supplement and any other documents relating to this offering that MSFL and Morgan Stanley have filed with the SEC for more complete information about MSFL and Morgan Stanley and this offering. You may get these documents without cost by visiting EDGAR on the SEC web site at.www.sec.gov. Alternatively, MSFL, Morgan Stanley, any underwriter or any dealer participating in this offering will arrange to send you the product supplement for PLUS, index supplement and prospectus if you so request by calling toll-free 800-584-6837.

You may access these documents on the SEC web site at.www.sec.gov.as follows:

Product Supplement for PLUS dated November 16, 2020

Index Supplement dated November 16, 2020

Prospectus dated November 16, 2020

Terms used but not defined in this document are defined in the product supplement for PLUS, in the index supplement or in the prospectus.

“Performance Leveraged Upside SecuritiesSM” and “PLUSSM” are our service marks.

 

February 2023 Page 19

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