Preliminary Pricing Supplement
No. 5,136
Registration Statement Nos. 333-221595; 333-221595-01
Dated October 26, 2020
Filed pursuant to Rule 424(b)(2)
Opportunities in U.S. Equities
The securities offered are unsecured obligations of Morgan Stanley
Finance LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley. The securities have the terms
described in the accompanying prospectus supplement, index supplement and prospectus, as supplemented or modified by this document.
The securities do not guarantee the repayment of principal and do not provide for the regular payment of interest. Instead, the
securities will pay a contingent quarterly coupon but only if the index closing value of each of the S&P 500®
Index and the NASDAQ-100 Index® on the related observation date is at or above 70% of its respective initial
index value, which we refer to as the respective coupon barrier level. If the index closing value of either underlying index
is less than the coupon barrier level for such index on any observation date, we will pay no interest for the related quarterly
period. In addition, beginning on November 4, 2021, we will redeem the securities on any quarterly redemption date for a
redemption payment equal to the sum of the stated principal amount plus any contingent quarterly coupon otherwise due with
respect to the related observation date, if and only if the output of a risk neutral valuation model on a business day that is
at least 2 but no more than 5 business days prior to such redemption date, based on the inputs indicated under “Call feature”
below, indicates that redeeming on such date is economically rational for us as compared to not redeeming on such date. An early
redemption of the securities will not automatically occur based on the performance of the underlying indices. At maturity, if the
securities have not previously been redeemed and if the final index value of each underlying index is greater than or
equal to 60% of the respective initial index value, which we refer to as the downside threshold level, the payment at maturity
will be the stated principal amount and, if the final index value of each underlying index is also greater than or equal
to its respective coupon barrier level, the related contingent quarterly coupon. If, however, the final index value of either
underlying index is less than its downside threshold level, investors will be exposed to the decline in the worst performing underlying
index on a 1-to-1 basis and will receive a payment at maturity that is less than 60% of the stated principal amount of the securities
and could be zero. Accordingly, investors in the securities must be willing to accept the risk of losing their entire
initial investment based on the performance of either underlying index and also the risk of not receiving any quarterly coupons
during the entire 3-year term of the securities. Because payments on the securities are based on the worst performing of the
underlying indices, a decline beyond the respective coupon barrier level and/or respective downside threshold level, as applicable,
of either underlying index will result in few or no contingent quarterly coupons and/or a significant loss of your investment,
as applicable, even if the other underlying index has appreciated or has not declined as much. Investors will not participate in
any appreciation in either underlying index. The securities are for investors who are willing to risk their principal and seek
an opportunity to earn interest at a potentially above-market rate in exchange for the risk of receiving no quarterly interest
if either underlying index closes below the coupon barrier level for such index on the observation dates, and the risk of
an early redemption of the securities based on the output of a risk neutral valuation model. The securities are notes issued as
part of MSFL’s Series A Global Medium-Term Notes program.
SUMMARY
TERMS
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Issuer:
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Morgan Stanley Finance LLC
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Guarantor:
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Morgan Stanley
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Underlying indices:
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S&P 500® Index (the “SPX Index”) and NASDAQ-100 Index® (the “NDX Index”)
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Aggregate principal amount:
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$
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Stated principal amount:
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$1,000 per security
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Issue price:
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$1,000 per security (see “Commissions and issue price” below)
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Pricing date:
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October 30, 2020
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Original issue date:
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November 4, 2020 (3 business days after the pricing date)
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Maturity date:
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November 2, 2023
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Call feature:
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Beginning on November 4, 2021, an early redemption, in whole but not in part, will occur on a redemption date if and only if the output of a risk neutral valuation model on a business day that is at least 2 but no more than 5 business days prior to such redemption date, as selected by the calculation agent (the “determination date”), taking as input: (i) prevailing reference market levels, volatilities and correlations, as applicable and in each case as of the determination date and (ii) Morgan Stanley’s credit spreads as of the pricing date, indicates that redeeming on such date is economically rational for us as compared to not redeeming on such date. If we call the securities, we will give you notice at least 2 business days before the call date specified in the notice. No further payments will be made on the securities once they have been redeemed.
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Contingent quarterly coupon:
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If, on any observation date, the index closing value of each
underlying index is greater than or equal to its respective coupon barrier level, we will pay a contingent quarterly
coupon at an annual rate of at least 7.25% (corresponding to at least approximately $18.125 per quarter per security, to be determined
on the pricing date) on the related contingent coupon payment date.
If, on any observation date, the closing value of
either underlying index is less than the coupon barrier level for such index, no contingent quarterly coupon will be
paid with respect to that observation date. It is possible that one or both underlying indices will remain below the respective
coupon barrier level(s) for extended periods of time or even throughout the entire term of the securities so that you will receive
few or no contingent quarterly coupons.
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Payment at maturity:
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If the securities have not previously been redeemed, investors
will receive on the maturity date a payment at maturity determined as follows:
If the final index value of each underlying index is greater
than or equal to its respective downside threshold level: the stated principal amount and, if the final index value of each
underlying index is also greater than or equal to its respective coupon barrier level, the contingent quarterly coupon with
respect to the final observation date.
If the final index value of either underlying
index is less than its respective downside threshold level: (i) the stated principal amount multiplied by (ii) the
index performance factor of the worst performing underlying index. Under these circumstances, the payment at maturity will be
less than 60% of the stated principal amount of the securities and could be zero.
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Terms continued on the following page
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Agent:
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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.”
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Estimated value on the pricing date:
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Approximately $965.90 per security, or within $30.00 of that estimate. See “Investment Overview” beginning on page 3.
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Commissions and issue price:
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Price to public(1)
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Agent’s commissions and fees(2)
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Proceeds to us(3)
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Per security
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$1,000
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$
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$
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Total
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$
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$
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$
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(1)
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The securities will be
sold only to investors purchasing the securities in fee-based advisory accounts.
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(2)
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MS & Co. expects
to sell all of the securities that it purchases from us to an unaffiliated dealer at a price of $ per security, for further sale
to certain fee-based advisory accounts at the price to public of $1,000 per security. MS & Co. will not receive a sales commission
with respect to the securities. See “Supplemental information regarding plan of distribution; conflicts of interest.”
For additional information, see “Plan of Distribution (Conflicts of Interest)” in the accompanying prospectus supplement.
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(3)
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See “Use of proceeds
and hedging” on page 29.
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The securities involve risks not associated with an investment
in ordinary debt securities. See “Risk Factors” beginning on page 11.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these securities, or determined if this document or the accompanying prospectus 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
prospectus supplement, index supplement and prospectus, each of which can be accessed via the hyperlinks below. Please also see
“Additional Terms of the Securities” and “Additional Information About the Securities” at the end of this
document.
References to “we,” “us” and “our”
refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Prospectus Supplement dated November 16, 2017 Index Supplement dated November 16, 2017 Prospectus dated November 16, 2017
Morgan Stanley
Finance LLC
Callable
Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the S&P 500®
Index and the NASDAQ-100 Index®
Principal at Risk Securities
Terms continued from previous page:
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Redemption payment:
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The redemption payment will be an amount equal to (i) the stated principal amount plus (ii) any contingent quarterly coupon otherwise due with respect to the related observation date.
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Redemption dates:
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Beginning on November 4, 2021, quarterly. See “Observation Dates, Coupon Payment Dates and Redemption Dates” below. If any such day is not a business day, the redemption payment will be made on the next succeeding business day and no adjustment will be made to any redemption payment made on that succeeding business day.
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Initial index value:
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With respect to the SPX Index: , which is the index
closing value of such index on the pricing date
With respect to the NDX Index: , which is the index
closing value of such index on the pricing date
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Final index value:
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With respect to each underlying index, the respective index closing value on the final observation date
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Worst performing
underlying index:
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The underlying index with the larger percentage decrease from the respective initial index value to the respective final index value
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Index performance factor:
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Final index value divided by the initial index value
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Coupon barrier level:
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With respect to the SPX Index: ,
which is 70% of the initial index value for such index
With respect to the NDX Index: , which is 70% of the
initial index value for such index
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Downside threshold level:
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With respect to the SPX Index: , which is 60% of the
initial index value for such index
With respect to the NDX Index: , which is 60% of the
initial index value for such index
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Coupon payment dates:
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Quarterly, as set forth under “Observation Dates, Coupon Payment Dates and Redemption Dates” below. If any such day is not a business day, that contingent quarterly coupon, if any, will be paid on the next succeeding business day and no adjustment will be made to any coupon payment made on that succeeding business day; provided further that the contingent quarterly coupon, if any, with respect to the final observation date will be paid on the maturity date.
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Observation dates:
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Quarterly, as set forth under “Observation Dates, Coupon Payment Dates and Redemption Dates” below, subject to postponement for non-index business days and certain market disruption events. We also refer to October 30, 2023 as the final observation date.
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CUSIP / ISIN:
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61771EER5 / US61771EER53
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Listing:
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The securities will not be listed on any securities exchange.
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Observation Dates, Coupon
Payment Dates and Redemption Dates
Observation Dates
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Coupon Payment Dates / Redemption Dates
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February 1, 2021
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February 4, 2021*
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April 30, 2021
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May 5, 2021*
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July 30, 2021
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August 4, 2021*
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November 1, 2021
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November 4, 2021
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January 31, 2022
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February 3, 2022
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May 2, 2022
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May 5, 2022
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August 1, 2022
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August 4, 2022
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October 31, 2022
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November 3, 2022
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January 30, 2023
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February 2, 2023
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May 1, 2023
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May 4, 2023
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July 31, 2023
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August 3, 2023
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October 30, 2023 (final observation date)
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November 2, 2023 (maturity date)
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* The securities are not subject to early
redemption until the fourth coupon payment date, which is November 4, 2021.
Morgan Stanley Finance LLC
Callable Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the S&P 500® Index and the NASDAQ-100 Index®
Principal at Risk Securities
Investment Overview
Callable Contingent Income Securities
Principal at Risk Securities
Callable Contingent Income Securities due November 2, 2023 Payments
on the Securities Based on the Worst Performing of the S&P 500® Index and the NASDAQ-100 Index®
(the “securities”) do not guarantee the repayment of principal and do not provide for the regular payment of interest.
Instead, the securities will pay a contingent quarterly coupon but only if the index closing value of each of the S&P
500® Index and the NASDAQ-100 Index® (which we refer to together as the “underlying indices”)
is at or above 70% of its respective initial index value, which we refer to as the respective coupon barrier level, on the
related observation date. If the index closing value of either underlying index is less than the coupon barrier level
for such index on any observation date, we will pay no coupon for the related quarterly period. It is possible that the index closing
value of one or both underlying indices will remain below the respective coupon barrier level(s) for extended periods of time or
even throughout the entire term of the securities so that you will receive few or no contingent quarterly coupons during the entire
3-year term of the securities. Even if an underlying index were to be at or above the coupon barrier level for such index on some
quarterly observation dates, it may fluctuate below the coupon barrier level on others. In addition, even if one underlying index
were to be at or above the coupon barrier level for such index on all quarterly observation dates, you will receive a contingent
quarterly coupon only with respect to the observation dates on which the other underlying index is also at or above the coupon
barrier level for such index, if any. In addition, beginning on November 4, 2021, we will redeem the securities on any quarterly
redemption date for a redemption payment equal to the sum of the stated principal amount plus any contingent quarterly coupon
otherwise due with respect to the related observation date, if and only if the output of a risk neutral valuation model on a business
day that is at least 2 but no more than 5 business days prior to such redemption date, based on the inputs indicated under “Call
feature” on the cover page, indicates that redeeming on such date is economically rational for us as compared to not redeeming
on such date. An early redemption of the securities will not automatically occur based on the performance of the underlying indices.
At maturity, if the securities have not been previously redeemed and if the final index value of each underlying index is
greater than or equal to 60% of the respective initial index value, which we refer to as the downside threshold level, the
payment at maturity will be the stated principal amount and, if the final index value of each underlying index is also greater
than or equal to its respective coupon barrier level, the related contingent quarterly coupon. If, however, the final index
value of either underlying index is less than its downside threshold level, investors will be exposed to the decline
in the worst performing underlying index on a 1-to-1 basis and will receive a payment at maturity that is less than 60% of the
stated principal amount of the securities and could be zero. Accordingly, investors in the securities must be willing to accept
the risk of losing their entire initial investment based on the performance of either index and also the risk of not receiving
any quarterly coupons throughout the entire term of the securities.
Maturity:
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Approximately 3 years, unless redeemed earlier based on the output of a risk neutral valuation model
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Contingent quarterly coupon:
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If, on any observation date, the index closing value of each
underlying index is greater than or equal to its respective coupon barrier level, we will pay a contingent quarterly
coupon at an annual rate of at least 7.25% (corresponding to at least approximately $18.125 per quarter per security, to be determined
on the pricing date) on the related contingent coupon payment date.
If, on any observation date, the closing value of
either underlying index is less than the coupon barrier level for such index, no contingent quarterly coupon will be
paid with respect to that observation date. It is possible that one or both underlying indices will remain below the respective
coupon barrier level(s) for extended periods of time or even throughout the entire term of the securities so that you will receive
few or no contingent quarterly coupons.
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Early redemption:
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Beginning on November 4, 2021, we will redeem the securities
on any quarterly redemption date for an early redemption payment equal to the stated principal amount plus any contingent
quarterly coupon otherwise due with respect to the related observation date, if and only if the output of a risk neutral valuation
model on a business day that is at least 2 but no more than 5 business days prior to such redemption date, based on the inputs
indicated under “Call feature” on the cover page, indicates that redeeming on such date is economically rational for
us as compared to not redeeming on such date.. An early redemption of the securities will not automatically occur based on the
performance of the underlying indices. In accordance with the risk neutral valuation model determination noted herein, it is more
likely that we will redeem the securities when it would otherwise be advantageous for
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Morgan Stanley Finance LLC
Callable Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the S&P 500® Index and the NASDAQ-100 Index®
Principal at Risk Securities
|
you to continue to hold the securities. As such, we will be more
likely to redeem the securities when the index closing value of each underlying index on the observation dates is at or above its
respective coupon barrier level, which would otherwise result in an amount of interest payable on the securities that is greater
than instruments of a comparable maturity and credit rating trading in the market. In other words, we will be more likely to redeem
the securities at a time when the securities are paying an above-market coupon. If the securities are redeemed prior to maturity,
you will receive no more contingent quarterly coupon payments, may be forced to invest in a lower interest rate environment and
may not be able to reinvest at comparable terms or returns.
On the other hand, we will be less likely to redeem
the securities when the index closing value of either underlying index is below its respective coupon barrier level and/or when
the final index value of either underlying index is expected to be below the downside threshold level, such that you will receive
no contingent quarterly coupons and/or that you will suffer a significant loss on your initial investment in the securities at
maturity. Therefore, if we do not redeem the securities, it is more likely that you will receive few or no contingent quarterly
coupons and suffer a significant loss at maturity.
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Payment at maturity:
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If the securities have not previously been redeemed, investors
will receive on the maturity date a payment at maturity determined as follows:
If the final index value of each
underlying index is greater than or equal to its respective downside threshold level: the stated principal amount and,
if the final index value of each underlying index is also greater than or equal to
its respective coupon barrier level, the contingent quarterly coupon with respect to the final observation date.
If the final index value of either underlying
index is less than its respective downside threshold level: (i) the stated principal amount multiplied by (ii) the
index performance factor of the worst performing underlying index. Under these circumstances, the payment at maturity will be
less than 60% of the stated principal amount of the securities and could be zero.
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We are using this preliminary pricing supplement to solicit from
you an offer to purchase the securities. You may revoke your offer to purchase the securities at any time prior to the time at
which we accept such offer by notifying the relevant agent. We reserve the right to change the terms of, or reject any offer to
purchase, the securities prior to their issuance. In the event of any material changes to the terms of the securities, we will
notify you.
Morgan Stanley Finance LLC
Callable Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the S&P 500® Index and the NASDAQ-100 Index®
Principal at Risk Securities
The original issue price 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. We estimate that the value of each security
on the pricing date will be approximately $965.90, or within $30.00 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 underlying indices. The estimated
value of the securities 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 securities?
In determining the economic terms of the securities, including
the contingent quarterly coupon rate, the coupon barrier levels and the downside 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 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 securities 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 securities 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
securities, and, if it once chooses to make a market, may cease doing so at any time.
Morgan Stanley Finance LLC
Callable Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the S&P 500® Index and the NASDAQ-100 Index®
Principal at Risk Securities
Key Investment Rationale
The securities do not provide for the regular payment of interest
and instead will pay a contingent quarterly coupon but only if the index closing value of each underlying index is
at or above 70% of its initial index value, which we refer to as the respective coupon barrier level, on the related observation
date. These securities are for investors who are willing to risk their principal and seek an opportunity to earn interest at a
potentially above-market rate in exchange for the risk of receiving no quarterly interest if either underlying index closes below
the coupon barrier level for such index on the observation dates, and the risk of an early redemption of the securities based on
the output of a risk neutral valuation model. The following scenarios are for illustration purposes only to demonstrate how the
payment at maturity and contingent quarterly coupon (if the securities have not previously been redeemed) are determined, and do
not attempt to demonstrate every situation that may occur. Accordingly, the securities may or may not be redeemed based on the
output of a risk neutral valuation model, the contingent quarterly coupon may be payable with respect to none of, or some but not
all of, the quarterly periods, and the payment at maturity may be less than 60% of the stated principal amount and could be zero.
Investors will not participate in any appreciation in either underlying index.
Scenario 1: The securities are redeemed prior to maturity.
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This scenario assumes that the securities are redeemed prior to the maturity date on one of the quarterly redemption dates, starting on November 4, 2021, one year after the original issue date, based on the output of a risk neutral valuation model, for the redemption payment equal to the stated principal amount plus any contingent quarterly coupon with respect to the relevant observation date, as applicable. Prior to the early redemption, each underlying index closes at or above its respective coupon barrier level on some or all of the quarterly observation dates. In this scenario, investors receive the contingent quarterly coupon with respect to each such observation date, but not for the quarterly periods for which one of both underlying indices close below the respective coupon barrier level on the related observation date. No further payments will be made on the securities once they have been redeemed.
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Scenario 2: The securities are not redeemed prior to maturity, and investors receive principal back at maturity.
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This scenario assumes that the securities are not redeemed on any of the quarterly redemption dates, and, as a result, investors hold the securities to maturity. During the term of the securities, each underlying index closes at or above its respective coupon barrier level on some quarterly observation dates, but one or both underlying indices close below the respective coupon barrier level(s) for such index on the others. Investors will receive the contingent quarterly coupon for the quarterly periods for which the index closing value of each underlying index is at or above its respective coupon barrier level on the related observation date, but not for the quarterly periods for which one or both underlying indices close below the respective coupon barrier level(s) on the related observation date. On the final observation date, each underlying index closes at or above its downside threshold level. At maturity, investors receive the stated principal amount and, if the final index value of each underlying index is also greater than or equal to its respective coupon barrier level, the contingent quarterly coupon with respect to the final observation date.
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Scenario 3: The securities are not redeemed prior to maturity, and investors suffer a substantial loss of principal at maturity.
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This scenario assumes that the securities are not redeemed on any of the quarterly redemption dates, and, as a result, investors hold the securities to maturity. During the term of the securities, one or both underlying indices close below the respective coupon barrier level(s) on every quarterly observation date. Since one or both underlying indices close below the respective coupon barrier level(s) on every quarterly observation date, investors do not receive any contingent quarterly coupon. On the final observation date, one or both underlying indices close below the respective downside threshold level(s). At maturity, investors will receive an amount equal to the stated principal amount multiplied by the index performance factor of the worst performing underlying index. Under these circumstances, the payment at maturity will be less than 60% of the stated principal amount and could be zero.
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Morgan Stanley Finance LLC
Callable Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the S&P 500® Index and the NASDAQ-100 Index®
Principal at Risk Securities
Underlying Indices Summary
S&P 500® Index
The S&P 500®
Index, which is calculated, maintained and published by S&P Dow Jones Indices LLC (“S&P”), consists of stocks
of 500 component companies 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.
Information as of market close on October 23, 2020:
Bloomberg Ticker Symbol:
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SPX
|
Current Index Value:
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3,465.39
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52 Weeks Ago:
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3,004.52
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52 Week High (on 9/2/2020):
|
3,580.84
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52 Week Low (on 3/23/2020):
|
2,237.40
|
For additional information about the S&P 500®
Index, see the information set forth under “S&P 500® Index” in the accompanying index supplement.
Furthermore, for additional historical information, see “S&P 500® Index Historical Performance”
below.
NASDAQ-100 Index®
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.
Information as of market close on October 23, 2020:
Bloomberg Ticker Symbol:
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NDX
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Current Index Value:
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11,692.57
|
52 Weeks Ago:
|
7,889.47
|
52 Week High (on 9/2/2020):
|
12,420.54
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52 Week Low (on 3/20/2020):
|
6,994.29
|
For additional information about the NASDAQ-100 Index®,
see the information set forth under “NASDAQ-100 Index®” in the accompanying index supplement. Furthermore,
for additional historical information, see “NASDAQ-100 Index® Historical Performance” below.
Morgan Stanley Finance LLC
Callable Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the S&P 500® Index and the NASDAQ-100 Index®
Principal at Risk Securities
Hypothetical Examples
The following hypothetical examples illustrate how to determine
whether a contingent quarterly coupon is paid with respect to an observation date and how to calculate the payment at maturity.
The following examples are for illustrative purposes only. Whether you receive a contingent quarterly coupon will be determined
by reference to the index closing value of each underlying index on each quarterly observation date, and the amount you will receive
at maturity, if any, will be determined by reference to the final index value of each underlying index on the final observation
date. Any early redemption of the securities will be based on the output of a risk neutral valuation model. The actual initial
index value, coupon barrier level and downside threshold level for each underlying index will be determined on the pricing date.
All payments on the securities, if any, are subject to our credit risk. The below examples are based on the following terms:
Hypothetical Contingent Quarterly Coupon:
|
If, on any observation date, the index closing value of each
underlying index is greater than or equal to its respective coupon barrier level, we will pay a contingent quarterly
coupon at an annual rate of 7.25% (corresponding to approximately $18.125 per quarter per security*) on the related contingent
coupon payment date.
If, on any observation date, the closing value of
either underlying index is less than the coupon barrier level for such index, no contingent quarterly coupon will be
paid with respect to that observation date. It is possible that one or both underlying indices will remain below the respective
coupon barrier level(s) for extended periods of time or even throughout the entire term of the securities so that you will receive
few or no contingent quarterly coupons.
|
Call Feature:
|
Beginning on November 4, 2021, an early redemption, in whole but not in part, will occur on a redemption date if and only if the output of a risk neutral valuation model on a business day that is at least 2 but no more than 5 business days prior to such redemption date, as selected by the calculation agent (the “determination date”), taking as input: (i) prevailing reference market levels, volatilities and correlations, as applicable and in each case as of the determination date and (ii) Morgan Stanley’s credit spreads as of the pricing date, indicates that redeeming on such date is economically rational for us as compared to not redeeming on such date. If we call the securities, we will give you notice at least 2 business days before the call date specified in the notice. Any redemption payment will be equal to the stated principal amount plus any contingent quarterly coupon otherwise due with respect to the related observation date. If the securities are redeemed prior to maturity, you will receive no more contingent quarterly coupon payments, may be forced to invest in a lower interest rate environment and may not be able to reinvest at comparable terms or returns.
|
Payment at Maturity (if the securities have not been redeemed early):
|
If the final index value of each underlying index is greater
than or equal to its respective downside threshold level: the stated principal amount and, if the final index value of each
underlying index is also greater than or equal to its respective coupon barrier level, the contingent quarterly coupon with
respect to the final observation date.
If the final index value of either underlying
index is less than its respective downside threshold level: (i) the stated principal amount multiplied by (ii) the
index performance factor of the worst performing underlying index. Under these circumstances, the payment at maturity will be
less than 60% of the stated principal amount of the securities and could be zero.
|
Stated Principal Amount:
|
$1,000
|
Hypothetical Initial Index Value:
|
With respect to the SPX Index: 3,000
With respect to the NDX Index: 10,000
|
Hypothetical Coupon Barrier Level:
|
With respect to the SPX Index: 2,100, which is 70% of
the hypothetical initial index value for such index
With respect to the NDX Index: 7,000, which is 70% of
the hypothetical initial index value for such index
|
Hypothetical Downside Threshold Level:
|
With respect to the SPX Index: 1,800, which is 60% of
the hypothetical initial index value for such index
With respect to the NDX Index: 6,000, which is 60% of
the hypothetical initial index value for such index
|
* The actual contingent quarterly coupon will be an amount determined
by the calculation agent based on the actual contingent quarterly coupon rate and the number of days in the applicable payment
period, calculated on a 30/360 day-count basis. The hypothetical contingent quarterly coupon of $18.125 is used in these examples
for ease of analysis.
Morgan Stanley Finance LLC
Callable Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the S&P 500® Index and the NASDAQ-100 Index®
Principal at Risk Securities
How to determine whether a contingent quarterly
coupon is payable with respect to an observation date (if the securities have not been previously redeemed):
|
Index Closing Value
|
Contingent Quarterly Coupon
|
|
SPX Index
|
NDX Index
|
|
Hypothetical Observation Date 1
|
2,150 (at or above coupon barrier level)
|
9,000 (at or above coupon barrier level)
|
$18.125
|
Hypothetical Observation Date 2
|
3,100 (at or above coupon barrier level)
|
6,000 (below coupon barrier level)
|
$0
|
Hypothetical Observation Date 3
|
1,800 (below coupon barrier level)
|
9,000 (at or above coupon barrier level)
|
$0
|
Hypothetical Observation Date 4
|
1,500 (below coupon barrier level)
|
5,200 (below coupon barrier level)
|
$0
|
On hypothetical observation date 1, both the SPX Index and NDX
Index close at or above their respective coupon barrier levels. Therefore a contingent quarterly coupon of $18.125 is paid on the
relevant coupon payment date.
On each of hypothetical observation dates 2 and 3, one underlying
index closes at or above its coupon barrier level but the other underlying index closes below its coupon barrier level. Therefore,
no contingent quarterly coupon is paid on the relevant coupon payment date.
On hypothetical observation date 4, each underlying index closes
below its respective coupon barrier level and accordingly no contingent quarterly coupon is paid on the relevant coupon payment
date.
How to calculate the payment
at maturity (if the securities have not been redeemed early):
|
Final Index Value
|
Payment at Maturity
|
|
SPX Index
|
NDX Index
|
|
Example 1:
|
3,500 (at or above the downside threshold level and at or above the coupon barrier level)
|
11,000 (at or above the downside threshold level and at or above the coupon barrier level)
|
$1,018.125 (the stated principal amount plus the contingent quarterly coupon with respect to the final observation date)
|
Example 2:
|
2,000 (at or above the downside threshold level)
|
4,000 (below the downside threshold level)
|
$1,000 × index performance factor of the worst performing underlying = $1,000 × (4,000 / 10,000) = $400
|
Example 3:
|
1,200 (below the downside threshold level)
|
10,000 (at or above the downside threshold level)
|
$1,000 × (1,200 / 3,000) = $400
|
Example 4:
|
900 (below the downside threshold level)
|
4,000 (below the downside threshold level)
|
$1,000 × (900 / 3,000) = $300
|
Example 5:
|
1,200 (below the downside threshold level)
|
3,000 (below the downside threshold level)
|
$1,000 × (3,000 / 10,000) = $300
|
In example 1, the final index values of both the SPX Index and
NDX Index are at or above their downside threshold levels and coupon barrier levels. Therefore, investors receive at maturity the
stated principal amount of the securities and the contingent quarterly coupon with respect to the final observation date. However,
investors do not participate in the appreciation of either underlying index.
In examples 2 and 3, the final index value of one underlying
index is at or above its downside threshold level but the final index value of the other underlying index is below its downside
threshold level. Therefore, investors are exposed to the downside performance of the worst performing underlying index at maturity
and receive at maturity an amount equal to the stated principal amount multiplied by the index performance factor of the
worst performing underlying index.
Similarly, in examples 4 and 5, the final index value of each
underlying index is below its respective downside threshold level, and investors receive at maturity an amount equal to the stated
principal amount multiplied by the index performance factor of the worst performing underlying index. In example 4, the
SPX Index has declined 70% from its initial index value to its final index value, while the
Morgan Stanley Finance LLC
Callable Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the S&P 500® Index and the NASDAQ-100 Index®
Principal at Risk Securities
NDX Index has declined 60% from its initial index value to its
final index value. Therefore, the payment at maturity equals the stated principal amount multiplied by the index performance
factor of the SPX Index, which is the worst performing underlying index in this example. In example 5, the SPX Index has declined
60% from its initial index value, while the NDX Index has declined 70% from its initial index value to its final index value. Therefore
the payment at maturity equals the stated principal amount multiplied by the index performance factor of the NDX Index,
which is the worst performing underlying index in this example.
If the securities have not been redeemed prior to maturity
and the final index value of EITHER underlying index is below its respective downside threshold level, you will be exposed to the
downside performance of the worst performing underlying index at maturity, and your payment at maturity will be less than $600
per security and could be zero.
Morgan Stanley Finance LLC
Callable Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the S&P 500® Index and the NASDAQ-100 Index®
Principal at Risk Securities
Risk Factors
The following is a non-exhaustive list of certain key risk
factors for investors in the securities. For further discussion of these and other risks, you should read the section entitled
“Risk Factors” in the accompanying prospectus supplement, index supplement and prospectus. We also urge you to consult
with your investment, legal, tax, accounting and other advisers before you invest in the securities.
|
§
|
The securities do not guarantee the return of any principal. The terms of the securities differ from those of ordinary
debt securities in that they do not guarantee the repayment of principal. If the securities have not been redeemed prior to maturity
and the final index value of either underlying index is less than its downside threshold level of 60% of its initial index
value, you will be exposed to the decline in the closing value of the worst performing underlying index, as compared to its initial
index value, on a 1-to-1 basis, and you will receive for each security that you hold at maturity an amount equal to the stated
principal amount multiplied by the index performance factor of the worst performing underlying index. In this case, the
payment at maturity will be less than 60% of the stated principal amount and could be zero.
|
|
§
|
The securities do not provide for regular interest payments. The terms of the securities differ from those of ordinary
debt securities in that they do not provide for the regular payment of interest. The securities will pay a contingent quarterly
coupon only if the index closing value of each underlying index is at or above 70% of its respective initial index value, which
we refer to as the respective coupon barrier level, on the related observation date. If, on the other hand, the index closing value
of either underlying index is lower than the coupon barrier level for such index on the relevant observation date for any interest
period, we will pay no coupon on the applicable coupon payment date. It is possible that the index closing value of one or both
underlying indices will remain below the respective coupon barrier level(s) for extended periods of time or even throughout the
entire term of the securities. If you do not earn sufficient contingent quarterly coupons over the term of the securities, the
overall return on the securities may be less than the amount that would be paid on a conventional debt security of ours of comparable
maturity.
|
|
§
|
The securities have early redemption risk. The
term of the securities, and thus your opportunity to earn a potentially above-market coupon if the index closing value of each
underlying index is greater than or equal to the coupon barrier level for such index on quarterly observation dates, will be limited
if we redeem the securities based on
the output of a risk neutral valuation model on any quarterly redemption date, beginning November 4, 2021. The term of your investment
in the securities may be limited to as short
as one year. In accordance with the risk neutral valuation model determination noted herein, it is more likely that we will redeem
the securities when it would be advantageous
for you to continue to hold the securities. As such, we will be more likely to redeem the securities when the index closing
value of each underlying index on the observation dates is at or above the coupon barrier level for such index, which would otherwise
result in an amount of interest payable on the securities that is greater than instruments of a comparable maturity and credit
rating trading in the market. In other words, we will be more likely to redeem the securities at a time when the securities are
paying an above-market coupon. If the securities are redeemed prior to maturity, you will receive no more contingent quarterly
coupon payments, may be forced to invest in a lower interest rate environment and may not be able to reinvest at comparable terms
or returns.
|
On the other hand, we will be less
likely to redeem the securities when the index closing value of either underlying index is below the respective coupon barrier
level and/or when the final index value for either underlying index is expected to be below the respective downside threshold level,
such that you will receive no contingent quarterly coupons and/or that you will suffer a significant loss on your initial investment
in the securities at maturity. Therefore, if we do not redeem the securities, it is more likely that you will receive few or no
contingent quarterly coupons and suffer a significant loss at maturity.
|
§
|
You are exposed to the price risk of both underlying indices, with respect to both the contingent quarterly coupons, if
any, and the payment at maturity, if any. Your
return on the securities is not linked to a basket consisting of both underlying indices. Rather, it will be contingent 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 both
underlying indices. Poor performance by either underlying
index 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 underlying index. To receive any contingent quarterly coupons, each underlying
index
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the S&P 500® Index and the NASDAQ-100 Index®
Principal at Risk Securities
must
close at or above its respective coupon barrier level on the applicable observation date. In addition, if either
underlying index has declined to below its respective downside threshold level as of the final
observation date, you will be fully exposed to the decline in the worst performing
underlying index over the term of the securities on a 1-to-1 basis, even if the other underlying index has appreciated or not
declined as much. Under this scenario, the value of any such payment will be less than 60% of the stated principal amount and
could be zero. Accordingly, your investment is subject to the price risk of both underlying indices.
|
§
|
Because the securities are linked to the performance of the worst performing underlying index, you are exposed to greater
risks of no contingent quarterly coupons and sustaining a significant loss on your investment than if the securities were linked
to just one index. The risk that you will not receive any contingent quarterly coupons, or that you will suffer a significant
loss on your investment, is greater if you invest in the securities as opposed to substantially similar securities that are linked
to the performance of just one underlying index. With two underlying indices, it is more likely that either underlying index will
close below its coupon barrier level on any observation date, or below its downside threshold level on the final observation date,
than if the securities were linked to only one underlying index. Therefore, it is more likely that you will not receive any contingent
quarterly coupons and that you will suffer a significant loss on your investment.
|
|
§
|
The contingent quarterly coupon, if any, is based only on the value of each underlying index on the related quarterly observation
date. Whether the contingent quarterly coupon will be paid on any coupon payment date will be determined at the end of the
relevant interest period, based on the closing value of each underlying index on the relevant quarterly observation date. As a
result, you will not know whether you will receive the contingent quarterly coupon on any coupon payment date until near the end
of the relevant quarterly period. Moreover, because the contingent quarterly coupon is based solely on the value of each underlying
index on quarterly observation dates, if the closing value of either underlying index on any observation date is below the coupon
barrier level for such index, you will receive no coupon for the related interest period, even if the level of such underlying
index was at or above its respective coupon barrier level on other days during that interest period and even if the closing value
of the other underlying index is at or above the coupon barrier level for such index.
|
|
§
|
Investors will not participate in any appreciation in either underlying index.
Investors will not participate in any appreciation in either underlying index from the initial index value for such index, and
the return on the securities will be limited to the contingent quarterly coupons, if any, that are paid with respect to each observation
date on which the index closing value of each underlying index is greater than or equal to its respective coupon barrier level
until the securities are redeemed or reach maturity.
|
|
§
|
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
index on any day, including in relation to its respective
coupon barrier level and downside 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 underlying indices,
|
|
o
|
whether the index closing value of either underlying index has been below its respective coupon barrier level on any observation
date,
|
|
o
|
geopolitical conditions and economic, financial, political, regulatory or judicial events that affect the component stocks
of the underlying indices or securities markets generally and which may affect the value of each underlying index,
|
|
o
|
dividend rates on the securities underlying the underlying indices,
|
|
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 underlying indices and changes in the constituent stocks of such indices, and
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the S&P 500® Index and the NASDAQ-100 Index®
Principal at Risk Securities
|
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. In particular,
if either underlying index has closed near or below its coupon barrier level and/or its downside threshold level, the market value
of the securities is expected to decrease substantially and you may have to sell your securities at a substantial discount from
the stated principal amount of $1,000 per security.
You cannot predict the future performance
of either underlying index based on its historical performance. The value of either underlying index may decrease and be below
the coupon barrier level for such index on each observation date so that you will receive no return on your investment, and one
or both underlying indices may close below the respective downside threshold level(s) on the final observation date so that you
lose more than 40% or all of your initial investment in the securities. There can be no assurance that the closing value of each
underlying index will be at or above the respective coupon barrier level on any observation date so that you will receive a coupon
payment on the securities for the applicable interest period or that they will be at or above their respective downside threshold
levels on the final observation date so that you do not suffer a significant loss on your initial investment in the securities.
See “S&P 500® Index Historical Performance” and “NASDAQ-100 Index® Historical
Performance” 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
at maturity or on any coupon payment date, and therefore you are subject to our credit risk. The securities are not guaranteed
by any other entity. 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 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.
|
|
§
|
Not equivalent to investing in the underlying indices. Investing in the securities
is not equivalent to investing in either underlying index or the component stocks of either underlying index. Investors in the
securities will not participate in any positive performance of either underlying index, and will not have voting rights or rights
to receive dividends or other distributions or any other rights with respect to stocks that constitute either underlying index.
|
|
§
|
The securities will not be listed on any securities exchange and secondary trading may be limited. Accordingly, you should
be willing to hold your securities for the entire 3-year term of the securities.
The securities will not be listed on any securities exchange. Therefore, there may be little or no secondary market for the securities.
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.
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the S&P 500® Index and the NASDAQ-100 Index®
Principal at Risk 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 original issue price reduce the economic terms of the securities,
cause the estimated value of the securities 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 securities 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 securities in the original issue price 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 6 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 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 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.
|
|
§
|
Hedging and trading activity by our affiliates could potentially 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 to other instruments
linked to the underlying indices or their component stocks), including trading in the stocks that 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 securities, and the hedging strategy may involve greater and more frequent dynamic adjustments
to the hedge as the final observation date approaches. Some of our 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 (i) the coupon barrier level for such underlying index,
which, if the securities have not been redeemed, is the value at or above which such underlying index must close on the observation
dates in order for you to earn a contingent quarterly coupon (depending also on the performance of the other underlying index),
and (ii) the downside threshold level for such underlying index, which, if the securities have not been redeemed prior to maturity,
is the value at or above which the underlying index must close on the final observation date so that you are not exposed to the
negative performance of the worst performing underlying index at maturity (depending also on the performance of the other underlying
index). Additionally, such hedging or trading activities during the term of the securities could affect the value of an underlying
index on the observation dates, and, accordingly, whether we pay a contingent quarterly coupon on the securities and the amount
of cash you receive at maturity, if any (depending also on the performance of the other underlying index).
|
|
§
|
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 initial index value, coupon barrier level and downside
threshold level for each underlying index, the payment at maturity, if any, and whether you receive a contingent quarterly coupon
on each coupon payment date. Moreover, certain determinations made by MS & Co., in its
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the S&P 500® Index and the NASDAQ-100 Index®
Principal at Risk Securities
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 index closing value in the event of a market
disruption event or discontinuance of an underlying index. These potentially subjective determinations may affect the payout to
you upon an early redemption or at maturity, if any. For further information regarding these types of determinations, see “Additional
Terms of the Securities—Additional Terms—Calculation agent,” “—Market disruption event,” “—Postponement
of observation dates,” “—Discontinuance of an underlying index; alteration of method of calculation” and
“—Alternate exchange calculation in case of an event of default” below. In addition, MS & Co. has determined
the estimated value of the securities on the pricing date.
|
§
|
Adjustments to the underlying indices could adversely affect the value of the securities. The publisher of each underlying
index may add, delete or substitute the component stocks of such underlying index or make other methodological changes that could
change the value of such underlying index. Any of these actions could adversely affect the value of the securities. The publisher
of each underlying index may also discontinue or suspend calculation or publication of such underlying index at any time. In these
circumstances, MS & Co., as the calculation agent, will have the sole discretion to substitute a successor index that is comparable
to the discontinued index. MS & Co. could have an economic interest that is different than that of investors in the securities
insofar as, for example, MS & Co. is permitted to consider indices that are calculated and published by MS & Co. or any
of its affiliates. If MS & Co. determines that there is no appropriate successor index on any observation date, the determination
of whether a contingent quarterly coupon will be payable on the securities on the applicable coupon payment date, and/or the amount
payable at maturity, will be based on the value of such underlying index, based on the closing prices of the stocks constituting
such underlying 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 underlying index last in effect prior to such discontinuance, as compared
to the coupon barrier level or downside threshold level, as applicable (depending also on the performance of the other underlying
index).
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|
§
|
The U.S. federal income tax consequences of an investment in the securities are uncertain. There is no direct legal
authority as to the proper treatment of the securities for U.S. federal income tax purposes, and, therefore, significant aspects
of the tax treatment of the securities are uncertain.
|
Please read the discussion under
“Additional Information—Tax considerations” in this document concerning the U.S. federal income tax consequences
of an investment in the securities. We intend to treat a security for U.S. federal income tax purposes as a single financial contract
that provides for a coupon that will be treated as gross income to you at the time received or accrued, in accordance with your
regular method of tax accounting. Under this treatment, the ordinary income treatment of the coupon payments, in conjunction with
the capital loss treatment of any loss recognized upon the sale, exchange or settlement of the securities, could result in adverse
tax consequences to holders of the securities because the deductibility of capital losses is subject to limitations. We do not
plan to request a ruling from the Internal Revenue Service (the “IRS”) regarding the tax treatment of the securities,
and the IRS or a court may not agree with the tax treatment described herein. If the IRS were successful in asserting an alternative
treatment for the securities, the timing and character of income or loss on the securities might differ significantly from the
tax treatment described herein. For example, under one possible treatment, the IRS could seek to recharacterize the securities
as debt instruments. In that event, U.S. Holders (as defined below) would be required to accrue into income original issue discount
on the securities every year at a “comparable yield” determined at the time of issuance (as adjusted based on the difference,
if any, between the actual and the projected amount of any contingent payments on the securities) and recognize all income and
gain in respect of the securities as ordinary income. The risk that financial instruments providing for buffers, triggers or similar
downside protection features, such as the securities, would be recharacterized as debt is greater than the risk of recharacterization
for comparable financial instruments that do not have such features.
Non-U.S. Holders (as defined
below) should note that we currently intend to withhold on any coupon paid to Non-U.S. Holders generally at a rate of 30%, or at
a reduced rate specified by an applicable income tax treaty under an “other income” or similar provision, and will
not be required to pay any additional amounts with respect to amounts withheld.
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. While it is not clear whether the securities would be viewed as similar to the prepaid forward contracts
described in the notice, it is possible that 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 securities, possibly with retroactive
effect. The notice focuses on a number of issues, the most
Morgan Stanley Finance LLC
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Payments on the Securities Based on the Worst Performing of the S&P 500® Index and the NASDAQ-100 Index®
Principal at Risk Securities
relevant of which for holders of
the securities are the character and timing of income or loss and the degree, if any, to which income realized by non-U.S. investors
should be subject to withholding tax. 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, the issues presented by
this notice and any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
Morgan Stanley Finance LLC
Callable Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the S&P 500® Index and the NASDAQ-100 Index®
Principal at Risk Securities
S&P 500® Index Historical
Performance
The following graph sets forth the daily closing values of the
SPX Index for the period from January 1, 2015 through October 23, 2020. 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 period from January 1, 2015
through October 23, 2020. The closing value of the SPX Index on October 23, 2020 was 3,465.39. 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.
No assurance can be given as to the level of the SPX Index on any observation date, including the final observation date.
SPX Index Daily
Closing Values
January 1, 2015
to October 23, 2020
|
|
*The black line in the graph indicates the hypothetical coupon barrier level and the red line in the graph indicates the hypothetical downside threshold level, in each case assuming the index closing value on October 23, 2020 were the initial index value.
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the S&P 500® Index and the NASDAQ-100 Index®
Principal at Risk Securities
S&P 500® Index
|
High
|
Low
|
Period End
|
2015
|
|
|
|
First Quarter
|
2,117.39
|
1,992.67
|
2,067.89
|
Second Quarter
|
2,130.82
|
2,057.64
|
2,063.11
|
Third Quarter
|
2,128.28
|
1,867.61
|
1,920.03
|
Fourth Quarter
|
2,109.79
|
1,923.82
|
2,043.94
|
2016
|
|
|
|
First Quarter
|
2,063.95
|
1,829.08
|
2,059.74
|
Second Quarter
|
2,119.12
|
2,000.54
|
2,098.86
|
Third Quarter
|
2,190.15
|
2,088.55
|
2,168.27
|
Fourth Quarter
|
2,271.72
|
2,085.18
|
2,238.83
|
2017
|
|
|
|
First Quarter
|
2,395.96
|
2,257.83
|
2,362.72
|
Second Quarter
|
2,453.46
|
2,328.95
|
2,423.41
|
Third Quarter
|
2,519.36
|
2,409.75
|
2,519.36
|
Fourth Quarter
|
2,690.16
|
2,529.12
|
2,673.61
|
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 (through October 23, 2020)
|
3,534.22
|
3,348.44
|
3,465.39
|
“Standard
& Poor’s®,” “S&P®,” “S&P 500®,” “Standard
& Poor’s 500” and “500” are trademarks of Standard and Poor’s Financial Services LLC. For more
information, see “S&P 500® Index” in the accompanying index supplement.
Morgan Stanley Finance LLC
Callable Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the S&P 500® Index and the NASDAQ-100 Index®
Principal at Risk Securities
NASDAQ-100 Index® Historical Performance
The following graph sets forth the daily closing values of the
NDX Index for the period from January 1, 2015 through October 23, 2020. 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 period from January 1, 2015
through October 23, 2020. The closing value of the NDX Index on October 23, 2020 was 11,692.57. 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.
No assurance can be given as to the level of the NDX Index on any observation date, including the final observation date.
NDX Index Daily Closing Values
January 1, 2015 to October 23, 2020
|
|
* The black line in the graph indicates the hypothetical coupon barrier level and the red line in the graph indicates the hypothetical downside threshold level, in each case assuming the index closing value on October 23, 2020 were the initial index value.
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the S&P 500® Index and the NASDAQ-100 Index®
Principal at Risk Securities
NASDAQ-100 Index®
|
High
|
Low
|
Period End
|
2015
|
|
|
|
First Quarter
|
4,483.05
|
4,089.65
|
4,333.69
|
Second Quarter
|
4,548.74
|
4,311.26
|
4,396.76
|
Third Quarter
|
4,679.68
|
4,016.32
|
4,181.06
|
Fourth Quarter
|
4,719.05
|
4,192.96
|
4,593.27
|
2016
|
|
|
|
First Quarter
|
4,497.86
|
3,947.80
|
4,483.66
|
Second Quarter
|
4,565.42
|
4,201.06
|
4,417.70
|
Third Quarter
|
4,891.36
|
4,410.75
|
4,875.70
|
Fourth Quarter
|
4,965.81
|
4,660.46
|
4,863.62
|
2017
|
|
|
|
First Quarter
|
5,439.74
|
4,911.33
|
5,436.23
|
Second Quarter
|
5,885.30
|
5,353.59
|
5,646.92
|
Third Quarter
|
6,004.38
|
5,596.96
|
5,979.30
|
Fourth Quarter
|
6,513.27
|
5,981.92
|
6,396.42
|
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 (through October 23, 2020)
|
12,088.11
|
11,255.69
|
11,692.57
|
“Nasdaq®,” “NASDAQ-100®”
and “NASDAQ-100 Index®” are trademarks of Nasdaq, Inc. For more information, see “NASDAQ-100 Index®”
in the accompanying index supplement.
Morgan Stanley Finance LLC
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Principal at Risk Securities
Additional Terms of the Securities
Please read this information in conjunction with the summary
terms on the front cover of this preliminary pricing supplement.
Additional
Terms:
|
|
If the terms described herein are inconsistent with those described in the accompanying prospectus supplement, index supplement or prospectus, the terms described herein shall control.
|
Day-count
convention:
|
Interest will be computed on the basis of a 360-day year of twelve 30-day months.
|
Underlying
index publisher:
|
With respect to the SPX Index, S&P Dow Jones Indices
LLC, or any successor thereof.
With respect to the NDX Index, Nasdaq, Inc., or any
successor thereof.
|
Denominations:
|
$1,000 per security and integral multiples thereof
|
Interest
period:
|
The quarterly period from and including the original issue date (in the case of the first interest period) or the previously scheduled coupon payment date, as applicable, to but excluding the following scheduled coupon payment date, with no adjustment for any postponement thereof.
|
Senior
security or subordinated security:
|
Senior
|
Specified
currency:
|
U.S. dollars
|
Record
date:
|
One business day prior to the related scheduled coupon payment date; provided that any contingent quarterly coupon payable at maturity shall be payable to the person to whom the payment at maturity shall be payable.
|
Trustee:
|
The Bank of New York Mellon, a New York banking corporation
|
Calculation
agent:
|
The calculation agent for the securities will be MS & Co.
All determinations made by the calculation agent will be at the sole discretion of the calculation agent and will, in the absence
of manifest error, be conclusive for all purposes and binding on you, the trustee and us.
All calculations with respect to the contingent quarterly coupon,
the redemption payment and the payment at maturity, if any, shall be made by the calculation agent and shall be rounded to the
nearest one hundred-thousandth, with five one-millionths rounded upward (e.g., .876545 would be rounded to .87655); all dollar
amounts related to determination of the amount of cash payable per stated principal amount, if any, shall be rounded to the nearest
ten-thousandth, with five one hundred-thousandths rounded upward (e.g., .76545 would be rounded up to .7655); and all dollar amounts
paid on the aggregate principal amount of the securities shall be rounded to the nearest cent, with one-half cent rounded upward.
Because the calculation agent is our affiliate, the
economic interests of the calculation agent and its affiliates may be adverse to your interests as an investor in the securities,
including with respect to certain determinations and judgments that the calculation agent must make in determining the payment
that you will receive, if any, on each coupon payment date, upon early redemption or at maturity or whether a market disruption
event has occurred. See “Market disruption event” and “Discontinuance of an underlying index; alteration of
method of calculation” below. MS & Co. is obligated to carry out its duties and functions as calculation agent in good
faith and using its reasonable judgment.
|
Business
day:
|
Any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in The City of New York.
|
Index
business day:
|
With respect to each underlying index, a day, as determined by the calculation agent, on which trading is generally conducted on each of the relevant exchange(s) for such underlying index, other than a day on which trading on such exchange(s) is scheduled to close prior to the time of the posting of its regular final weekday closing price.
|
Market
disruption event:
|
With respect to each underlying index, market disruption event
means:
(i) the
occurrence or existence of any of:
(a) a suspension, absence or material
limitation of trading of securities then constituting 20 percent or more of the value of such underlying index (or a successor
index) on the relevant exchange(s) for such securities for more than two hours of trading or during the one-half hour period preceding
the close of the principal trading session on such relevant exchange(s), or
(b) a breakdown or failure
in the price and trade reporting systems of any relevant exchange as a result of which the reported trading prices for securities
then constituting 20 percent or more of the value of such underlying index (or a successor index) during the last one-half hour
preceding the close of the principal trading session on such relevant exchange(s) are materially inaccurate, or
|
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|
(c) the suspension, material limitation
or absence of trading on any major U.S. securities market for trading in futures or options contracts or exchange-traded funds
related to such underlying index (or a successor index) for more than two hours of trading or during the one-half hour period preceding
the close of the principal trading session on such market,
in each case as determined by the
calculation agent in its sole discretion; and
(ii) a
determination by the calculation agent in its sole discretion that any event described in clause (i) above materially interfered
with our ability or the ability of any of our affiliates to unwind or adjust all or a material portion of the hedge position with
respect to the securities.
For the purpose of determining whether a market disruption event
exists at any time with respect to an underlying index, if trading in a security included in such underlying index is materially
suspended or materially limited at that time, then the relevant percentage contribution of that security to the value of such underlying
index shall be based on a comparison of (x) the portion of the value of such underlying index attributable to that security relative
to (y) the overall value of such underlying index, in each case immediately before that suspension or limitation.
For the purpose of determining whether a market disruption
event exists at any time with respect to an underlying index: (1) a limitation on the hours or number of days of trading will
not constitute a market disruption event if it results from an announced change in the regular business hours of the relevant
exchange or market, (2) a decision to permanently discontinue trading in the relevant futures or options contract or exchange-traded
fund will not constitute a market disruption event, (3) a suspension of trading in futures or options contracts or exchange-traded
funds on such underlying index by the primary securities market trading in such contracts or funds by reason of (a) a price change
exceeding limits set by such securities exchange or market, (b) an imbalance of orders relating to such contracts or funds or
(c) a disparity in bid and ask quotes relating to such contracts or funds will constitute a suspension, absence or material limitation
of trading in futures or options contracts or exchange-traded funds related to such underlying index and (4) a “suspension,
absence or material limitation of trading” on any relevant exchange or on the primary market on which futures or options
contracts or exchange-traded funds related to such underlying index are traded will not include any time when such securities
market is itself closed for trading under ordinary circumstances.
|
Relevant
exchange:
|
With respect to each underlying index or its successor index, the primary exchange(s) or market(s) of trading for (i) any security then included in such index and (ii) any futures or options contracts related to such index or to any security then included in such index.
|
Postponement of observation dates:
|
The observation dates are subject to postponement due to non-index
business days or certain market disruption events, as described in the following paragraph.
If any scheduled observation date, including the final
observation date, is not an index business day with respect to any underlying index or if there is a market disruption event on
such day with respect to any underlying index, the relevant observation date solely with respect to that affected underlying index
shall be the next succeeding index business day with respect to that underlying index on which there is no market disruption event
with respect to that underlying index; provided that if a market disruption event with respect to that underlying index
has occurred on each of the five index business days with respect to that underlying index immediately succeeding any of the scheduled
observation dates, then (i) such fifth succeeding index business day shall be deemed to be the relevant observation date with
respect to that affected underlying index, notwithstanding the occurrence of a market disruption event with respect to that underlying
index on such day, and (ii) with respect to any such fifth index business day on which a market disruption event occurs with respect
to that underlying index, the calculation agent shall determine the index closing value on such fifth index business day in accordance
with the formula for and method of calculating that underlying index last in effect prior to the commencement of the market disruption
event, using the closing price (or, if trading in the relevant securities has been materially suspended or materially limited,
its good faith estimate of the closing price that would have prevailed but for such suspension or limitation) at the close of
the principal trading session of the relevant exchange on such index business day of each security most recently constituting
that affected underlying index without any rebalancing or substitution of such securities following the commencement of the market
disruption event.
|
Postponement of coupon payment
dates (including the maturity date and redemption dates):
|
If any scheduled coupon payment date is not a business day, that quarterly coupon, if any, shall be paid on the next succeeding business day; provided that the contingent quarterly coupon, if any, with respect to the final observation date shall be paid on the maturity date; provided further that if, due to a market disruption event or otherwise, any observation date with respect to either underlying index is postponed so that it falls less than two business days prior to the scheduled coupon payment date, maturity date or redemption date, as applicable, the coupon payment date, maturity date or redemption date, as applicable, shall be postponed to the second business day following the observation date as postponed, by which date the index closing value of each underlying index has been determined. In any of these cases, no adjustment shall be made to
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the S&P 500® Index and the NASDAQ-100 Index®
Principal at Risk Securities
|
any contingent quarterly coupon payment, payment at maturity or redemption payment made on that postponed date.
|
Discontinuance of an underlying
index; alteration of method of calculation:
|
If any underlying index publisher discontinues publication of
the relevant underlying index and such underlying index publisher or another entity (including MS & Co.) publishes a successor
or substitute index that the calculation agent determines, in its sole discretion, to be comparable to the discontinued index (such
index being referred to herein as the “successor index”), then any subsequent index closing value for the discontinued
index will be determined by reference to the published value of such successor index at the regular weekday close of trading on
any index business day that the index closing value for such underlying index is to be determined, and, to the extent the index
closing value of such successor index differs from the index closing value of the relevant underlying index at the time of such
substitution, proportionate adjustments shall be made by the calculation agent to the relevant initial index value, coupon barrier
level and downside threshold level.
Upon any selection by the calculation agent of a successor index,
the calculation agent will cause written notice thereof to be furnished to the trustee, to us and to the depositary, as holder
of the securities, within three business days of such selection. We expect that such notice will be made available to you, as a
beneficial owner of the securities, in accordance with the standard rules and procedures of the depositary and its direct and indirect
participants.
If any underlying index publisher discontinues publication of
the relevant underlying index or a successor index prior to, and such discontinuance is continuing on, any observation date and
the calculation agent determines, in its sole discretion, that no successor index is available at such time, then the calculation
agent will determine the index closing value for such underlying index for such date. The index closing value of such underlying
index or such successor index will be computed by the calculation agent in accordance with the formula for and method of calculating
such index last in effect prior to such discontinuance, using the closing price (or, if trading in the relevant securities has
been materially suspended or materially limited, its good faith estimate of the closing price that would have prevailed but for
such suspension or limitation) at the close of the principal trading session of the relevant exchange on such date of each security
most recently constituting such index without any rebalancing or substitution of such securities following such discontinuance.
Notwithstanding these alternative arrangements, discontinuance of the publication of an underlying index may adversely affect the
value of the securities.
If at any time, the method of calculating any underlying
index or any successor index, or the value thereof, is changed in a material respect, or if any underlying index or any successor
index is in any other way modified so that such index does not, in the opinion of the calculation agent, fairly represent the
value of such index had such changes or modifications not been made, then, from and after such time, the calculation agent will,
at the close of business in New York City on each date on which the index closing value for such underlying index is to be determined,
make such calculations and adjustments as, in the good faith judgment of the calculation agent, may be necessary in order to arrive
at a value of a stock index comparable to such underlying index or such successor index, as the case may be, as if such changes
or modifications had not been made, and the calculation agent will calculate the index closing value with reference to such underlying
index or such successor index, as adjusted. Accordingly, if the method of calculating any underlying index or any successor index
is modified so that the value of such index is a fraction of what it would have been if it had not been modified (e.g., due to
a split in such underlying index), then the calculation agent will adjust such index in order to arrive at a value of such underlying
index or such successor index as if it had not been modified (e.g., as if such split had not occurred).
|
Alternate exchange calculation
in case of an event of default:
|
If an event of default with respect to the securities shall have
occurred and be continuing, the amount declared due and payable upon any acceleration of the securities (the “Acceleration
Amount”) will be an amount, determined by the calculation agent in its sole discretion, that is equal to the cost of having
a qualified financial institution, of the kind and selected as described below, expressly assume all our payment and other obligations
with respect to the securities as of that day and as if no default or acceleration had occurred, or to undertake other obligations
providing substantially equivalent economic value to you with respect to the securities. That cost will equal:
· the
lowest amount that a qualified financial institution would charge to effect this assumption or undertaking, plus
· the
reasonable expenses, including reasonable attorneys’ fees, incurred by the holders of the securities in preparing any documentation
necessary for this assumption or undertaking.
During the default quotation period for the securities,
which we describe below, the holders of the securities and/or we may request a qualified financial institution to provide a quotation
of the amount it would charge to effect this assumption or undertaking. If either party obtains a quotation, it must notify the
other party in writing of the quotation. The amount referred to in the first bullet point above will equal the lowest—or,
if there is only one, the only—quotation obtained, and as to which notice is so given, during the default quotation
|
Morgan Stanley Finance LLC
Callable Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the S&P 500® Index and the NASDAQ-100 Index®
Principal at Risk Securities
|
period. With respect to any quotation, however, the party not
obtaining the quotation may object, on reasonable and significant grounds, to the assumption or undertaking by the qualified financial
institution providing the quotation and notify the other party in writing of those grounds within two business days after the last
day of the default quotation period, in which case that quotation will be disregarded in determining the Acceleration Amount.
Notwithstanding the foregoing, if a voluntary or involuntary
liquidation, bankruptcy or insolvency of, or any analogous proceeding is filed with respect to MSFL or Morgan Stanley, then depending
on applicable bankruptcy law, your claim may be limited to an amount that could be less than the Acceleration Amount.
If the maturity of the securities is accelerated because of an
event of default as described above, we shall, or shall cause the calculation agent to, provide written notice to the trustee at
its New York office, on which notice the trustee may conclusively rely, and to the depositary of the Acceleration Amount and the
aggregate cash amount due, if any, with respect to the securities as promptly as possible and in no event later than two business
days after the date of such acceleration.
Default quotation period
The default quotation period is the period beginning on the day
the Acceleration Amount first becomes due and ending on the third business day after that day, unless:
· no
quotation of the kind referred to above is obtained, or
· every
quotation of that kind obtained is objected to within five business days after the due date as described above.
If either of these two events occurs, the default quotation period
will continue until the third business day after the first business day on which prompt notice of a quotation is given as described
above. If that quotation is objected to as described above within five business days after that first business day, however, the
default quotation period will continue as described in the prior sentence and this sentence.
In any event, if the default quotation period and the subsequent
two business day objection period have not ended before the final observation date, then the Acceleration Amount will equal the
principal amount of the securities.
Qualified financial institutions
For the purpose of determining the Acceleration Amount at any
time, a qualified financial institution must be a financial institution organized under the laws of any jurisdiction in the United
States or Europe, which at that time has outstanding debt obligations with a stated maturity of one year or less from the date
of issue and rated either:
· A-2
or higher by Standard & Poor’s Ratings Services or any successor, or any other comparable rating then used by that rating
agency, or
· P-2
or higher by Moody’s Investors Service or any successor, or any other comparable rating then used by that rating agency.
|
Issuer
notices to registered security holders, the trustee and the depositary:
|
In the event that the maturity date is postponed due to postponement
of the final observation 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 securities 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 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 securities 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 final observation date as postponed.
In the event that any coupon payment date is postponed
due to the postponement of the relevant observation date, the issuer shall give notice of such postponement and, once it has been
determined, of the date to which the applicable coupon payment date has been rescheduled (i) to each registered holder of the
securities 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 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 securities in the manner herein
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Morgan Stanley Finance LLC
Callable Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the S&P 500® Index and the NASDAQ-100 Index®
Principal at Risk Securities
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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 any coupon payment date, the business day
immediately preceding the applicable scheduled coupon payment date, and (ii) with respect to notice of the date to which the applicable
coupon payment date has been rescheduled, the business day immediately following the applicable observation date as postponed.
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 to be delivered as contingent quarterly coupon, if any, with respect to the securities on or prior to 10:30 a.m. (New York
City time) on the business day preceding each coupon payment date, and (ii) deliver the aggregate cash amount due with respect
to the applicable coupon to the trustee for delivery to the depositary, as holder of the securities, on the applicable coupon payment
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 securities, on or prior to 10:30 a.m. (New York City time) on the
business day preceding the redemption date or the business day preceding the maturity date, as applicable, and (ii) deliver the
aggregate cash amount due with respect to the securities, if any, to the trustee for delivery to the depositary, as holder of
the securities, on the redemption date or maturity date, as applicable.
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Morgan Stanley Finance LLC
Callable Contingent Income Securities due November 2, 2023
Payments on the Securities Based on the Worst Performing of the S&P 500® Index and the NASDAQ-100 Index®
Principal at Risk Securities