CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities Offered
|
|
Maximum Aggregate Offering Price
|
|
Amount of Registration Fee
|
Auto-Callable Securities with Contingent Downside due 2024
|
|
$5,957,000
|
|
$552.21
|
November 2021
Pricing Supplement No. 2,965
Registration Statement Nos. 333-250103;
333-250103-01
Dated November 29, 2021
Filed pursuant to Rule 424(b)(2)
Morgan
Stanley Finance LLC
Structured
Investments
Opportunities
in U.S. Equities
Market
Linked Securities—Auto-Callable with Contingent Downside
Principal
at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000®
Index and the NASDAQ-100 Index® due December 2, 2024
Fully
and Unconditionally Guaranteed by Morgan Stanley
§
|
Linked to the lowest performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the NASDAQ-100 Index® (each referred to as an “underlying”)
|
§
|
The securities are unsecured obligations of Morgan Stanley Finance LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley. Unlike ordinary debt securities, the securities do not pay interest, provide for a maturity payment amount that may be significantly less than the face amount and may be zero and have the terms described in the accompanying product supplement for auto-callable securities, index supplement and prospectus, as supplemented or modified by this document.
|
§
|
Automatic Call. The securities will be automatically called if the closing level of each underlying on any of the determination dates is greater than or equal to its respective starting level for a call payment equal to the face amount plus a call premium. The call premium applicable to each determination date will be a percentage of the face amount that increases for each determination date based on a simple (non-compounding) return of 11.30% per annum. No further payments will be made on the securities once they have been called.
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§
|
Maturity Payment Amount. If the securities are not automatically called, you will receive at maturity a cash payment per security as follows:
|
|
§
|
If the ending level of any underlying is less than its respective starting level but the ending level of each underlying is greater than or equal to 75% of its respective starting level, which we refer to as the respective threshold level, you will receive a maturity payment amount of $1,000 per $1,000 security.
|
|
§
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If the ending level of any underlying is less than its respective threshold level, investors will be exposed to the full decline in the lowest performing underlying on a 1-to-1 basis, and will receive a maturity payment amount that is less than 75% of the face amount of the securities and could be zero.
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§
|
Investors may lose a significant portion, or all, of the face amount of the securities
|
§
|
The securities are for investors who are willing to forgo current income and participation in the appreciation of any underlying in exchange for the possibility of receiving a call payment or maturity payment amount greater than the face amount of the securities if each underlying closes at or above the respective starting level on a determination date or the final determination date, respectively.
|
§
|
Because all payments on the securities are based on the lowest performing underlying, a decline beyond the respective threshold level of any underlying will result in a significant loss of your investment, even if the other underlyings have appreciated or have not declined as much.
|
§
|
Investors will not participate in any appreciation of any underlying.
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§
|
The securities are notes issued as part of MSFL’s Series A Global Medium-Term Notes program
|
§
|
All payments are subject to our credit risk. If we default on our obligations, you could lose some or all of your investment
|
§
|
These securities are not secured obligations and you will not have any security interest in, or otherwise have any access to, any securities included in any of the underlyings
|
The current estimated value of the securities is $931.00
per security. The estimated value of the securities is determined using our own pricing and valuation models, market inputs
and assumptions relating to the underlyings, instruments based on the underlyings, volatility and other factors including current and
expected interest rates, as well as an interest rate related to our secondary market credit spread, which is the implied interest rate
at which our conventional fixed rate debt trades in the secondary market. See “Estimated Value of the Securities” on page
4.
The securities have complex features and investing
in the securities involves risks not associated with an investment in ordinary debt securities. See “Risk Factors”
beginning on page 9. All payments on the securities are subject to our credit risk.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these securities, or determined if this document or the accompanying product supplement,
index supplement and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The securities are not deposits or savings accounts and
are not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they obligations
of, or guaranteed by, a bank.
You should read this document together with the related
product supplement for auto-callable securities, 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.
As used in this document, “we,” “us”
and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Commissions and offering price:
|
Price to public
|
Agent’s commissions(1)(2)
|
Proceeds to us(3)
|
Per security
|
$1,000
|
$24.25
|
$975.75
|
Total
|
$5,957,000
|
$144,457.25
|
$5,812,542.75
|
|
(1)
|
Wells Fargo Securities, LLC, an agent for this offering,
will receive a commission of up to $24.25 for each security it sells. Dealers, including Wells Fargo Advisors (“WFA”),
may receive a selling concession of up to $17.50 per security, and WFA will receive a distribution expense fee of $0.75 for each security
sold by WFA. See “Supplemental information concerning plan of distribution; conflicts of interest.”
|
|
(2)
|
In respect
of certain securities sold in this offering, we may pay a fee of up to $1.50 per security to selected securities dealers in consideration
for marketing and other services in connection with the distribution of the securities to other securities dealers.
|
|
(3)
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See “Use of proceeds and hedging” on page 22.
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Prospectus dated November 16, 2020
Morgan Stanley
|
Wells Fargo Securities
|
Morgan Stanley Finance LLC
Market Linked Securities—Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100® Index due December 2, 2024
Issuer:
|
Morgan Stanley Finance LLC
|
Guarantor:
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Morgan Stanley
|
Maturity date:
|
December 2, 2024, subject to postponement if the final determination date is postponed
|
Underlyings:
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Dow Jones Industrial AverageSM (the “INDU Index”), Russell 2000® Index (the “RTY Index”) and the NASDAQ-100 Index® (the “NDX Index”)
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Aggregate face amount:
|
$5,957,000
|
Automatic call:
|
If, on any determination date, beginning on December 2,
2022, the closing level of each underlying is greater than or equal to its respective starting level, the securities will be automatically
called for the applicable call payment on the related call settlement date. The last determination date is the final determination date,
and any payment upon an automatic call on the final determination date, if applicable, will be made on the maturity date.
The securities will not be automatically called on
any call settlement date if the closing level of any underlying is below its respective starting level on the related determination date.
Any positive return on the securities will be
limited to the applicable call premium, even if the closing level of any underlying on the applicable determination date significantly
exceeds its starting level. You will not participate in any appreciation of any underlying.
|
Call payment:
|
The call payment will be an amount in cash per face amount corresponding to
a return at a per-annum rate set forth on the cover of this document, as follows:
· 1st
determination date: $1,113.00, which corresponds to a call premium of 11.30%
· 2nd
determination date: $1,226.00, which corresponds to a call premium of 22.60%
· Final
determination date: $1,339.00, which corresponds to a call premium of 33.90%
No further payments will be made on the securities once they have been
called.
|
Determination dates:
|
Annually, as follows:
· 1st
determination date: December 2, 2022
· 2nd
determination date: December 4, 2023
· Final
determination date: November 22, 2024
The determination dates are subject to postponement
for non-trading days and certain market disruption events.
|
Call settlement date:
|
Five business days after the applicable determination date (as each such determination date may be postponed pursuant to “—Postponement of the determination dates” below, if applicable); provided that the call settlement date for the final determination date is the maturity date. If a determination date is postponed with respect to one or more underlyings, the related call settlement date will be five business days after the last determination date as postponed.
|
Maturity payment amount:
|
If the securities are not automatically called, you will
be entitled to receive on the maturity date a cash payment per security as follows:
§ if
the ending level of any underlying is less than its respective starting level but the ending level of each underlying
is greater than or equal to its respective threshold level:
$1,000; or
§ if
the ending level of any underlying is less than its respective threshold level:
$1,000 × performance factor of the lowest
performing underlying
Under these circumstances, you will lose more than 25%, and possibly
all, of your investment.
|
Lowest performing underlying:
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The underlying with the lowest performance factor
|
Performance factor:
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With respect to each underlying, the ending level divided by the starting level
|
Starting level:
|
With respect to the Dow Jones Industrial
AverageSM: 35,135.94, its closing level on the pricing date.
|
Morgan Stanley Finance LLC
Market Linked Securities—Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100® Index due December 2, 2024
|
With respect to the Russell 2000®
Index: 2,241.976, its closing level on the pricing date.
With respect to the NASDAQ-100 Index®:
16,399.24, its closing level on the pricing date.
|
Ending level:
|
With respect to each underlying, its closing level on the final determination date.
|
Threshold level:
|
With respect to the Dow Jones Industrial AverageSM: 26,351.955,
which is equal to 75% of its starting level.
With respect to the Russell 2000® Index: 1,681.482, which is
equal to 75% of its starting level.
With respect to the NASDAQ-100 Index®: 12,299.43, which
is equal to 75% of its starting level.
|
Face amount:
|
$1,000 per security. References in this document to a “security” are to a security with a face amount of $1,000.
|
Pricing date:
|
November 29, 2021
|
Original issue date:
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December 2, 2021 (3 business days after the pricing date)
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CUSIP / ISIN:
|
61773HBX6 / US61773HBX61
|
Listing:
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The securities will not be listed on any securities exchange.
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Agents:
|
Morgan Stanley & Co. LLC (“MS & Co.”), an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley, and Wells Fargo Securities, LLC (“WFS”). See “Supplemental information regarding plan of distribution; conflicts of interest.”
|
Morgan Stanley Finance LLC
Market Linked Securities—Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100® Index due December 2, 2024
Estimated Value of the Securities
|
The face amount of each security is $1,000. This price includes
costs associated with issuing, selling, structuring and hedging the securities, which are borne by you, and, consequently, the estimated
value of the securities on the pricing date is less than $1,000 per security. We estimate that the value of each security on
the pricing date is $931.00.
What goes into the estimated value on the pricing date?
In valuing the securities on the pricing date, we take into account that the
securities comprise both a debt component and a performance-based component linked to the underlyings. The estimated value
of the securities is determined using our own pricing and valuation models, market inputs and assumptions relating to the underlyings,
instruments based on the underlyings, volatility and other factors including current and expected interest rates, as well as an interest
rate related to our secondary market credit spread, which is the implied interest rate at which our conventional fixed rate debt trades
in the secondary market.
What determines the economic terms of the securities?
In determining the economic terms of the securities, including the call payment
amounts and the threshold levels, we use an internal funding rate which is likely to be lower than our secondary market credit spreads
and therefore advantageous to us. If the issuing, selling, structuring and hedging costs borne by you were lower or if the
internal funding rate were higher, one or more of the economic terms of the securities would be more favorable to you.
What is the relationship between the estimated value on the pricing date
and the secondary market price of the securities?
The price at which MS & Co. purchases the securities in the secondary market,
absent changes in market conditions, including those related to the underlyings, may vary from, and be lower than, the estimated value
on the pricing date, because the secondary market price takes into account our secondary market credit spread as well as the bid-offer
spread that MS & Co. would charge in a secondary market transaction of this type and other factors. However, because the
costs associated with issuing, selling, structuring and hedging the securities are not fully deducted upon issuance, for a period of up
to 3 months following the issue date, to the extent that MS & Co. may buy or sell the securities in the secondary market, absent changes
in market conditions, including those related to the underlyings, and to our secondary market credit spreads, it would do so based on
values higher than the estimated value. We expect that those higher values will also be reflected in your brokerage account
statements.
MS & Co. may, but is not obligated to, make a market in the securities
and, if it once chooses to make a market, may cease doing so at any time.
Morgan Stanley Finance LLC
Market Linked Securities—Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100® Index due December 2, 2024
The Principal at Risk Securities Linked to the Lowest Performing of the Dow
Jones Industrial AverageSM, the Russell 2000® Index and the NASDAQ-100® Index due December 2,
2024 (the “securities”) may be appropriate for investors who:
|
§
|
Seek the potential for a fixed return if each underlying has appreciated at all as
of any of the determination dates in lieu of full participation in any potential appreciation of any or all of the underlyings;
|
|
§
|
Understand that if the closing level of any underlying is less than its respective
starting level on each determination date, they will not receive any positive return on their investment in the securities, and that if
the closing level of any underlying on the final determination date has declined by more than 25% from its starting level, they will be
fully exposed to the decline in the lowest performing underlying from its starting level and will lose more than 25%, and possibly all,
of the face amount of their securities at maturity;
|
|
§
|
Understand that the term of the securities may be as short as approximately one year,
and that they will not receive a higher call payment with respect to a later determination date if the securities are called on an earlier
determination date;
|
|
§
|
Understand that the return on the securities will depend solely on the performance
of the underlying that is the lowest performing underlying on each determination date and that they will not benefit in any way from the
performance of the better performing underlyings;
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|
§
|
Understand that the securities are riskier than alternative investments linked to
only one of the underlyings or linked to a basket composed of each underlying;
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§
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Understand and are willing to accept the full downside risks of each underlying;
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§
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Are willing to forgo interest payments on the securities and dividends on securities
included in the underlyings; and
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§
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Are willing to hold the securities until maturity.
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The securities are not designed for, and may not be an appropriate investment
for, investors who:
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§
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Seek a liquid investment or are unable or unwilling to hold the securities to maturity;
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§
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Require full payment of the face amount of the securities at maturity;
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§
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Seek a security with a fixed term;
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|
§
|
Are unwilling to accept the risk that, if the closing level of any underlying is
less than its respective starting level on each determination date, they will not receive any positive return on their investment in the
securities;
|
|
§
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Are unwilling to accept the risk that the closing level of any underlying on the
final determination date may decline by more than 25% from its respective starting level to its ending level, in which case they will
lose a significant portion or all of their investment;
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|
§
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Are unwilling to accept the risk of exposure to each of the underlyings;
|
|
§
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Seek exposure to a basket composed of each underlying or a similar investment in
which the overall return is based on a blend of the performances of the underlyings, rather than solely on the lowest performing underlying;
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|
§
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Seek exposure to the upside performance of any or each underlying beyond the applicable
call premiums;
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|
§
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Are unwilling to accept our credit risk; or
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|
§
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Prefer the lower risk of fixed income investments with comparable maturities issued
by companies with comparable credit ratings.
|
The considerations identified above are not exhaustive.
Whether or not the securities are an appropriate investment for you will depend on your individual circumstances, and you should reach
an investment decision only after you and your investment, legal, tax, accounting and other advisors have carefully considered the appropriateness
of an investment in the securities in light of your particular circumstances. You should also review carefully the “Risk Factors”
herein and in the accompanying product supplement for risks related to an investment in the securities. For more information about the
underlyings, please see the sections titled “Dow Jones Industrial AverageSM Overview,” “Russell 2000®
Index Overview” and “NASDAQ-100 Index® Overview” below.
Morgan Stanley Finance LLC
Market Linked Securities—Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100® Index due December 2, 2024
Determining Timing and Amount of Payment on the Securities
|
The timing and amount of the payment you will receive will be determined as
follows:
Morgan Stanley Finance LLC
Market Linked Securities—Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100® Index due December 2, 2024
Scenario Analysis and Examples of Hypothetical Payments on the Securities
|
The following scenario analysis and examples
are provided for illustrative purposes only and are hypothetical. Whether the securities are called will be determined by reference
to the closing level of each underlying on the determination dates, and the maturity payment amount, if any, will be determined by reference
to the closing level of each underlying on the final determination date. The actual call payment with respect to each applicable
determination date, starting levels and threshold levels are set forth under “Terms” above. Some numbers appearing
in the examples below have been rounded for ease of analysis. All payments on the securities are subject to our credit risk. The
below examples are based on the following terms*:
Investment term:
|
Approximately 3 years
|
|
|
Hypothetical call payments:
|
The hypothetical call payment will be an amount in cash per face amount for each determination date based on the bottom of the range specified, as follows:
|
|
Call Payment
|
|
· 1st
determination date: $1,113.00
· 2nd
determination date: $1,226.00
· Final
determination date: $1,339.00
|
|
|
Hypothetical starting level:
|
With respect to the INDU Index: 100
|
|
With respect to the RTY Index: 100
|
|
With respect to the NDX Index: 100
|
Hypothetical threshold level:
|
With respect to the INDU Index: 75, which is 75% of its hypothetical starting level
|
|
With respect to the RTY Index: 75, which is 75% of its hypothetical starting level
|
|
With respect to the NDX Index: 75, which is 75% of its hypothetical starting level
|
* The hypothetical starting
level of 100 for the underlyings has been chosen for illustrative purposes only and does not represent the actual starting level of any
underlying. The actual starting levels and threshold levels are set forth under “Final Terms” above. For
historical data regarding the actual closing levels of the underlyings, see the historical information set forth herein.
Automatic Call:
Example 1 — the securities are called following
the second determination date
Date
|
INDU Index Closing Level
|
RTY Index Closing Level
|
NDX Index Closing Level
|
Payment (per Security)
|
|
|
|
|
|
1st Determination Date
|
80 (below the starting level)
|
120 (at or above the starting level)
|
140 (at or above the starting level)
|
--
|
|
|
|
|
|
2nd Determination Date
|
110 (at or above the starting level)
|
125 (at or above the starting level)
|
135 (at or above the starting level)
|
$1,226.00
|
In this example, on the first determination date, the closing levels of two
of the underlyings are at or above their respective starting levels, but the closing level of the other underlying is below its respective
starting level. Therefore, the securities are not called. On the second determination date, the closing level of each underlying
is at or above the respective starting level. Therefore, the securities are automatically called on the second call settlement
date. Investors will receive a payment of $1,226.00 per security on the related call settlement date. No further
payments will be made on the securities once they have been called, and investors do not participate in the appreciation in any underlying.
How to calculate the payment investors will receive at maturity:
Morgan Stanley Finance LLC
Market Linked Securities—Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100® Index due December 2, 2024
In the following examples, one or more of the underlyings close below the respective
starting level(s) on each of the determination dates prior to the final determination date, and, consequently, the securities are not
automatically called prior to, and remain outstanding until, maturity.
|
INDU Index Ending Level
|
RTY Index Ending Level
|
NDX Index Ending Level
|
Maturity Payment Amount (per Security)
|
Example 1:
|
150 (at or above its starting level)
|
140 (at or above its starting level)
|
142 (at or above its starting level)
|
$1,339.00
|
|
|
|
|
|
Example 2:
|
80 (below its starting level but at or above its threshold level)
|
110 (at or above its starting level and threshold level)
|
120 (at or above its starting level and threshold level)
|
$1,000
|
|
|
|
|
|
Example 3:
|
125 (at or above its starting level and threshold level)
|
40 (below its threshold level)
|
120 (at or above its starting level and threshold level)
|
$1,000 × (40 / 100) = $400
|
|
|
|
|
|
Example 4:
|
20 (below its threshold level)
|
80 (below its starting level but at or above its threshold level)
|
120 (at or above its starting level and threshold level)
|
$1,000 × (20 / 100) = $200
|
|
|
|
|
|
Example 5:
|
45 (below its threshold level)
|
50 (below its threshold level)
|
20 (below its threshold level)
|
$1,000 × (20 / 100) = $200
|
In example 1, the ending level of each underlying is at or above its respective
starting level. Therefore, investors receive at maturity the call payment applicable to the final determination date. Investors
do not participate in any appreciation in any underlying.
In example 2, the ending levels of two of the underlyings are at or above their
starting levels and threshold levels, but the ending level of the other underlying is below its starting level and at or above its threshold
level. The INDU Index has declined 20% from its starting level to its ending level, the RTY Index has increased 10% from its
starting level to its ending level and the NDX Index has increased 20% from its starting level to its ending level. Therefore,
investors receive $1,000 per security at maturity. Investors do not participate in any appreciation in any underlying.
In example 3, the ending levels of two of the underlyings are at or above their
starting levels and threshold levels, but the ending level of the other underlying is below its respective threshold level. Therefore,
investors are exposed to the downside performance of the lowest performing underlying at maturity. The INDU Index has increased
25% from its starting level to its ending level, the RTY Index has declined 60% from its starting level to its ending level and the NDX
Index has increased 20% from its starting level to its ending level. Therefore, investors receive at maturity an amount equal to the face
amount times the performance factor of the RTY Index, which is the lowest performing underlying in this example.
In example 4, the ending level of one of the underlyings is at or above its
starting level and threshold level, the ending level of one of the underlyings is below its starting level and at or above its threshold
level, and the ending level of the other underlying is below its respective threshold level. Therefore, investors are exposed
to the downside performance of the lowest performing underlying at maturity. The INDU Index has declined 80% from its starting level to
its ending level, the RTY Index has declined 20% from its starting level to its ending level and the NDX Index has increased 20% from
its starting level to its ending level. Therefore, investors receive at maturity an amount equal to the face amount the performance
factor of the INDU Index, which is the lowest performing underlying in this example.
In example 5, the ending level of each underlying is below its respective threshold
level, and investors receive at maturity an amount equal to the face amount times the performance factor of the lowest performing
underlying. The INDU Index has declined 55% from its starting level to its ending level, the RTY Index has declined 50% from
its starting level to its ending level and the NDX Index has declined 80% from its starting level to its ending level. Therefore,
the maturity payment amount equals the face amount times the performance factor of the NDX Index, which is the lowest performing
underlying in this example.
If the ending level of any underlying is below its respective threshold
level, you will be exposed to the downside performance of the lowest performing underlying at maturity, and your maturity payment amount
will be less than 75% of the face amount per security and could be zero.
Morgan Stanley Finance LLC
Market Linked Securities—Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100® Index due December 2, 2024
This section describes the material risks relating to the securities. For
further discussion of these and other risks, you should read the section entitled “Risk Factors” in the accompanying product
supplement for auto-callable securities, index supplement and prospectus. We also urge you to consult your investment, legal,
tax, accounting and other advisers in connection with your investment in the securities.
Risks Relating to an Investment in the Securities
|
§
|
The securities do not pay interest or guarantee the return of the face amount
of your securities at maturity. The terms of the securities differ from those of ordinary debt securities in that they
do not pay interest or guarantee the return of the face amount of your securities at maturity. If the securities have not been
automatically called and if the ending level of any underlying is less than its respective threshold level of 75% of its starting
level, you will be exposed to the decline in the value of the lowest performing underlying, as compared to its starting level, on a 1-to-1
basis, and you will receive for each security that you hold at maturity an amount equal to the face amount times the performance
factor of the lowest performing underlying. In this case, you will lose more than 25%, and possibly all, of the face amount
of your securities at maturity.
|
|
§
|
The appreciation potential of the securities is limited
by the call payment specified for each determination date. The appreciation potential of the securities is limited to the
call payment specified for each determination date if each underlying closes at or above its respective starting level on any determination
date. In all cases, you will not participate in any appreciation of any underlying, which could be significant.
|
|
§
|
The market price will be influenced by many unpredictable factors. Several
factors, many of which are beyond our control, will influence the value of the securities in the secondary market and the price at which
MS & Co. may be willing to purchase or sell the securities in the secondary market. We expect that generally the level
of interest rates available in the market and the value of each underlying on any day, including
in relation to its respective starting level and threshold level, will affect the value of the securities more than any other factors. Other
factors that may influence the value of the securities include:
|
|
o
|
the volatility (frequency and magnitude of changes in value) of the underlyings,
|
|
o
|
geopolitical conditions and economic, financial, political, regulatory or judicial
events that affect the component stocks of the underlyings or securities markets generally and which may affect the value of each underlying,
|
|
o
|
dividend rates on the securities underlying the underlyings,
|
|
o
|
the time remaining until the securities mature,
|
|
o
|
interest and yield rates in the market,
|
|
o
|
the availability of comparable instruments,
|
|
o
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the composition of the underlyings and changes in the constituent stocks of such
underlyings, and
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o
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any actual or anticipated changes in our credit ratings or credit spreads.
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Generally, the
longer the time remaining to maturity, the more the market price of the securities will be affected by the other factors described above. Some
or all of these factors will influence the price that you will receive if you sell your securities prior to maturity. For
example, you may have to sell your securities at a substantial discount from the face amount of $1,000 per security if the level of any
underlying at the time of sale is near or below its threshold level or if market interest rates rise.
Morgan Stanley Finance LLC
Market Linked Securities—Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100® Index due December 2, 2024
You cannot predict the future performance of any
underlying based on its historical performance. The value(s) of one or more of the underlyings may decrease so that you will
receive no return on your investment and receive a maturity payment amount that is significantly less than the face amount. See
“Dow Jones Industrial AverageSM Overview,” “Russell 2000®
Index Overview” and “NASDAQ-100 Index® Overview” below.
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§
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The securities are subject to our credit risk, and any actual or anticipated changes
to our credit ratings or credit spreads may adversely affect the market value of the securities. You are dependent on our
ability to pay all amounts due on the securities upon an automatic call or at maturity, and therefore you are subject to our credit risk. If
we default on our obligations under the securities, your investment would be at risk and you could lose some or all of your investment. As
a result, the market value of the securities prior to maturity will be affected by changes in the market’s view of our creditworthiness. Any
actual or anticipated decline in our credit ratings or increase in the credit spreads charged by the market for taking our credit risk
is likely to adversely affect the market value of the securities.
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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.
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Investing in the securities is not equivalent to investing in the underlyings. Investing
in the securities is not equivalent to investing in the underlyings or the component stocks or any underlying. Investors in
the securities will not participate in any positive performance of any underlying, and will not have voting rights or rights to receive
dividends or other distributions or any other rights with respect to the stocks that constitute any underlying.
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Reinvestment risk. The term of
your investment in the securities may be shortened due to the automatic call feature of the securities. If the securities are
called prior to maturity, you will receive no further payments on the securities and may be forced to invest in a lower interest rate
environment and may not be able to reinvest at comparable terms or returns. However, under no circumstances will the
securities be called within the first year of the term of the securities.
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The rate we are willing to pay for securities of this type, maturity and issuance
size is likely to be lower than the rate implied by our secondary market credit spreads and advantageous to us. Both the lower
rate and the inclusion of costs associated with issuing, selling, structuring and hedging the securities in the face amount reduce the
economic terms of the securities, cause the estimated value of the securities to be less than the face amount and will adversely affect
secondary market prices. Assuming no change in market conditions or any other relevant factors, the prices, if any, at
which dealers, including MS & Co., may be willing to purchase the securities in secondary market transactions will likely be significantly
lower than the face amount, because secondary market prices will exclude the issuing, selling, structuring and hedging-related costs that
are included in the face amount and borne by you and because the secondary market prices will reflect our secondary market credit spreads
and the bid-offer spread that any dealer would charge in a secondary market transaction of this type as well as other factors.
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The inclusion of the costs of issuing, selling,
structuring and hedging the securities in the face amount and the lower rate we are willing to pay as issuer make the economic terms of
the securities less favorable to you than they otherwise would be.
However, because the costs associated with issuing,
selling, structuring and hedging the securities are not fully deducted upon issuance, for a period of up to 3 months following the issue
date, to the extent that MS & Co. may buy or sell the
Morgan Stanley Finance LLC
Market Linked Securities—Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100® Index due December 2, 2024
securities in the secondary market, absent changes
in market conditions, including those related to the underlyings, and to our secondary market credit spreads, it would do so based on
values higher than the estimated value, and we expect that those higher values will also be reflected in your brokerage account statements.
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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.
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The securities will not be listed on any securities exchange and secondary trading
may be limited. The securities will not be listed on any securities exchange. Therefore, there may be little
or no secondary market for the securities. MS & Co. and WFS may, but are not obligated to, make a market in the securities
and, if either of them once chooses to make a market, may cease doing so at any time. When they do make a market, they will
generally do so for transactions of routine secondary market size at prices based on their respective estimates of the current value of
the securities, taking into account their respective bid/offer spreads, our credit spreads, market volatility, the notional size of the
proposed sale, the cost of unwinding any related hedging positions, the time remaining to maturity and the likelihood that they will be
able to resell the securities. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade
or sell the securities easily. Since other broker-dealers may not participate significantly in the secondary market for the
securities, the price at which you may be able to trade your securities is likely to depend on the price, if any, at which MS & Co.
or WFS is willing to transact. If, at any time, MS & Co. and WFS were to cease making a market in the securities, it is
likely that there would be no secondary market for the securities. Accordingly, you should be willing to hold your securities
to maturity.
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§
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The calculation agent, which is a subsidiary of Morgan Stanley and an affiliate
of MSFL, will make determinations with respect to the securities. As calculation agent, MS & Co. will determine the
starting levels, the threshold levels and the ending levels and will calculate the amount of cash you receive at maturity, if any. Moreover,
certain determinations made by MS & Co., in its capacity as calculation agent, may require it to exercise discretion and make subjective
judgments, such as with respect to the occurrence or non-occurrence of market disruption events and the selection of a successor index
or calculation of the ending level in the event of a market disruption event or discontinuance of any of the underlyings. These
potentially subjective determinations may adversely affect the payout to you at maturity, if any. For further information regarding
these types of determinations, see “Description of Auto-Callable Securities—Alternate Exchange Calculation in Case of an Event
of Default,” “—Discontinuance of Any Underlying Index; Alteration of Method of Calculation” and “—Calculation
Agent and Calculations” in the accompanying product supplement for auto-callable securities and “Additional Terms of the Securities—Postponement
of the determination dates” below. In addition, MS & Co. has determined the estimated value of the securities on
the pricing date.
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§
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Hedging and trading activity by our affiliates could potentially adversely affect
the value of the securities. One or more of our affiliates and/or third-party dealers expect to carry out hedging activities
related to the securities (and possibly to other instruments linked to the underlyings or the component stocks of the underlyings), including
trading in the stocks that constitute the underlyings as well as in other instruments related to the underlyings. As a result,
these entities may be unwinding or adjusting hedge positions during the term of the securities, and the hedging strategy may involve greater
and more frequent dynamic adjustments to the hedge as the final determination date approaches. Some of our affiliates also
trade the stocks that constitute the underlyings and other financial
|
Morgan Stanley Finance LLC
Market Linked Securities—Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100® Index due December 2, 2024
instruments related to the underlyings on a regular
basis as part of their general broker-dealer and other businesses. Any of these hedging or trading activities on or prior to
the pricing date could potentially affect the starting level of an underlying, and, therefore, could increase (i) the level at or above
which such underlying must close on the determination dates so that the securities are called for the call payment (depending also on
the performance of the other underlyings) and (ii) the threshold level for such underlying, which is the level at or above which such
underlying must close on the final determination date so that you are not exposed to the negative performance of the lowest performing
underlying at maturity (depending also on the performance of the other underlyings). Additionally, such hedging or trading
activities during the term of the securities could potentially affect the value of any underlying on the determination dates, and, accordingly,
whether we call the securities prior to maturity and the amount of cash you will receive at maturity, if any.
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§
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The maturity date may be postponed if the final determination date is postponed. If
the scheduled final determination date is not a trading day or if a market disruption event occurs on that day so that the final determination
date is postponed and falls less than two business days prior to the maturity date, the maturity date of the securities will be postponed
to the second business day following that final determination date as postponed.
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§
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Potentially inconsistent research, opinions or recommendations by Morgan Stanley,
MSFL, WFS or our or their respective affiliates. Morgan Stanley, MSFL, WFS and our or their respective affiliates may publish
research from time to time on financial markets and other matters that may influence the value of the securities, or express opinions
or provide recommendations that are inconsistent with purchasing or holding the securities. Any research, opinions or recommendations
expressed by Morgan Stanley, MSFL, WFS or our or their respective affiliates may not be consistent with each other and may be modified
from time to time without notice. Investors should make their own independent investigation of the merits of investing in the securities
and the underlyings to which the securities are linked.
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§
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The U.S. federal income tax consequences of an investment in the securities are
uncertain. Please read the discussion under “Additional Information – Tax considerations” in this document
and the discussion under “United States Federal Taxation” in the accompanying product supplement for auto-callable securities
(together, the “Tax Disclosure Sections”) concerning the U.S. federal income tax consequences of an investment in the securities. If
the Internal Revenue Service (the “IRS”) were successful in asserting an alternative treatment for the securities, the timing
and character of income on the securities might differ significantly from the tax treatment described in the Tax Disclosure Sections. For
example, under one possible treatment, the IRS could seek to recharacterize the securities as debt instruments. In that event, U.S. Holders
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 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. We
do not plan to request a ruling from the IRS regarding the tax treatment of the securities, and the IRS or a court may not agree with
the tax treatment described in the Tax Disclosure Sections.
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In 2007, the U.S. Treasury Department and the
IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar
instruments. The notice focuses in particular on whether to require holders of these instruments to accrue income over the
term of their investment. It also asks for comments on a number of related topics, including the character of income or loss
with respect to these instruments; whether short-term instruments should be subject to any such accrual regime; the relevance of factors
such as the exchange-traded status of the instruments and the nature of the underlying property to which the instruments are linked; the
degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors should be subject to withholding tax;
and whether these instruments are or should be subject to the “constructive ownership” rule, which very generally can operate
to recharacterize certain long-term capital gain as ordinary income and impose an interest charge. While the notice requests
comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated after consideration
of these issues could materially and adversely affect the tax consequences of an investment in the securities, possibly with retroactive
effect. Both U.S. and Non-U.S. Holders should consult their
Morgan Stanley Finance LLC
Market Linked Securities—Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100® Index due December 2, 2024
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.
Risks Relating to the Underlyings
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§
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You are exposed to the price risk of each underlying. Your
return on the securities is not linked to a basket consisting of each underlying. Rather, it will be contingent upon the independent
performance of each underlying. Unlike an instrument with a return linked to a basket of underlying assets, in which risk is mitigated
and diversified among all the components of the basket, you will be exposed to the risks related to each underlying. Poor performance
by any underlying over the term of the securities may negatively affect your return and
will not be offset or mitigated by any positive performance by the other underlyings. To receive the call premium, each
underlying must close at or above its respective starting level on the applicable determination
date. In addition, if the securities have not been called and any underlying has
declined to below its respective threshold level as of the final determination date, you will be fully exposed to
the decline in the lowest performing underlying over the term of the securities on a 1-to-1 basis, even if the other underlyings have
appreciated or have not declined as much. Under this scenario, the value of any such maturity payment amount will be less than
75% of the face amount of your securities and could be zero. Accordingly, your investment is subject to the price risk of each
underlying.
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The securities are linked to the Russell 2000® Index and are subject
to risks associated with small-capitalization companies. As the Russell 2000® Index is one of the underlyings,
and the Russell 2000® Index consists of stocks issued by companies with relatively small market capitalization, the securities
are linked to the value of small-capitalization companies. These companies often have greater stock price volatility, lower
trading volume and less liquidity than large-capitalization companies and therefore the Russell 2000® Index may be more
volatile than underlyings that consist of stocks issued by large-capitalization companies. Stock prices of small-capitalization
companies are also more vulnerable than those of large-capitalization companies to adverse business and economic developments, and the
stocks of small-capitalization companies may be thinly traded. In addition, small capitalization companies are typically less
well-established and less stable financially than large-capitalization companies and may depend on a small number of key personnel, making
them more vulnerable to loss of personnel. Such companies tend to have smaller revenues, less diverse product lines, smaller
shares of their product or service markets, fewer financial resources and less competitive strengths than large-capitalization companies
and are more susceptible to adverse developments related to their products.
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Adjustments to the underlyings could adversely affect the value of the securities. The
publisher of any underlying may add, delete or substitute the stocks constituting such underlying or make other methodological changes
that could change the value of such underlying. The publisher of such underlying may discontinue or suspend calculation or
publication of such underlying at any time. In these circumstances, the calculation agent will have the sole discretion to
substitute a successor underlying that is comparable to the discontinued underlying and is permitted to consider underlyings that are
calculated and published by the calculation agent or any of its affiliates. If the calculation
agent determines that there is no appropriate successor underlying, the maturity payment amount on the securities will be an amount based
on the closing prices at maturity of the securities composing the relevant underlying at the time of such discontinuance, without rebalancing
or substitution, computed by the calculation agent in accordance with the formula for calculating the underlying last in effect prior
to discontinuance of such underlying.
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Historical levels of the underlyings should not be taken as an indication of the
future performance of the underlyings during the term of the securities. No assurance can be given as to the level of the
underlyings at any time, including on the final determination date, because historical levels of the underlyings do not provide an indication
of future performance of the underlyings.
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Morgan Stanley Finance LLC
Market Linked Securities—Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100® Index due December 2, 2024
Dow Jones Industrial AverageSM Overview
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The Dow Jones Industrial AverageSM is a price-weighted index composed
of 30 common stocks that is published by S&P Dow Jones Indices LLC, the marketing name and a licensed trademark of CME Group Inc.,
as representative of the broad market of U.S. industry. For additional information about the Dow Jones Industrial AverageSM,
see the information set forth under “Dow Jones Industrial AverageSM” in the accompanying index supplement.
The following graph sets forth the daily closing levels of the INDU Index for
the period from January 1, 2016 through November 29, 2021. The closing level of the INDU Index on November 29, 2021 was 35,135.94. We
obtained the information in the graph below from Bloomberg Financial Markets without independent verification. The INDU Index
has at times experienced periods of high volatility. You should not take the historical levels of the INDU Index as an indication
of its future performance, and no assurance can be given as to the closing level of the INDU Index at any time, including on the determination
dates.
Dow Jones Industrial AverageSM
Daily Closing Levels
January 1, 2016 to November 29,
2021
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“Dow Jones,” “Dow Jones Industrial Average,” “Dow
Jones Indexes” and “DJIA” are service marks of Dow Jones Trademark Holdings LLC. For more information, see
“Dow Jones Industrial AverageSM” in the accompanying index supplement.
Morgan Stanley Finance LLC
Market Linked Securities—Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100® Index due December 2, 2024
Russell 2000® Index Overview
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The Russell 2000® Index is an index calculated, published and
disseminated by FTSE Russell, and measures the composite price performance of stocks of 2,000 companies incorporated in the U.S. and its
territories. All 2,000 stocks are traded on a major U.S. exchange and are the 2,000 smallest securities that form the Russell
3000® Index. The Russell 3000® Index is composed of the 3,000 largest U.S. companies as
determined by market capitalization and represents approximately 98% of the U.S. equity market. The Russell 2000®
Index consists of the smallest 2,000 companies included in the Russell 3000® Index and represents a small portion
of the total market capitalization of the Russell 3000® Index. The Russell 2000®
Index is designed to track the performance of the small capitalization segment of the U.S. equity market. For additional information
about the Russell 2000® Index, see the information set forth under “Russell 2000® Index” in
the accompanying index supplement.
The following graph sets forth the daily closing levels of the RTY Index for
the period from January 1, 2016 through November 29, 2021. The closing level of the RTY Index on November 29, 2021 was 2,241.976. We
obtained the information in the graph below from Bloomberg Financial Markets without independent verification. The RTY Index
has at times experienced periods of high volatility. You should not take the historical levels of the RTY Index as an indication
of its future performance, and no assurance can be given as to the closing level of the RTY Index at any time, including on the determination
dates.
Russell 2000® Index
Daily Closing Levels
January 1, 2016 to November 29,
2021
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The “Russell 2000® Index” is a trademark of FTSE
Russell. For more information, see “Russell 2000® Index” in the accompanying index supplement.
Morgan Stanley Finance LLC
Market Linked Securities—Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100® Index due December 2, 2024
NASDAQ-100 Index® Overview
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The NASDAQ-100 Index®, which is calculated, maintained and published
by Nasdaq, Inc., is a modified capitalization-weighted index of 100 of the largest and most actively traded equity securities of non-financial
companies listed on The Nasdaq Stock Market LLC. The NASDAQ-100 Index® includes companies across a variety of major industry
groups. At any moment in time, the value of the NASDAQ-100 Index® equals the aggregate value of the then-current NASDAQ-100
Index® share weights of each of the NASDAQ-100 Index® component securities, which are based on the total
shares outstanding of each such NASDAQ-100 Index® component security, multiplied by each such security’s respective
last sale price on NASDAQ (which may be the official closing price published by NASDAQ), and divided by a scaling factor, which becomes
the basis for the reported NASDAQ-100 Index® value. For additional information about the NASDAQ-100 Index®,
see the information set forth under “NASDAQ-100 Index®” in the accompanying index supplement.
The following graph sets forth the daily closing levels of the NDX Index for
the period from January 1, 2016 through November 29, 2021. The closing level of the NDX Index on November 29, 2021 was 16,399.24. We
obtained the information in the graph below from Bloomberg Financial Markets without independent verification. The NDX Index
has at times experienced periods of high volatility. You should not take the historical levels of the NDX Index as an indication
of its future performance, and no assurance can be given as to the closing level of the NDX Index at any time, including on the determination
dates.
NASDAQ-100 Index® Daily
Closing Levels
January 1, 2016 to November 29,
2021
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“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
Market Linked Securities—Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100® Index due December 2, 2024
Additional Terms of the Securities
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Additional Terms
Please read this information in conjunction
with the Final terms on the front cover of this document.
If the terms described herein are inconsistent
with those described in the accompanying product supplement, index supplement or prospectus, the terms described herein shall control.
Certain definitions
A “trading day” with respect to an
underlying means a day, as determined by the calculation agent, on which (i) the relevant stock exchanges with respect to each security
underlying such underlying are scheduled to be open for trading for their respective regular trading sessions and (ii) each related futures
or options exchange with respect to such underlying is scheduled to be open for trading for its regular trading session.
The “relevant stock exchange” for any
security underlying an underlying means the primary exchange or quotation system on which such security is traded, as determined by the
calculation agent.
The “related futures or options exchange”
for an underlying means an exchange or quotation system where trading has a material effect (as determined by the calculation agent) on
the overall market for futures or options contracts relating to such underlying.
Market disruption events
A “market disruption event” with respect
to an underlying means any of the following events as determined by the calculation agent in its sole discretion:
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(A)
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The occurrence or existence of a material suspension of or
limitation imposed on trading by the relevant stock exchanges or otherwise relating to securities which then comprise 20% or more of
the level of such underlying or any successor equity index at any time during the one-hour period that ends at the close of trading on
that day, whether by reason of movements in price exceeding limits permitted by those relevant stock exchanges or otherwise.
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(B)
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The occurrence or existence of a material suspension of or
limitation imposed on trading by any related futures or options exchange or otherwise in futures or options contracts relating to such
underlying or any successor equity index on any related futures or options exchange at any time during the one-hour period that ends
at the close of trading on that day, whether by reason of movements in price exceeding limits permitted by the related futures or options
exchange or otherwise.
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(C)
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The occurrence or existence of any event, other than an early
closure, that materially disrupts or impairs the ability of market participants in general to effect transactions in, or obtain market
values for, securities that then comprise 20% or more of the level of such underlying or any successor equity index on their relevant
stock exchanges at any time during the one-hour period that ends at the close of trading on that day.
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(D)
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The occurrence or existence of any event, other than an early
closure, that materially disrupts or impairs the ability of market participants in general to effect transactions in, or obtain market
values for, futures or options contracts relating to such underlying or any successor equity index on any related futures or options
exchange at any time during the one-hour period that ends at the close of trading on that day.
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(E)
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The closure on any exchange business day of the relevant stock
exchanges on which securities that then comprise 20% or more of the level of such underlying or any successor equity index are traded
or any related futures or options exchange with respect to such underlying prior to its scheduled closing time unless the earlier closing
time is announced by the relevant stock exchange or related futures or options exchange, as applicable, at least one hour prior to the
earlier of (1) the actual closing time for the regular trading session on such relevant stock exchange or related futures
or options exchange, as applicable, and (2) the submission deadline for orders to be entered into the relevant stock exchange or related
futures or options exchange, as applicable, system for execution at such actual closing time on that day.
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Morgan Stanley Finance LLC
Market Linked Securities—Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100® Index due December 2, 2024
|
(F)
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The relevant stock exchange for any security underlying such
underlying or successor equity index or any related futures or options exchange with respect to such underlying fails to open for trading
during its regular trading session.
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For purposes of determining whether a market disruption
event has occurred with respect to an underlying:
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(1)
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the relevant percentage contribution of a security to the
level of such underlying or any successor equity index will be based on a comparison of (x) the portion of the level of such index attributable
to that security and (y) the overall level of the underlying or successor equity index, in each case immediately before the occurrence
of the market disruption event;
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(2)
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the “close of trading” on any trading day
for such underlying or any successor equity index means the scheduled closing time of the relevant stock exchanges with respect to the
securities underlying such underlying or successor equity index on such trading day; provided that, if the actual closing time of the
regular trading session of any such relevant stock exchange is earlier than its scheduled closing time on such trading day, then (x)
for purposes of clauses (A) and (C) of the definition of “market disruption event” above, with respect to any security underlying
such underlying or successor equity index for which such relevant stock exchange is its relevant stock exchange, the “close of
trading” means such actual closing time and (y) for purposes of clauses (B) and (D) of the definition of “market disruption
event” above, with respect to any futures or options contract relating to such underlying or successor equity index, the “close
of trading” means the latest actual closing time of the regular trading session of any of the relevant stock exchanges, but in
no event later than the scheduled closing time of the relevant stock exchanges;
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(3)
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the “scheduled closing time” of any relevant
stock exchange or related futures or options exchange on any trading day for such underlying or any successor equity index means the
scheduled weekday closing time of such relevant stock exchange or related futures or options exchange on such trading day, without regard
to after hours or any other trading outside the regular trading session hours; and
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(4)
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an “exchange business day” means any trading
day for such underlying or any successor equity index on which each relevant stock exchange for the securities underlying such underlying
or any successor equity index and each related futures or options exchange with respect to such underlying are open for trading during
their respective regular trading sessions, notwithstanding any such relevant stock exchange or related futures or options exchange closing
prior to its scheduled closing time.
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Postponement of the determination dates
If a market disruption event occurs or is continuing with
respect to an underlying on any determination date, then such determination date for underlying will be postponed to the first succeeding
trading day for such underlying on which a market disruption event for such underlying has not occurred and is not continuing; however,
if such first succeeding trading day has not occurred as of the eighth trading day for such underlying after the originally scheduled
determination date, that eighth trading day shall be deemed to be the determination date for such underlying. If an determination
date has been postponed eight trading days for an underlying after the originally scheduled determination date and a market disruption
event occurs or is continuing with respect to such underlying on such eighth trading day, the calculation agent will determine the closing
level of such underlying on such eighth trading day in accordance with the formula for and method of calculating the closing level of
such underlying last in effect prior to commencement of the market disruption event, using the closing price (or, with respect to any
relevant security, if a market disruption event has occurred with respect to such security, its good faith estimate of the value of such
security at the scheduled closing time of the relevant stock exchange for such security or, if earlier, the actual closing time of the
regular trading session of such relevant stock exchange) on such date of each security included in such underlying. As used herein, “closing
price” means, with respect to any security on any date, the relevant stock exchange traded or quoted price of such security as of
the scheduled closing time of the relevant stock exchange for such security or, if earlier, the actual closing time of the regular trading
session of such relevant stock exchange. Notwithstanding the postponement of an determination date for an underlying due to a market disruption
event with respect to such underlying on such determination date, the originally scheduled determination date will remain the determination
date for any underlying not affected by a market disruption event on such day.
Morgan Stanley Finance LLC
Market Linked Securities—Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100® Index due December 2, 2024
Postponement of maturity date
If the scheduled final determination date is not a trading
day or if a market disruption event occurs on that day so that the final determination date as postponed falls less than two business
days prior to the scheduled maturity date, the maturity date of the securities will be postponed to the second business day following
that final determination date as postponed.
Underlying publisher
With respect to the INDU Index, S&P Dow
Jones Indices LLC, or any successor thereof
With respect to the RTY Index, FTSE Russell, or any successor thereof
With respect to the NDX Index, Nasdaq, Inc., or any successor thereof
Interest
None
Denominations
$1,000 per security and integral multiples thereof
Trustee
The Bank of New York Mellon
Calculation agent
MS & Co.
Issuer notice to registered security holders, the trustee and the depositary
In the event that the call settlement date
or the maturity date is postponed due to postponement of the relevant determination date, the issuer shall give notice of such postponement
and, once it has been determined, of the date to which the call settlement date or the maturity date, as applicable, has been rescheduled
(i) to the holder of the securities by mailing notice of such postponement by first class mail, postage prepaid, to the holder’s
last address as it shall appear upon the registry books, (ii) to the trustee by facsimile confirmed by mailing such notice to the trustee
by first class mail, postage prepaid, at its New York office and (iii) to The Depository Trust Company (the “depositary”)
by telephone or facsimile confirmed by mailing such notice to the depositary by first class mail, postage prepaid. Any notice
that is mailed to the holder of the securities in the manner herein provided shall be conclusively presumed to have been duly given to
such holder, whether or not such 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 call settlement date or the maturity date, as applicable, the
business day immediately preceding the scheduled call settlement date or maturity date, as applicable, and (ii) with respect to notice
of the date to which the call settlement date or the maturity date, as applicable, has been rescheduled, the business day immediately
following the relevant determination date as postponed.
In the event that the securities are subject
to automatic call, the issuer shall, (i) on the business day following the applicable determination date, give notice of the automatic
call of the securities and the applicable call payment, including specifying the payment date of the applicable amount due upon the automatic
call, (x) to each holder of the securities by mailing notice of such automatic call by first class mail, postage prepaid, to such holder’s
last address as it shall appear upon the registry books, (y) 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 (z) to the depositary by telephone or facsimile confirmed by mailing
such notice to the depositary by first class mail, postage prepaid and (ii) on or prior to the call settlement date, deliver the aggregate
cash amount due with respect to the securities to the trustee for delivery to the depositary, as holder of the securities. Any
notice that is mailed to the holder of the securities in the manner herein provided shall be conclusively presumed to have been duly given
to such holder, whether or not such holder receives the notice. This notice shall be given by the issuer or, at the issuer’s request,
by the trustee in the name and at the expense of the issuer, with any such request to be accompanied by a copy of the notice to be given.
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 each face amount of the securities, on or prior to 10:30 a.m. (New York City time) on
the business day preceding the maturity date, and (ii) deliver the aggregate cash amount due with respect to the securities, if any, to
the trustee for delivery to the depositary, as holder of the securities, on the maturity date.
Morgan Stanley Finance LLC
Market Linked Securities—Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100® Index due December 2, 2024
Underlying
The accompanying product supplement refers to an underlying as the “underlying
asset.”
Face amount
The accompanying product supplement refers to the face amount as the “stated
principal amount.”
Maturity payment amount
The accompanying product supplement refers to the maturity payment amount as
the “payment at maturity.”
Closing level
The accompanying product supplement refers to the closing level as the “index
closing value.”
Notwithstanding the definition of “index closing value” in the
accompanying product supplement, the “closing level” on any trading day solely with respect to the RTY Index means the closing
value of such underlying or any successor index reported by Bloomberg Financial Services, or any successor reporting service the calculation
agent may select, on such trading day.
Starting level
The accompanying product supplement refers to the starting level as the “initial
value” or “initial index value.”
Ending level
The accompanying product supplement refers to the ending level as the “final
value” or “final index value.”
Call payment
The accompanying product supplement refers to the call payment as the “early
redemption payment.”
Call settlement dates
The accompanying product supplement refers
to the call settlement dates as the “early redemption dates.”
Threshold level
The accompanying product supplement refers to the threshold level as the “trigger
level.”
Morgan Stanley Finance LLC
Market Linked Securities—Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100® Index due December 2, 2024
Additional Information About the Securities
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Minimum ticketing size
$1,000 / 1 security
Tax considerations
Although there is
uncertainty regarding the U.S. federal income tax consequences of an investment in the securities due to the lack of governing authority,
in the opinion of our counsel, Davis Polk & Wardwell LLP, under current law, and based on current market conditions, a security should
be treated as a single financial contract that is an “open transaction” for U.S. federal income tax purposes.
Assuming this
treatment of the securities is respected and subject to the discussion in “United States Federal Taxation” in the
accompanying product supplement for auto-callable securities, the following U.S. federal income tax consequences should result based
on current law:
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§
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A U.S. Holder should not be required to recognize
taxable income over the term of the securities prior to settlement, other than pursuant to a sale or exchange.
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§
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Upon sale, exchange or settlement of the securities,
a U.S. Holder should recognize gain or loss equal to the difference between the amount realized and the U.S. Holder’s tax basis
in the securities. Such gain or loss should be long-term capital gain or loss if the investor has held the securities for more than one
year, and short-term capital gain or loss otherwise.
|
In 2007, the U.S.
Treasury Department and the Internal Revenue Service (the “IRS”) released a notice requesting comments on the U.S. federal
income tax treatment of “prepaid forward contracts” and similar instruments. The notice focuses in particular on
whether to require holders of these instruments to accrue income over the term of their investment. It also asks for comments
on a number of related topics, including the character of income or loss with respect to these instruments; whether short-term instruments
should be subject to any such accrual regime; the relevance of factors such as the exchange-traded status of the instruments and the nature
of the underlying property to which the instruments are linked; the degree, if any, to which income (including any mandated accruals)
realized by non-U.S. investors should be subject to withholding tax; and whether these instruments are or should be subject to the “constructive
ownership” rule, which very generally can operate to recharacterize certain long-term capital gain as ordinary income and impose
an interest charge. While the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations
or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment
in the securities, possibly with retroactive effect.
As discussed in the
accompanying product supplement for auto-callable securities, Section 871(m) of the Internal Revenue Code of 1986, as amended, and Treasury
regulations promulgated thereunder (“Section 871(m)”) generally impose a 30% (or a lower applicable treaty rate) withholding
tax on dividend equivalents paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments linked to U.S. equities
or indices that include U.S. equities (each, an “Underlying Security”). Subject to certain exceptions, Section
871(m) generally applies to securities that substantially replicate the economic performance of one or more Underlying Securities, as
determined based on tests set forth in the applicable Treasury regulations (a “Specified Security”). However, pursuant
to an IRS notice, Section 871(m) will not apply to securities issued before January 1, 2023 that do not have a delta of one with respect
to any Underlying Security. Based on our determination that the securities do not have a delta of one with respect to any Underlying
Security, our counsel is of the opinion that the securities should not be Specified Securities and, therefore, should not be subject to
Section 871(m).
Our determination is not binding on the IRS,
and the IRS may disagree with this determination. Section 871(m) is complex and its application may depend on your particular
circumstances, including whether you enter into other transactions with respect to an Underlying Security. If withholding is
required, we will not be required to pay any additional amounts with respect to the amounts so withheld. You should consult
your tax adviser regarding the potential application of Section 871(m) to the securities.
Morgan Stanley Finance LLC
Market Linked Securities—Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100® Index due December 2, 2024
Both U.S. and non-U.S. investors considering an investment in
the securities should read the discussion under “Risk Factors” in this document and the discussion under “United States
Federal Taxation” in the accompanying product supplement for auto-callable securities and consult their tax advisers regarding all
aspects of the U.S. federal income tax consequences of an investment in the securities, including possible alternative treatments, the
issues presented by the aforementioned notice and any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
The discussion in the preceding paragraphs under “Tax
considerations” and the discussion contained in the section entitled “United States Federal Taxation” in the accompanying
product supplement for auto-callable securities, insofar as they purport to describe provisions of U.S. federal income tax laws or legal
conclusions with respect thereto, constitute the full opinion of Davis Polk & Wardwell LLP regarding the material U.S. federal tax
consequences of an investment in the securities.
Use of proceeds and hedging
The proceeds from the sale of the securities will be used
by us for general corporate purposes. We will receive, in aggregate, $1,000 per security issued, because, when we enter into
hedging transactions in order to meet our obligations under the securities, our hedging counterparty will reimburse the cost of the agent’s
commissions. The costs of the securities borne by you and described beginning on page 4 above comprise the agent’s commissions
and the cost of issuing, structuring and hedging the securities.
On or prior to the pricing date, we will hedge our anticipated exposure in
connection with the securities, by entering into hedging transactions with our affiliates and/or third party dealers. We expect
our hedging counterparties to take positions in stocks of the underlyings, in futures and options contracts on the underlyings and any
component stocks of the underlyings listed on major securities markets or positions in any other available securities or instruments that
they may wish to use in connection with such hedging. Such purchase activity could increase the level of an underlying on the
pricing date, and therefore increase (i) the level at or above which such underlying must close on the determination dates so that the
securities are called for the call payment (depending also on the performance of the other underlyings) and (ii) the threshold level for
such underlying, which is the level at or above which such underlying must close on the final determination date so that you are not exposed
to the negative performance of the lowest performing underlying at maturity (depending also on the performance of the other underlyings). 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 determination date approaches. Additionally, our hedging activities,
as well as our other trading activities, during the term of the securities could potentially affect the level of any underlying on the
determination dates, and, accordingly, whether we call the securities prior to maturity and the amount of cash you will receive at maturity,
if any. For further information on our use of proceeds and hedging, see “Use of Proceeds and Hedging” in the accompanying
product supplement.
Additional considerations
Client accounts over which Morgan Stanley, Morgan Stanley
Wealth Management or any of their respective subsidiaries have investment discretion are not permitted to purchase the securities, either
directly or indirectly.
Supplemental information regarding plan of distribution;
conflicts of interest
MS & Co. and WFS will act as the agents for this offering. WFS
will receive a commission of up to $24.25 for each security it sells. WFS proposes to offer the securities in part directly
to the public at the price to public set forth on the cover page of this document and in part to Wells Fargo Advisors (“WFA”)
(the trade name of the retail brokerage business of WFS’s affiliates, Wells Fargo Clearing Services, LLC and Wells Fargo Advisors
Financial Network, LLC), an affiliate of WFS, or other securities dealers at such price less a selling concession of up to $17.50 per
security. In addition to the selling concession allowed to WFA, WFS will pay $0.75 per security of the commission to WFA as
a distribution expense fee for each security sold by WFA.
In addition, in respect of certain securities sold in this
offering, we may pay a fee of up to $1.50 per security to selected securities dealers in consideration for marketing and other services
in connection with the distribution of the securities to other securities dealers.
Morgan Stanley Finance LLC
Market Linked Securities—Auto-Callable with Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Dow Jones Industrial AverageSM, the Russell 2000® Index and the Nasdaq-100® Index due December 2, 2024
See "Plan of Distribution (Conflicts of Interest)"
in the accompanying product supplement for auto-callable securities for information about the distribution arrangements for the securities. References
therein to "agent" refer to each of MS & Co. and WFS, as agents for this offering, except that references to "agent"
in the context of offers to certain Morgan Stanley dealers and compliance with FINRA Rule 5121 do not apply to WFS. MS &
Co., WFS or their affiliates may enter into hedging transactions with us in connection with this offering.
MS & Co. is an affiliate of MSFL and a wholly owned
subsidiary of Morgan Stanley, and it and other affiliates of ours expect to make a profit by selling, structuring and, when applicable,
hedging the securities.
MS & Co. will conduct this offering in compliance with the requirements
of FINRA Rule 5121 of the Financial Industry Regulatory Authority, Inc., which is commonly referred to as FINRA, regarding a FINRA member
firm’s distribution of the securities of an affiliate and related conflicts of interest. MS & Co. or any of our other
affiliates may not make sales in this offering to any discretionary account. See “Plan of Distribution (Conflicts of
Interest)” and “Use of Proceeds and Hedging” in the accompanying product supplement.
Validity of the securities:
In the opinion of Davis
Polk & Wardwell LLP, as special counsel to MSFL and Morgan Stanley, when the securities offered by this pricing supplement have been
executed and issued by MSFL, authenticated by the trustee pursuant to the MSFL Senior Debt Indenture (as defined in the accompanying prospectus)
and delivered against payment as contemplated herein, such securities will be valid and binding obligations of MSFL and the related guarantee
will be a valid and binding obligation of Morgan Stanley, enforceable in accordance with their terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors’ rights generally, concepts of reasonableness and equitable principles of general
applicability (including, without limitation, concepts of good faith, fair dealing and the lack of bad faith), provided that such
counsel expresses no opinion as to (i) the effect of fraudulent conveyance, fraudulent transfer or similar provision of applicable law
on the conclusions expressed above and (ii) any provision of the MSFL Senior Debt Indenture that purports to avoid the effect of fraudulent
conveyance, fraudulent transfer or similar provision of applicable law by limiting the amount of Morgan Stanley’s obligation under
the related guarantee. This opinion is given as of the date hereof and is limited to the laws of the State of New York, the
General Corporation Law of the State of Delaware and the Delaware Limited Liability Company Act. In addition, this opinion
is subject to customary assumptions about the trustee’s authorization, execution and delivery of the MSFL Senior Debt Indenture
and its authentication of the securities and the validity, binding nature and enforceability of the MSFL Senior Debt Indenture with respect
to the trustee, all as stated in the letter of such counsel dated November 16, 2020, which is Exhibit 5-a to the Registration Statement
on Form S-3 filed by Morgan Stanley on November 16, 2020.
Where you can find more information
Morgan Stanley and MSFL have filed a registration statement
(including a prospectus, as supplemented by the product supplement for auto-callable securities and the index supplement) with the Securities
and Exchange Commission, or SEC, for the offering to which this communication relates. You should read the prospectus in that
registration statement, the product supplement for auto-callable securities, the index supplement and any other documents relating to
this offering that Morgan Stanley and MSFL have filed with the SEC for more complete information about Morgan Stanley, MSFL and this offering. You
may get these documents without cost by visiting EDGAR on the SEC web site at.www.sec.gov. Alternatively,
Morgan Stanley, MSFL, any underwriter or any dealer participating in the offering will arrange to send you the product supplement for
auto-callable securities, index supplement and prospectus if you so request by calling toll-free 1-(800)-584-6837.
You may access these documents on the SEC web site at.www.sec.gov
as follows:
Product Supplement for Auto-Callable Securities dated November 16, 2020
Index Supplement dated November 16, 2020
Prospectus dated November 16, 2020
Terms used but not defined in this document are defined
in the product supplement for auto-callable securities, in the index supplement or in the prospectus.
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