CALCULATION
OF REGISTRATION FEE
|
|
Maximum Aggregate
|
|
Amount of Registration
|
Title of Each Class of Securities Offered
|
|
Offering Price
|
|
Fee
|
Dual Directional Knock-Out Notes
|
|
$503,000
|
|
$60.96
|
due 2021
|
|
|
|
|
May 2019
Pricing Supplement
No. 1,927
Registration Statement
Nos. 333-221595; 333-221595-01
Dated May 31, 2019
Filed pursuant to
Rule 424(b)(2)
M
organ
S
tanley
F
inance
LLC
Structured
Investments
Opportunities in U.S. Equities
Dual Directional Knock-Out Notes With Daily
Trigger Monitoring due December 3, 2021
Based on the Value of the S&P 500
®
Index
Fully and Unconditionally Guaranteed by Morgan
Stanley
The notes are unsecured obligations of Morgan Stanley Finance
LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley. The notes will pay no interest and will
have the terms described in the accompanying product supplement, index supplement and prospectus, as supplemented and modified
by this document. The payment at maturity on the notes will be determined as follows: If the index closing value of the underlying
index has remained less than or equal to the upside knock-out level, which is 120% of the initial index value,
and
greater
than or equal to the downside knock-out level, which is 80% of the initial index value, on
each index business day
during
the term of the notes, we will pay per note at maturity: (i) if the final index value is greater than or equal to the initial
index value, the stated principal amount of $1,000 plus a return reflecting 100% of the upside performance of the underlying index,
which will effectively be limited to a return of 20%, or (ii) if the final index value is less than the initial index value, the
stated principal amount plus a positive return equal to the absolute value of the percentage decline, which will also effectively
be limited to a positive return of 20%. However, if the index closing value of the underlying index is greater than the upside
knock-out level
or
less than the downside knock-out level on
any index business day
during the term of the notes,
a trigger event will have occurred and, at maturity, we will pay per note only the stated principal amount of $1,000 plus the
upside payment of $37.50 per note. The notes are for investors who are concerned about principal risk but seek an equity index-based
return, determined as set forth herein, and who are willing to forgo current income and uncapped participation in the appreciation
of the underlying index in exchange for the repayment of principal at maturity plus the possibility of receiving a return based
on a limited range of performance of the underlying index
but only if
the index closing value of the underlying index has
remained less than or equal to the upside knock-out level
and
greater than or equal to the downside knock-out level on
each index business day
during the term of the notes. The notes 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 notes are not secured obligations and you will not have
any security interest in, or otherwise have any access to, any underlying reference asset or assets.
FINAL Terms
|
Issuer:
|
Morgan Stanley Finance LLC
|
Guarantor:
|
Morgan Stanley
|
Issue price:
|
$1,000 per note
|
Stated principal amount:
|
$1,000 per note
|
Aggregate principal amount:
|
$503,000
|
Pricing date:
|
May 31, 2019
|
Original issue date:
|
June 5, 2019 (3 business days after the pricing date)
|
Maturity date:
|
December 3, 2021
|
Interest:
|
None
|
Underlying index:
|
S&P 500
®
Index
|
Trigger event:
|
A trigger event occurs if, on
any index business day
from but excluding the pricing date to and including the valuation date, the index closing value of the underlying index is greater than the upside knock-out level
or
less than the downside knock-out level. If a trigger event occurs on a
ny index business day
during the term of the notes, you will receive at maturity only the stated principal amount of $1,000 plus the upside payment.
|
Payment at maturity:
|
The payment at maturity will depend on whether or not
a trigger event has occurred and will be determined as follows:
·
If
a trigger event HAS NOT occurred on any index business day during the term of the notes up to and including the valuation date:
·
If
the final index value is greater than or equal to the initial index value:
$1,000 + ($1,000 x index return)
In this scenario, you will receive a 1%
positive return on the notes for each 1% positive return on the underlying index. In no event will this amount exceed the stated
principal amount plus $200.
·
If
the final index value is less than the initial index value:
$1,000 + ($1,000 x absolute index return)
In this scenario, you will receive a 1%
positive return on the notes for each 1% negative return on the underlying index. In no event will this amount exceed the stated
principal amount plus $200.
·
If
a trigger event HAS occurred on any index business day during the term of the notes up to and including the valuation date:
$1,000 + the upside payment
|
Upside payment:
|
$37.50 per note (3.75% of the stated principal amount)
|
Initial index value:
|
2,752.06, which is the index closing value on the pricing date
|
Final index value:
|
The index closing value on the valuation date
|
Upside knock-out level:
|
3,302.472, which is 120% of the initial index value
|
Downside knock-out level:
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2,201.648, which is 80% of the initial index value
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Index return:
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(final index value – initial index value) / initial index value
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Absolute index return:
|
The absolute value of the index return
|
Valuation date:
|
November 30, 2021, subject to postponement for non-index business days and certain market disruption events
|
CUSIP:
|
61769HAG0
|
ISIN:
|
US61769HAG02
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Listing:
|
The notes will not be listed on any securities exchange.
|
Agent:
|
Morgan Stanley & Co. LLC (“MS & Co.”), an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley. See “Supplemental information regarding plan of distribution; conflicts of interest.”
|
Estimated value on the pricing date:
|
$980.20 per note. See “Investment Summary” beginning on page 2.
|
Commissions and issue price:
|
Price to public
(1)
|
Agent’s commissions and fees
(2)
|
Proceeds to us
(3)
|
Per note
|
$1,000
|
$8.50
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$991.50
|
Total
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$503,000
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$4,275.50
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$498,724.50
|
|
(1)
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The notes will
be sold only to investors purchasing the notes in fee-based advisory accounts.
|
|
(2)
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MS & Co.
expects to sell all of the notes that it purchases from us to an unaffiliated dealer
at a price of $991.50 per note, for further sale to certain fee-based advisory accounts
at the price to public of $1,000 per note. MS & Co. will not receive a sales commission
with respect to the notes See “Supplemental information regarding plan of distribution;
conflicts of interest.” For additional information, see “Plan of Distribution
(Conflicts of Interest)” in the accompanying product supplement for equity-linked
notes.
|
|
(3)
|
See “Use
of proceeds and hedging” on page 12.
|
The notes involve risks not
associated with an investment in ordinary debt securities. See “Risk Factors” beginning on page 5.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these notes, 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 notes are not deposits or savings accounts and are not
insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they obligations
of, or guaranteed by, a bank.
You should read this document together with the related
product supplement, index supplement and prospectus, each of which can be accessed via the hyperlinks below. Please also see “Additional
Terms of the Notes” and “Additional Information About the Notes” at the end of this document.
As used in this document, “we,” “us”
and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Product
Supplement for Equity-Linked Notes dated November 16, 2017
Index
Supplement dated November 16, 2017
Prospectus
dated November 16, 2017
M
organ
S
tanley
F
inance
LLC
Dual Directional
Knock-Out Notes With Daily Trigger Monitoring due December 3, 2021
Based
on the Value of the S&P 500
®
Index
Investment Summary
Dual Directional Knock-Out Notes With Daily
Trigger Monitoring
The Dual Directional Knock-Out Notes With Daily Trigger Monitoring
due December 3, 2021 Based on the Value of the S&P 500
®
Index (the “notes”) offer a positive return
based on the performance of the underlying index
but only if
the index closing value of the underlying index has remained
less than or equal to the upside knock-out level
and
greater than or equal to the downside knock-out level on
each index
business day
during the term of the notes. The notes provide investors:
|
§
|
an opportunity to gain 1-to-1 upside exposure to the performance of
the S&P 500
®
Index
|
|
§
|
the repayment of principal at maturity, subject to our creditworthiness
|
If the index closing value of the underlying index has remained
less than or equal to the upside knock-out level
and
greater than or equal to the downside knock-out level on
each index
business day
during the term of the notes, we will pay per note at maturity: (i) if the final index value is greater than or
equal to the initial index value, the stated principal amount plus a return reflecting 100% of the upside performance of the underlying
index, which will effectively be limited to a return of 20%, or (ii) if the final index value is less than the initial index value,
the stated principal amount plus a positive return equal to the absolute value of the percentage decline, which will effectively
be limited to a positive return of 20%. However, if the index closing value of the underlying index is greater than the upside
knock-out level
or
less than the downside knock-out level on
any index business day
during the term of the notes,
a trigger event will have occurred and, at maturity, we will pay per note only the stated principal amount of $1,000 plus the upside
payment of $37.50 per note. All payments on the notes, including the repayment of principal at maturity, are subject to our credit
risk.
Maturity:
|
Approximately 2.5 years
|
Upside payment:
|
$37.50 per note (3.75% of the stated principal amount)
|
Upside knock-out level:
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120% of the initial index value, monitored daily throughout the term of the notes
|
Downside knock-out level:
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80% of the initial index value, monitored daily throughout the term of the notes
|
Interest:
|
None
|
The original issue price of each note is $1,000. This price includes
costs associated with issuing, selling, structuring and hedging the notes, which are borne by you, and, consequently, the estimated
value of the notes on the pricing date is less than $1,000. We estimate that the value of each note on the pricing date is $980.20.
What goes into the estimated value on the pricing date?
In valuing the notes on the pricing date, we take into account
that the notes comprise both a debt component and a performance-based component linked to the underlying index. The estimated value
of the notes is determined using our own pricing and valuation models, market inputs and assumptions relating to the underlying
index, instruments based on the underlying index, volatility and other factors including current and expected interest rates, as
well as an interest rate related to our secondary market credit spread, which is the implied interest rate at which our conventional
fixed rate debt trades in the secondary market.
What determines the economic terms of the notes?
In determining the economic terms of the notes, including the
upside payment, the upside knock-out level and the downside knock-out level, we use an internal funding rate, which is likely to
be lower than our secondary market credit spreads and therefore advantageous to us. If the issuing, selling, structuring and hedging
costs borne by you were lower or if the internal funding rate were higher, one or more of the economic terms of the notes would
be more favorable to you.
What is the relationship between the estimated value on the
pricing date and the secondary market price of the notes?
The price at which MS & Co. purchases the notes in the secondary
market, absent changes in market conditions, including those related to the underlying index, 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 notes are not fully deducted upon issuance,
for a period of up to 6 months following the issue date, to the extent that MS & Co. may buy or sell the notes in the secondary
market, absent changes in market conditions, including those related to the underlying index, 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
notes, and, if it once chooses to make a market, may cease doing so at any time.
M
organ
S
tanley
F
inance
LLC
Dual Directional Knock-Out Notes With Daily Trigger Monitoring due December 3, 2021
Based on the Value of the S&P 500
®
Index
Key Investment Rationale
Dual Directional Knock-Out Notes With Daily Trigger Monitoring
offer investors potential upside exposure to the performance of the underlying index
but only if
a trigger event does not
occur. They are for investors who are concerned about principal risk but seek an equity index-based return, determined as set forth
herein, and who are willing to forgo current income and uncapped participation in the appreciation of the underlying index in exchange
for the repayment of principal at maturity plus the possibility of receiving a return based on a limited range of performance of
the underlying index but only if the index closing value of the underlying index has remained less than or equal to the upside
knock-out level
and
greater than or equal to the downside knock-out level on
each index business day
during the term
of the notes. If the index closing value of the underlying index has remained less than or equal to the upside knock-out level
and
greater than or equal to the downside knock-out level on
each index business day
during the term of the notes,
we will pay per note at maturity: (i) if the final index value is greater than or equal to the initial index value, the stated
principal amount plus a return reflecting 100% of the upside performance of the underlying index, which will effectively be limited
to a return of 20%, or (ii) if the final index value is less than the initial index value, the stated principal amount plus a positive
return equal to the absolute value of the percentage decline, which will effectively be limited to a positive return of 20%. However,
if the index closing value of the underlying index is greater than the upside knock-out level
or
less than the downside
knock-out level on
any index business day
during the term of the notes, a trigger event will have occurred and, at maturity,
we will pay per note only the stated principal amount of $1,000 plus the upside payment of $37.50 per note.
Trigger Event
|
A trigger event occurs if, on
any index business day
from but excluding the pricing date to and including the valuation date, the index closing value of the underlying index is greater than the upside knock-out level
or
less than the downside knock-out level. If a trigger event occurs on
any index business day
during the term of the notes, you will receive at maturity only the stated principal amount of $1,000 plus the upside payment.
|
Scenario 1 – A Trigger Event Does Not Occur and the Underlying Index Appreciates
|
If a trigger event has not occurred (meaning that the index closing value of the underlying index has remained less than or equal to the upside knock-out level
and
greater than or equal to the downside knock-out level on
each index business day
during the term of the notes) and the final index value is greater than or equal to the initial index value, you will receive for each security that you hold $1,000 plus a return reflecting 100% of the index return. The maximum return you may receive in this scenario is a positive 20% return at maturity.
|
Scenario 2 – A Trigger Event Does Not Occur and the Underlying Index Depreciates
|
If a trigger event has not occurred (meaning that the index closing value of the underlying index has remained less than or equal to the upside knock-out level
and
greater than or equal to the downside knock-out level on
each index business day
during the term of the notes) and the final index value is less than the initial index value, the notes pay a 1% positive return for each 1% negative return on the underlying index. The maximum return you may receive in this scenario is a positive 20% return at maturity.
|
Scenario 3 – A Trigger Event Occurs
|
If a trigger event has occurred (meaning that the index closing value of the underlying index is greater than the upside knock-out level
or
less than the downside knock-out level on
any index business day
during the term of the notes), you will receive at maturity only the stated principal amount of $1,000 plus the upside payment of $37.50 per note.
|
M
organ
S
tanley
F
inance
LLC
Dual Directional Knock-Out Notes With Daily Trigger Monitoring due December 3, 2021
Based on the Value of the S&P 500
®
Index
Hypothetical Payout on the Notes
The following hypothetical examples illustrate how to calculate
the payment at maturity on the notes. The following examples are for illustrative purposes only. The payment at maturity on the
notes is subject to our credit risk. The below examples are based on the following terms. The actual initial index value, upside
knock-out level and downside knock-out level are set forth on the cover of this document.
Stated Principal Amount:
|
$1,000 per note
|
Hypothetical Initial Index Value:
|
2,200
|
Hypothetical Upside Knock-Out Level:
|
2,640 (120% of the hypothetical initial index value)
|
Hypothetical Downside Knock-Out Level:
|
1,760 (80% of the hypothetical initial index value)
|
Upside Payment:
|
$37.50 (3.75% of the stated principal amount)
|
Interest:
|
None
|
EXAMPLE 1: A Trigger Event HAS occurred.
In this example, the index closing value of the underlying index
is greater than the upside knock-out level
or
less than the downside knock-out level on
any index business day
during
the term of the notes. Therefore, a trigger event has occurred and investors receive at maturity only the stated principal amount
of $1,000 plus the upside payment, regardless of the performance of the underlying index. The investor would receive a payment
at maturity of $1,037.50 per note, or a return of 3.75%, but would not participate in any performance of the underlying index because
a trigger event has occurred.
EXAMPLE 2: A Trigger Event HAS NOT occurred and the underlying
index increases by 5% from the initial index value to the final index value.
Final index value
|
|
2,310
|
Index return
|
=
|
(2,310 – 2,200) / 2,200 = 5%
|
Payment at maturity
|
=
|
$1,000 + ($1,000 x index return)
|
|
=
|
$1,000 + ($1,000 x 5%)
|
|
=
|
$1,000 + $50
|
|
=
|
$1,050
|
In this example, the index closing value of the underlying index
has remained less than or equal to the upside knock-out level
and
greater than or equal to the downside knock-out level
on
each index business day
during the term of the notes. Therefore, a trigger event has not occurred, and investors receive
a return at maturity equal to the index return. The payment at maturity is $1,050 per note, resulting in a return of 5%.
EXAMPLE 3: A Trigger Event HAS NOT occurred and the underlying
index decreases by 8% from the initial index value to the final index value.
Final index value
|
|
2,024
|
Index return
|
=
|
(2,024 – 2,200) / 2,200 = - 8%
|
Payment at maturity
|
=
|
$1,000 + ($1,000 x absolute index return)
|
|
=
|
$1,000 + ($1,000 x 8%)
|
|
=
|
$1,000 + $80
|
|
=
|
$1,080
|
In this example, the index closing value of the underlying index
has remained less than or equal to the upside knock-out level
and
greater than or equal to the downside knock-out level
on
each index business day
during the term of the notes. Therefore, a trigger event has not occurred, and investors receive
a return at maturity equal to the absolute index return. The payment at maturity is $1,080 per note, resulting in a return of 8%.
If a trigger event does not occur on
any index business day
during the term of the notes, the return on the notes will equal the index return or the absolute index return, as applicable.
If a trigger event occurs on
any index business day
during the term of the notes, the return on the notes will equal only
the upside payment, without any participation in the performance of the underlying index.
M
organ
S
tanley
F
inance
LLC
Dual Directional Knock-Out Notes With Daily Trigger Monitoring due December 3, 2021
Based on the Value of the S&P 500
®
Index
Risk Factors
The following is a non-exhaustive list of certain key risk
factors for investors in the notes. For further discussion of these and other risks, you should read the section entitled “Risk
Factors” in the accompanying product supplement, index supplement and prospectus. We also urge you to consult your investment,
legal, tax, accounting and other advisers in connection with your investment in the notes.
|
§
|
The notes do not pay interest and may not pay more than the stated principal amount at maturity.
If a trigger event
does not occur and the final index value is equal to the initial index value, you will receive a payment at maturity of only the
stated principal amount of $1,000 for each note you hold, without any positive return on your investment. If a trigger event occurs,
the return on the notes will equal only the upside payment, without any participation in the performance of the underlying index.
As the notes do not pay any interest, the overall return on the notes (the effective yield to maturity) may be less than the amount
that would be paid on a conventional debt security of ours of comparable maturity. The notes are for investors who are concerned
about principal risk but seek an equity index-based return, determined as set forth herein, and who are willing to forgo current
income in exchange for the repayment of principal at maturity plus the possibility of receiving a return based on a limited range
of performance of the underlying index, but only if a trigger event does not occur.
|
|
§
|
You may not participate in any performance of the underlying index, and your maximum gain on the notes is limited by the
upside knock-out level and downside knock-out level.
If the index closing value of the underlying index is greater than the
upside knock-out level
or
less than the downside knock-out level on
any index business day
during the term of the
notes, the payment at maturity will equal only the stated principal amount plus the upside payment, without any participation in
the performance of the underlying index, and you will not benefit from the dual-directional feature of the notes. If the index
closing value of the underlying index has remained less than or equal to the upside knock-out level
and
greater than or
equal to the downside knock-out level on
each index business day
during the term of the notes, we will pay per note at maturity:
(i) if the final index value is greater than or equal to the initial index value, the stated principal amount plus a return reflecting
100% of the upside performance of the underlying index, which will effectively be limited to a return of 20%, or (ii) if the final
index value is less than the initial index value, the stated principal amount plus a positive return equal to the absolute value
of the percentage decline, which will also effectively be limited to a positive return of 20%. Accordingly, the maximum gain on
the notes is limited by the upside knock-out level and the downside knock-out level, and the maximum payment at maturity is $1,200
per $1,000 principal amount of notes, which would be payable only if a trigger event has not occurred
and
the final index
value represents an appreciation of exactly 20% from the initial index value, or a decline of exactly 20% from the initial index
value, as applicable. Any further appreciation of the underlying index beyond the upside knock-out level, or any further depreciation
of the underlying index beyond the downside knock-out level, each measured as of the close of trading on
each index business
day
during the term of the notes, will result in a payment at maturity of only the stated principal amount plus the upside
payment, without any participation in the performance of the underlying index.
|
|
§
|
The market price of the notes will be influenced by many unpredictable factors.
Several factors will influence the value
of the notes in the secondary market and the price at which MS & Co. may be willing to purchase or sell the notes in the secondary
market, including whether or not a trigger event has occurred, the value of the underlying index at any time and, in particular,
on the valuation date, the volatility (frequency and magnitude of changes in value) of the underlying index, dividend rate on the
stocks underlying the index, interest and yield rates in the market, time remaining until the notes mature, geopolitical conditions
and economic, financial, political, regulatory or judicial events that affect the underlying index or equities markets generally
and which may affect the final index value of the underlying index and any actual or anticipated changes in our credit ratings
or credit spreads. The value of the underlying index may be, and has recently been, volatile, and we can give you no assurance
that the volatility will lessen. See “S&P 500
®
Index Overview” below. You may receive less, and
possibly significantly less, than the stated principal amount per note if you try to sell your notes prior to maturity.
|
|
§
|
The notes 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 notes.
You are dependent on our ability to pay all amounts due on the notes at
maturity and therefore you are subject to our credit risk. The notes are not guaranteed by any other entity. If we default on our
obligations under the notes, your investment would be at risk and you could lose some or all of your investment. As a result, the
market value of the notes 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 notes.
|
|
§
|
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
|
M
organ
S
tanley
F
inance
LLC
Dual Directional Knock-Out Notes With Daily Trigger Monitoring due December 3, 2021
Based on the Value of the S&P 500
®
Index
obligations
of Morgan Stanley. Holders will have recourse only to a single claim against Morgan Stanley and its assets under the guarantee.
Holders of securities issued by MSFL should accordingly assume that in any such proceedings they would not have any priority over
and should be treated
pari passu
with the claims of other unsecured, unsubordinated creditors of Morgan Stanley, including
holders of Morgan Stanley-issued securities.
|
§
|
The final index value is not based on the value of the underlying index at any time other than the valuation date.
The
final index value will be based on the index closing value on the valuation date, subject to postponement for non-index business
days and certain market disruption events. Assuming a trigger event does not occur, even if the value of the underlying index moves
in a favorable manner prior to the valuation date but then moves in an unfavorable manner by the valuation date, the payment at
maturity may be significantly less than it would have been had the payment at maturity been linked to the value of the underlying
index prior to such appreciation. Although the actual value of the underlying index on the stated maturity date or at other times
during the term of the notes may be different than the final index value, as determined on the valuation date, the final index
value will be based solely on the index closing value of the underlying index on the valuation date.
|
|
§
|
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 notes in the original issue price reduce the economic terms of the notes, cause
the estimated value of the notes to be less than the original issue price and will adversely affect secondary market prices.
Assuming
no change in market conditions or any other relevant factors, the prices, if any, at which dealers, including MS & Co., may
be willing to purchase the notes in secondary market transactions will likely be significantly lower than the original issue price,
because secondary market prices will exclude the issuing, selling, structuring and hedging-related costs that are included in the
original issue price and borne by you and because the secondary market prices will reflect our secondary market credit spreads
and the bid-offer spread that any dealer would charge in a secondary market transaction of this type as well as other factors.
|
The inclusion of the costs of issuing, selling, structuring
and hedging the notes in the original issue price and the lower rate we are willing to pay as issuer make the economic terms of
the notes less favorable to you than they otherwise would be.
However, because the costs associated with issuing,
selling, structuring and hedging the notes are not fully deducted upon issuance, for a period of up to 6 months following the issue
date, to the extent that MS & Co. may buy or sell the notes in the secondary market, absent changes in market conditions, including
those related to the underlying index, and to our secondary market credit spreads, it would do so based on values higher than the
estimated value, and we expect that those higher values will also be reflected in your brokerage account statements.
|
§
|
The estimated value of the notes 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 notes than those generated by others, including other dealers in the market, if they attempted to value
the notes. 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 notes in the secondary market (if any exists) at any time. The value
of your notes 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 of the notes will be influenced
by many unpredictable factors” above.
|
|
§
|
Adjustments to the underlying index could adversely affect the value of the notes
. The publisher of the underlying index
can add, delete or substitute the stocks underlying the index, and can make other methodological changes required by certain events
relating to the underlying stocks, such as stock dividends, stock splits, spin-offs, rights offerings and extraordinary dividends,
that could change the value of the underlying index. Any of these actions could adversely affect the value of the notes. The publisher
of the underlying index may also discontinue or suspend calculation or publication of the underlying index at any time. In these
circumstances, MS & Co., as the calculation agent, will have the sole discretion to substitute a successor index that is comparable
to the discontinued index. MS & Co. could have an economic interest that is different than that of investors in the notes insofar
as, for example, MS & Co. is permitted to consider indices that are calculated and published by MS & Co. or any of its
affiliates. If MS & Co. determines that there is no appropriate successor index, the index closing value will be an amount
based on the values of the stocks underlying the discontinued index at the time of such discontinuance, without rebalancing or
substitution, computed by MS & Co, as calculation agent, in accordance with the formula for calculating the index closing value
last in effect prior to discontinuance of the underlying index.
|
|
§
|
Investing in the notes is not equivalent to investing in the underlying index.
Investing in the notes is not equivalent
to investing in the underlying index or its component stocks. As an investor in the notes, you will not have voting rights or rights
to receive
dividends or other distributions or any other rights with respect to stocks that constitute the underlying index. See “Hypothetical
Payout on the Notes” above.
|
M
organ
S
tanley
F
inance
LLC
Dual Directional Knock-Out Notes With Daily Trigger Monitoring due December 3, 2021
Based on the Value of the S&P 500
®
Index
|
§
|
The notes will not be listed on any securities exchange and secondary trading may be limited. Accordingly, you should be
willing to hold your notes for the entire 2.5-year term of the notes.
The notes will not be listed on any securities exchange.
Therefore, there may be little or no secondary market for the notes. MS & Co. may, but is not obligated to, make a market in
the notes and, if it once chooses to make a market, may cease doing so at any time. When it does make a market, it will generally
do so for transactions of routine secondary market size at prices based on its estimate of the current value of the notes, taking
into account its bid/offer spread, our credit spreads, market volatility, the notional size of the proposed sale, the cost of unwinding
any related hedging positions, the time remaining to maturity and the likelihood that it will be able to resell the notes. Even
if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the notes easily. Since other
broker-dealers may not participate significantly in the secondary market for the notes, the price at which you may be able to trade
your notes is likely to depend on the price, if any, at which MS & Co. is willing to transact. If, at any time, MS & Co.
were to cease making a market in the notes, it is likely that there would be no secondary market for the notes. Accordingly, you
should be willing to hold your notes to maturity.
|
|
§
|
The calculation agent, which is a subsidiary of Morgan Stanley and
an affiliate of MSFL, will make determinations with respect to the notes.
As calculation agent, MS & Co. has determined
the initial index value, will determine whether a trigger event occurs and the final index value, if applicable, and will calculate
the amount of cash you will receive at maturity. Moreover, certain determinations made by MS & Co., in its capacity as calculation
agent, may require it to exercise discretion and make subjective judgments, such as with respect to the occurrence or non-occurrence
of market disruption events and the selection of a successor index or calculation of the index closing value in the event of a
discontinuance of the underlying index. These potentially subjective determinations may adversely affect the payout to you at maturity.
For further information regarding these types of determinations, see “Description of Equity-Linked Notes—Calculation
Agent and Calculations,” “—Alternate Exchange Calculation in the Case of an Event of Default” and “—Discontinuance
of Any Underlying Index; Alteration of Method of Calculation” in the accompanying product supplement for equity-linked notes.
In addition, MS & Co. has determined the estimated value of the notes on the pricing date.
|
|
§
|
Hedging and trading activity by our affiliates could potentially adversely affect
the value of the notes.
One or more of our affiliates and/or third-party dealers have carried out, and will continue to carry
out, hedging activities related to the notes (and to other instruments linked to the underlying index or its component stocks),
including trading in the stocks that constitute the underlying index as well as in other instruments related to the underlying
index. As a result, these entities may be unwinding or adjusting hedge positions during the term of the notes, and the hedging
strategy may involve greater and more frequent dynamic adjustments to the hedge as the valuation date approaches. Some of our affiliates
also trade the stocks that constitute the underlying index and other financial instruments related to the underlying index 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 have affected the initial index value, and, therefore, could have affected the value that will be used
to determine the payment at maturity. Additionally, such hedging or trading activities during the term of the notes, including
on the valuation date, could affect the closing value of the underlying index, and, accordingly, the amount of cash an investor
will receive at maturity.
|
M
organ
S
tanley
F
inance
LLC
Dual Directional Knock-Out Notes With Daily Trigger Monitoring due December 3, 2021
Based on the Value of the S&P 500
®
Index
S&P 500
®
Index Overview
The S&P 500
®
Index, which is calculated, maintained
and published by S&P Dow Jones Indices LLC (“S&P”), consists of stocks of 500 component companies selected
to provide a performance benchmark for the U.S. equity markets. The calculation of the S&P 500
®
Index is based
on the relative value of the float adjusted aggregate market capitalization of the 500 component companies as of a particular time
as compared to the aggregate average market capitalization of 500 similar companies during the base period of the years 1941 through
1943. For additional information about the S&P 500
®
Index, see the information set forth under “S&P
500
®
Index” in the accompanying index supplement.
Information as of market close on May 31, 2019:
Bloomberg Ticker Symbol:
|
SPX
|
Current Index Value:
|
2,752.06
|
52 Weeks Ago:
|
2,705.27
|
52 Week High (on 4/30/2019):
|
2,945.83
|
52 Week Low (on 12/24/2018):
|
2,351.10
|
The following graph sets forth the daily index closing values
of the underlying index for each quarter in the period from January 1, 2014 through May 31, 2019. The related table sets forth
the published high and low closing values, as well as end-of-quarter closing values, of the underlying index for each quarter in
the same period. The index closing value of the underlying index on May 31, 2019 was 2,752.06. We obtained the information in the
table and graph below from Bloomberg Financial Markets, without independent verification. The underlying index has at times experienced
periods of high volatility. You should not take the historical values of the underlying index as an indication of its future performance,
and no assurance can be given as to the index closing value of the underlying index on any day, including the valuation date.
S&P 500
®
Index Daily Index Closing Values
January 1, 2014 to May
31, 2019
|
|
M
organ
S
tanley
F
inance
LLC
Dual Directional Knock-Out Notes With Daily Trigger Monitoring due December 3, 2021
Based on the Value of the S&P 500
®
Index
S&P 500
®
Index
|
High
|
Low
|
Period End
|
2014
|
|
|
|
First Quarter
|
1,878.04
|
1,741.89
|
1,872.34
|
Second Quarter
|
1,962.87
|
1,815.69
|
1,960.23
|
Third Quarter
|
2,011.36
|
1,909.57
|
1,972.29
|
Fourth Quarter
|
2,090.57
|
1,862.49
|
2,058.90
|
2015
|
|
|
|
First Quarter
|
2,117.39
|
1,992.67
|
2,067.89
|
Second Quarter
|
2,130.82
|
2,057.64
|
2,063.11
|
Third Quarter
|
2,128.28
|
1,867.61
|
1,920.03
|
Fourth Quarter
|
2,109.79
|
1,923.82
|
2,043.94
|
2016
|
|
|
|
First Quarter
|
2,063.95
|
1,829.08
|
2,059.74
|
Second Quarter
|
2,119.12
|
2,000.54
|
2,098.86
|
Third Quarter
|
2,190.15
|
2,088.55
|
2,168.27
|
Fourth Quarter
|
2,271.72
|
2,085.18
|
2,238.83
|
2017
|
|
|
|
First Quarter
|
2,395.96
|
2,257.83
|
2,362.72
|
Second Quarter
|
2,453.46
|
2,328.95
|
2,423.41
|
Third Quarter
|
2,519.36
|
2,409.75
|
2,519.36
|
Fourth Quarter
|
2,690.16
|
2,529.12
|
2,673.61
|
2018
|
|
|
|
First Quarter
|
2,872.87
|
2,581.00
|
2,640.87
|
Second Quarter
|
2,786.85
|
2,581.88
|
2,718.37
|
Third Quarter
|
2,930.75
|
2,713.22
|
2,913.98
|
Fourth Quarter
|
2,925.51
|
2,351.10
|
2,506.85
|
2019
|
|
|
|
First Quarter
|
2,854.88
|
2,447.89
|
2,834.40
|
Second Quarter (through May 31, 2019)
|
2,945.83
|
2,752.06
|
2,752.06
|
“Standard & Poor’s
®
,” “S&P
®
,”
“S&P 500
®
,” “Standard & Poor’s 500” and “500” are trademarks of
Standard and Poor’s Financial Services LLC. See “S&P 500
®
Index” in the accompanying index
supplement.
M
organ
S
tanley
F
inance
LLC
Dual Directional Knock-Out Notes With Daily Trigger Monitoring due December 3, 2021
Based on the Value of the S&P 500
®
Index
Additional Terms of the Notes
Please read this information in conjunction with the summary
terms on the front cover of this document.
Additional Terms
:
|
|
If the terms described herein are inconsistent with those described in the accompanying product supplement, index supplement or prospectus, the terms described herein shall control.
|
Underlying index publisher:
|
S&P Dow Jones Indices LLC or any successor thereof
|
Denominations:
|
$1,000 and integral multiples thereof
|
Interest:
|
None
|
Call right:
|
The notes are not callable prior to the maturity date
|
Postponement of maturity date:
|
If the valuation date is postponed so that it falls less than two business days prior to the scheduled maturity date, the maturity date will be postponed to the second business day following the valuation date as postponed.
|
Equity-linked notes:
|
All references to “equity-linked notes” or related terms in the accompanying product supplement for equity-linked notes shall be deemed to refer to dual directional knock-out notes when read in conjunction with this document.
|
Trustee:
|
The Bank of New York Mellon
|
Calculation agent:
|
MS & Co.
|
Issuer notice to registered note holders, the trustee and the depositary:
|
In the event that the maturity date is postponed due to postponement
of the valuation date, the issuer shall give notice of such postponement and, once it has been determined, of the date to which
the maturity date has been rescheduled (i) to each registered holder of the notes by mailing notice of such postponement by first
class mail, postage prepaid, to such registered holder’s last address as it shall appear upon the registry books, (ii) to
the trustee by facsimile, confirmed by mailing such notice to the trustee by first class mail, postage prepaid, at its New York
office and (iii) to The Depository Trust Company (the “depositary”) by telephone or facsimile, confirmed by mailing
such notice to the depositary by first class mail, postage prepaid. Any notice that is mailed to a registered holder of the notes
in the manner herein provided shall be conclusively presumed to have been duly given to such registered holder, whether or not
such registered holder receives the notice. The issuer shall give such notice as promptly as possible, and in no case later than
(i) with respect to notice of postponement of the maturity date, the business day immediately preceding the scheduled maturity
date, and (ii) with respect to notice of the date to which the maturity date has been rescheduled, the business day immediately
following the actual valuation date for determining the final index value.
The issuer shall, or shall cause the calculation agent to, (i)
provide written notice to the trustee at its New York office, on which notice the trustee may conclusively rely, and to the depositary
of the payment at maturity 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 notes to the trustee for delivery to the depositary, as holder of the
notes, on the maturity date.
|
M
organ
S
tanley
F
inance
LLC
Dual Directional Knock-Out Notes With Daily Trigger Monitoring due December 3, 2021
Based on the Value of the S&P 500
®
Index
Additional Information About the Notes
Additional Information
:
|
|
Minimum ticketing size:
|
$1,000 / 1 note
|
Tax considerations:
|
Subject to the discussion below regarding the occurrence of a
trigger event prior to the issue date, in the opinion of our counsel, Davis Polk & Wardwell LLP, the notes should be treated
as “contingent payment debt instruments” for U.S. federal income tax purposes, as described in the section of the accompanying
product supplement called “United States Federal Taxation—Tax Consequences to U.S. Holders.” Under this treatment,
if you are a U.S. taxable investor, you generally will be subject to annual income tax based on the “comparable yield”
(as defined in the accompanying product supplement) of the notes, adjusted upward or downward to reflect the difference, if any,
between the actual and projected amount of the payments on the notes. In addition, any gain recognized by U.S. taxable investors
on the sale or exchange, or at maturity, of the notes generally will be treated as ordinary income. We have determined that the
“comparable yield” for the notes is a rate of 2.6435% per annum, compounded semi-annually. Based on the comparable
yield set forth above, the “projected payment schedule” for a note (assuming an issue price of $1,000) consists of
a single projected amount equal to $ 1,067.7248 due at maturity.
You should read the discussion under “United States Federal
Taxation” in the accompanying product supplement concerning the U.S. federal income tax consequences of an investment in
the notes.
The following table states the amount of interest income (without
taking into account any adjustment to reflect the difference, if any, between the actual and the projected amount of the contingent
payment on a note) that will be deemed to have accrued with respect to a note for each accrual period (assuming a day count convention
of 30 days per month and 360 days per year), based upon the comparable yield set forth above.
|
|
ACCRUAL
PERIOD
|
INTEREST
INCOME DEEMED TO ACCRUE DURING ACCRUAL PERIOD (PER NOTE)
|
TOTAL
INTEREST INCOME DEEMED TO HAVE ACCRUED FROM ORIGINAL ISSUE DATE (PER NOTE) AS OF END OF ACCRUAL PERIOD
|
|
Original Issue Date through June 30, 2019
|
$1.8358
|
$1.8358
|
|
July 1, 2019 through December 31, 2019
|
$13.2418
|
$15.0776
|
|
January 1, 2020 through June 30, 2020
|
$13.4168
|
$28.4944
|
|
July 1, 2020 through December 31, 2020
|
$13.5941
|
$42.0885
|
|
January 1, 2021 through June 30, 2021
|
$13.7738
|
$55.8623
|
|
July 1, 2021 through the Maturity Date
|
$11.8625
|
$67.7248
|
|
The comparable yield and the projected payment schedule are
not provided for any purpose other than the determination of U.S. Holders’ accruals of interest income and adjustments thereto
in respect of the notes for U.S. federal income tax purposes, and we make no representation regarding the actual amount of the
payments that will be made on the notes.
Notwithstanding the foregoing, if a trigger event occurs prior
to the issue date, the notes will not be treated as “contingent payment debt instruments” for U.S. federal income tax
purposes. In this event, the notes will be treated as debt instruments issued with original issue discount (“OID”)
in an amount equal to the excess of the fixed payment at maturity over the “issue price” of each note. A U.S. Holder
will be required to include OID in income for U.S. federal income tax purposes as it accrues, in accordance with a constant-yield
method based on a compounding of interest, regardless of such U.S. Holder’s method of accounting. Gain or loss realized on
the sale, exchange or maturity of a note generally will be capital gain or loss and will be long-term capital gain or loss if the
U.S. Holder has held the notes for more than one year.
Special rules will apply if a trigger event occurs after the
issue date and more than six months prior to the maturity date. Please read the discussion under “United States Federal Taxation—Tax
Consequences to U.S. Holders—Long-Term Notes—Adjustments to Interest Accruals on the Notes” in the accompanying
product supplement for a discussion of the rules.
If you are a non-U.S. investor, please also read the section
of the accompanying product supplement called “United States Federal Taxation—Tax Consequences to Non-U.S. Holders.”
As discussed in the accompanying product supplement, Section
871(m) of the Internal Revenue Code of 1986, as amended (the “Code”), 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,
|
M
organ
S
tanley
F
inance
LLC
Dual Directional Knock-Out Notes With Daily Trigger Monitoring due December 3, 2021
Based on the Value of the S&P 500
®
Index
|
pursuant to an Internal Revenue Service (“IRS”) notice,
Section 871(m) will not apply to securities issued before January 1, 2021 that do not have a delta of one with respect to any Underlying
Security. Based on our determination that the notes do not have a delta of one with respect to any Underlying Security, our counsel
is of the opinion that the notes 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 notes.
In addition, as discussed in the accompanying product supplement,
withholding rules commonly referred to as “FATCA” apply to certain financial instruments (including the notes) with
respect to payments of amounts treated as interest and to any payment of gross proceeds of a disposition (including retirement)
of such an instrument. However, recently proposed regulations (the preamble to which specifies that taxpayers are permitted to
rely on them pending finalization) eliminate the withholding requirement on payments of gross proceeds of a taxable disposition.
|
|
You should consult your tax adviser regarding all aspects
of the U.S. federal income tax consequences of an investment in the notes, as well as any tax consequences arising under the laws
of any state, local or non-U.S. taxing jurisdiction. A holder who has made a separate investment the return of which is based on
or linked to the performance of the underlying (including any component thereof) should discuss with its tax adviser the U.S. federal
income tax consequences of an investment in the notes (including the potential application of the “straddle” rules).
Moreover, neither this document nor the accompanying product supplement addresses the consequences to taxpayers subject to special
tax accounting rules under Section 451(b) of the Code.
|
|
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, 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 notes.
|
Use of proceeds and hedging:
|
The proceeds from the sale of the notes will be used by us for
general corporate purposes. We will receive, in aggregate, $1,000 per note issued, because, when we enter into hedging transactions
in order to meet our obligations under the notes, our hedging counterparty will reimburse the cost of the agent’s commissions.
The costs of the notes borne by you and described beginning on page 2 above comprise the agent’s commissions and the cost
of issuing, structuring and hedging the notes.
On or prior to the pricing date, we hedged our anticipated exposure
in connection with the notes by entering into hedging transactions with our affiliates and/or third party dealers. We expect our
hedging counterparties to have taken positions in stocks of the underlying index and in futures and options contracts on the underlying
index and any component stocks of the underlying index listed on major securities markets. Such purchase activity could have affected
the value of the underlying index on the pricing date, and, therefore, could have affected the value that will be used to determine
the payment at maturity. In addition, through our affiliates, we are likely to modify our hedge position throughout the term of
the notes, including on the valuation date, by purchasing and selling the stocks constituting the underlying index, futures or
options contracts on the underlying index or its component stocks listed on major securities markets or positions in any other
available securities or instruments that we may wish to use in connection with such hedging activities. As a result, these entities
may be unwinding or adjusting hedge positions during the term of the notes, and the hedging strategy may involve greater and more
frequent dynamic adjustments to the hedge as the valuation date approaches. We cannot give any assurance that our hedging activities
will not affect the value of the underlying index, and, therefore, adversely affect the value of the notes or the payment you will
receive at maturity. For further information on our use of proceeds and hedging, see “Use of Proceeds and Hedging”
in the accompanying product supplement.
|
Benefit plan investor considerations:
|
Each fiduciary of a pension, profit-sharing or other employee
benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (a “Plan”),
should consider the fiduciary standards of ERISA in the context of the Plan’s particular circumstances before authorizing
an investment in the notes. Accordingly, among other factors, the fiduciary should consider whether the investment would satisfy
the prudence and diversification requirements of ERISA and would be consistent with the documents and instruments governing the
Plan.
In addition, we and certain of our affiliates, including MS &
Co., may each be considered a “party in interest” within the meaning of ERISA, or a “disqualified person”
within the meaning of the Internal Revenue Code of 1986, as amended (the “Code”), with respect to many Plans, as well
as many individual retirement accounts and Keogh plans (such accounts and plans, together with other plans, accounts and arrangements
subject to Section 4975 of the Code, also “Plans”). ERISA Section 406 and Code Section 4975 generally prohibit transactions
between Plans and parties in interest or disqualified persons. Prohibited transactions within the meaning of ERISA or the Code
would likely arise, for example, if the notes are acquired by or with the assets of a Plan with respect to which MS & Co. or
any of its affiliates is a service provider or other party in interest, unless the notes are acquired pursuant to an exemption
from the “prohibited transaction” rules. A violation of these “prohibited transaction” rules could result
in an excise tax or other liabilities under ERISA and/or Section 4975 of the Code for those persons, unless exemptive relief is
available under an applicable statutory or administrative exemption.
The U.S. Department of Labor has issued five prohibited transaction
class exemptions (“PTCEs”) that may
|
M
organ
S
tanley
F
inance
LLC
Dual Directional Knock-Out Notes With Daily Trigger Monitoring due December 3, 2021
Based on the Value of the S&P 500
®
Index
|
provide exemptive relief for direct or indirect prohibited transactions
resulting from the purchase or holding of the notes. Those class exemptions are PTCE 96-23 (for certain transactions determined
by in-house asset managers), PTCE 95-60 (for certain transactions involving insurance company general accounts), PTCE 91-38 (for
certain transactions involving bank collective investment funds), PTCE 90-1 (for certain transactions involving insurance company
separate accounts) and PTCE 84-14 (for certain transactions determined by independent qualified professional asset managers). In
addition, ERISA Section 408(b)(17) and Section 4975(d)(20) of the Code provide an exemption for the purchase and sale of securities
and the related lending transactions, provided that neither the issuer of the securities nor any of its affiliates has or exercises
any discretionary authority or control or renders any investment advice with respect to the assets of the Plan involved in the
transaction and provided further that the Plan pays no more, and receives no less, than “adequate consideration” in
connection with the transaction (the so-called “service provider” exemption). There can be no assurance that any of
these class or statutory exemptions will be available with respect to transactions involving the notes.
Because we may be considered a party in interest with respect
to many Plans, the notes may not be purchased, held or disposed of by any Plan, any entity whose underlying assets include “plan
assets” by reason of any Plan’s investment in the entity (a “Plan Asset Entity”) or any person investing
“plan assets” of any Plan, unless such purchase, holding or disposition is eligible for exemptive relief, including
relief available under PTCEs 96-23, 95-60, 91-38, 90-1, 84-14 or the service provider exemption or such purchase, holding or disposition
is otherwise not prohibited. Any purchaser, including any fiduciary purchasing on behalf of a Plan, transferee or holder of the
notes will be deemed to have represented, in its corporate and its fiduciary capacity, by its purchase and holding of the notes
that either (a) it is not a Plan or a Plan Asset Entity and is not purchasing such notes on behalf of or with “plan assets”
of any Plan or with any assets of a governmental, non-U.S. or church plan that is subject to any federal, state, local or non-U.S.
law that is substantially similar to the provisions of Section 406 of ERISA or Section 4975 of the Code (“Similar Law”)
or (b) its purchase, holding and disposition of these notes will not constitute or result in a non-exempt are not prohibited transaction
under Section 406 of ERISA or Section 4975 of the Code or violate any Similar Law.
Due to the complexity of these rules and the penalties that may
be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries or other
persons considering purchasing the notes on behalf of or with “plan assets” of any Plan consult with their counsel
regarding the availability of exemptive relief.
Each purchaser and holder of the notes has exclusive responsibility
for ensuring that its purchase, holding and disposition of the notes do not violate the prohibited transaction rules of ERISA or
the Code or any Similar Law. The sale of any notes to any Plan or plan subject to Similar Law is in no respect a representation
by us or any of our affiliates or representatives that such an investment meets all relevant legal requirements with respect to
investments by plans generally or any particular plan, or that such an investment is appropriate for plans generally or any particular
plan. In this regard, neither this discussion nor anything provided in this document is or is intended to be investment advice
directed at any potential Plan purchaser or at Plan purchasers generally and such purchasers of these notes should consult and
rely on their own counsel and advisers as to whether an investment in these notes is suitable.
However, individual retirement accounts, individual retirement
annuities and Keogh plans, as well as employee benefit plans that permit participants to direct the investment of their accounts,
will not be permitted to purchase or hold the notes if the account, plan or annuity is for the benefit of an employee of Morgan
Stanley or Morgan Stanley Wealth Management or a family member and the employee receives any compensation (such as, for example,
an addition to bonus) based on the purchase of the notes by the account, plan or annuity.
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Supplemental information regarding plan of distribution; conflicts of interest:
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MS & Co. expects
to sell all of the notes that it purchases from us to an unaffiliated dealer at a price of $991.50 per note, for further sale to
certain fee-based advisory accounts at the price to public of $1,000 per note. MS & Co. will not receive a sales commission
with respect to the notes
.
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 notes.
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.
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Validity of the notes:
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In the opinion of Davis Polk & Wardwell LLP, as special counsel to MSFL and Morgan Stanley, when the notes 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 notes 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,
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M
organ
S
tanley
F
inance
LLC
Dual Directional Knock-Out Notes With Daily Trigger Monitoring due December 3, 2021
Based on the Value of the S&P 500
®
Index
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execution and delivery of the MSFL Senior Debt Indenture and its authentication of the notes 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, 2017, which is Exhibit 5-a to the Registration Statement on Form S-3 filed by Morgan Stanley on November 16, 2017.
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Where you can find more information:
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Morgan Stanley and MSFL have filed a registration statement (including
a prospectus, as supplemented by the product supplement for Equity-Linked Notes 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 Equity-Linked Notes, 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 or
MSFL will arrange to send you the product supplement for Equity-Linked Notes, 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 Equity-Linked Notes dated November 16, 2017
Index
Supplement dated November 16, 2017
Prospectus
dated November 16, 2017
Terms used but not defined in this document are defined in the
product supplement for Equity-Linked Notes, in the index supplement or in the prospectus.
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