MSPI Morgan Stanley Depository Shares Representing 1/1000TH Preferred Series 1 Fixed TO Floating Non (Cum)

Morgan Stanley and MSFL have filed a registration statement (including a prospectus, as supplemented by a prospectus supplement for commodity-linked notes) with the SEC for the offering to which this communication relates. In connection with your investment, you should read the prospectus in that registration statement, the prospectus supplement for commodity-linked notes 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 for free by visiting EDGAR on the SEC website at . www.sec.gov. Alternatively, Morgan Stanley, MSFL, any underwriter or any dealer participating in this offering will arrange to send you the prospectus and the prospectus supplement for commodity-linked notes if you so request by calling toll-free 1-(800)-584-6837.

You may access the accompanying prospectus supplement for commodity-linked notes and prospectus on the SEC website at . www.sec.gov as follows:

References to “MSFL” refer only to MSFL, references to “Morgan Stanley,” refer only to Morgan Stanley and references to “we,” “our” and “us” refer to MSFL and Morgan Stanley collectively. In this document, the “Notes” refers to the Market-Linked Notes that are offered hereby. Also, references to the accompanying “prospectus” and “prospectus supplement for commodity-linked notes” mean the prospectus filed by MSFL and Morgan Stanley dated November 16, 2017 and the prospectus supplement for commodity-linked notes filed by MSFL and Morgan Stanley dated November 16, 2017, respectively.

You should rely only on the information incorporated by reference or provided in this pricing supplement or the accompanying prospectus supplement for commodity-linked notes and prospectus. We have not authorized anyone to provide you with different information. We are not making an offer of these Notes in any state where the offer is not permitted. You should not assume that the information in this pricing supplement or the accompanying prospectus supplement for commodity-linked notes and prospectus is accurate as of any date other than the date on the front of this document.

If the terms discussed in this pricing supplement differ from those discussed in the prospectus supplement for commodity-linked notes or prospectus, the terms contained in this pricing supplement will control.

The 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 Trade Date is less than $1,000. We estimate that the value of each Note on the Trade Date is $978.60.

What goes into the estimated value on the Trade Date?

In valuing the Notes on the Trade Date, we take into account that the Notes comprise both a debt component and a performance-based component linked to the Underlying Commodity. The estimated value of the Notes is determined using our own pricing and valuation models, market inputs and assumptions relating to the Underlying Commodity, instruments based on the Underlying Commodity, 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 Conditional Return and the Upper Barrier, 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 Trade 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 Commodity, may vary from, and be lower than, the estimated value on the Trade 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.

MS & Co. currently intends, 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.

The investor suitability considerations identified above are not exhaustive. Whether or not the Notes are a suitable 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 suitability of an investment in the Notes in light of your particular circumstances. You should also review carefully the sections entitled “Key Risks” beginning on page 6 of this pricing supplement and “Risk Factors” beginning on S-24 of the accompanying prospectus supplement for commodity-linked notes for risks related to an investment in the Notes. For more information about the Underlying Commodity, see the information set forth under “Historical Information” on page 15.

 

Investment Timeline

 

	The Initial Commodity Price and the Upper Barrier were determined.
	The Commodity Price of the Underlying Commodity is observed.
	MSFL will pay you a cash payment at maturity linked to the performance of the Underlying Commodity during the term of the Notes, as follows:   In the two scenarios that follow, the return on the Notes will be limited to the Conditional Return of 1.00%, regardless of the Underlying Commodity Return: If a Barrier Event has occurred during the Observation Period, irrespective of the Final Commodity Price: $1,000 + ($1,000 × Conditional Return) If a Barrier Event has not occurred during the Observation Period and the Underlying Commodity Return is zero or negative: $1,000 + ($1,000 × Conditional Return) However, if (i) a Barrier Event has not occurred during the Observation Period and (ii) the Underlying Commodity Return is positive: $1,000 + ($1,000 × Underlying Commodity Return) In this scenario, the potential return on the Notes will be limited to a maximum possible return of 25% due to the effect of the Upper Barrier.

 

Investing in the Notes involves significant risks. The Notes do not pay interest. Your return on the Notes at maturity will be limited to 1.00% if a Barrier Event occurs during the Observation Period or if the Underlying Commodity Return is zero or negative, and will be less than the Conditional Return if a Barrier Event has not occurred during the Observation Period and the Underlying Return is positive but less than the Conditional Return. Even if a Barrier Event has not OCCURRED DURING the Observation Period, your return on the Notes is limited to a maximum possible return of 25% due to the effect of the Upper Barrier. MSFL will repay your full principal amount only if you hold the Notes to maturity. All payments are subject to our credit risk.

An investment in the Notes involves significant risks. Some of the risks that apply to the Notes are summarized here, but we urge you to also read the “Risk Factors” section in the accompanying prospectus and the accompanying prospectus supplement for commodity-linked notes. You should also consult your investment, legal, tax, accounting and other advisers in connection with your investment in the Notes.

¨         The price of gold may change unpredictably and affect the value of the Notes in unforeseen ways — The price of gold to which the return on the Notes is linked is the afternoon London gold price per troy ounce of gold for delivery in London through a member of the LBMA authorized to effect such delivery. The market for gold bullion is global, and gold prices are subject to volatile price movements over short periods of time. Specific factors affecting the price of gold include economic factors, including, among other things, the structure of and confidence in the global monetary system, expectations of the future rate of inflation, the relative strength of, and confidence in, the U.S. dollar (the currency in which the price of gold is generally quoted), interest rates and gold borrowing and lending rates, and global or regional economic, financial, political, regulatory, judicial or other events, as well as wars and political and civil upheavals. Gold prices may also be affected by industry factors such as industrial and jewelry demand, lending, sales and purchases of gold by the official sector, including central banks and other governmental agencies and multilateral institutions that hold gold, sales of gold recycled from jewelry, as opposed to newly produced gold, in particular as the result of financial crises, levels of gold production and production costs in major gold producing nations such as South Africa, the United States and Australia, non-concurrent trading hours of gold markets and short-term changes in supply and demand because of trading activities in the gold market. It is not possible to predict the aggregate effect of all or any combination of these factors. The price of gold may be, and has recently been, extremely volatile, and we can give you no assurance that the volatility will lessen. See “Historical Information” on page 15.

temporary distortions or other disruptions due to various factors, including lack of liquidity, participation of speculators and government intervention. As a result, you may receive less, and possibly significantly less, than the stated principal amount per Note if you are able to sell your Notes prior to maturity.

For example, the Dodd-Frank Act, which was enacted on July 21, 2010, requires the CFTC to establish limits on the amount of positions that may be held by any person in certain commodity futures contracts and swaps, futures and options that are economically equivalent to such contracts. While the effects of these or other regulatory developments are difficult to predict, when adopted, such rules may have the effect of making the markets for commodities, commodity futures contracts, options on futures contracts and other related derivatives more volatile and over time potentially less liquid. Such restrictions may force market participants, including us and our affiliates, or such market participants may decide, to sell their positions in such futures contracts and other instruments subject to the limits. If this broad market selling were to occur, it would likely lead to declines, possibly significant declines, in commodity prices, in the price of such commodity futures contracts or instruments and potentially, the value of the Notes.

The inclusion of the costs of issuing, selling, structuring and hedging the Notes in the 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.

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 Trade 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 pricing supplement 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.

These examples are based on hypothetical terms. The actual terms are set forth on the cover of this pricing supplement.

The below scenario analysis and examples are provided for illustrative purposes only and are purely hypothetical. They do not purport to be representative of every possible scenario concerning increases or decreases in the price of the Underlying Commodity relative to the Initial Commodity Price or the occurrence or non-occurrence of a Barrier Event. We cannot predict the Commodity Price on any Observation Day during the Observation Period, whether a Barrier Event will occur or the Final Commodity Price on the Determination Date. You should not take the scenario analysis and these examples as an indication or assurance of the expected performance of the Underlying Commodity. The numbers set forth in the examples below have been rounded for ease of analysis. The following scenario analysis and examples illustrate the Payment at Maturity for a $1,000 principal amount of Notes on a hypothetical offering of the Notes, based on the following terms*:

* The actual Initial Commodity Price and Upper Barrier are specified on the cover of this pricing supplement.

The table below illustrates the Payment at Maturity for a hypothetical range of Underlying Commodity Returns, depending also on whether or not a Barrier Event has occurred, and does not cover the complete range of possible payouts at maturity.

(1) The “Return on $1,000 Note” is the number, expressed as a percentage, that results from comparing the Payment at Maturity per $1,000 principal amount per Note to the purchase price of $1,000 per Note.

Example 1 — A Barrier Event HAS occurred during the Observation Period and the Commodity Price increases by 50% from the Initial Commodity Price to the Final Commodity Price.

In this example, the Commodity Price is greater than the Upper Barrier on one or more Observation Days during the Observation Period. Therefore, a Barrier Event has occurred and you receive at maturity the principal amount of $1,000 per Note plus a return based on the hypothetical Conditional Return equal to $10 per Note, irrespective of the Final Commodity Price.

$1,000 + ($1,000 x Conditional Return)

$1,000 + ($1,000 x 1.0%)

$1,000 + $10 = $1,010

The investor would receive a Payment at Maturity of $1,010 per Note, or a return of 1.0%, but would not participate in any performance of the Underlying Commodity because a Barrier Event has occurred.

Example 2 — A Barrier Event HAS occurred during the Observation Period and the Commodity Price increases by 10% from the Initial Commodity Price to the Final Commodity Price.

In this example, the Commodity Price is greater than the Upper Barrier on one or more Observation Days during the Observation Period. Therefore, a Barrier Event has occurred and you receive at maturity the principal amount of $1,000 per Note plus a return based on the hypothetical Conditional Return equal to $10 per Note, irrespective of the Final Commodity Price.

$1,000 + ($1,000 x Conditional Return)

$1,000 + ($1,000 x 1.0%)

$1,000 + $10 = $1,010

Even though the Underlying Commodity Return is positive and the Final Commodity Price is below the Upper Barrier, because a Barrier Event has occurred, you will not benefit from any appreciation in the Commodity Price as of the Determination Date and your return will instead be limited to the hypothetical Conditional Return.

Example 3 — A Barrier Event HAS NOT occurred and the Commodity Price increases by 20% from the Initial Commodity Price to the Final Commodity Price.

In this example, the Commodity Price has remained less than or equal to the Upper Barrier on each Observation Day during the Observation Period. Therefore, a Barrier Event has not occurred, and you receive at maturity the Principal Amount of $1,000 per Note plus $1,000 times the Underlying Commodity Return.

$1,000 + ($1,000 x Underlying Commodity Return)

$1,000 + ($1,000 x 20%)

$1,000 + $200 = $1,200

The Payment at Maturity is $1,200 per Note, resulting in a return of 20%.

Example 4 — A Barrier Event HAS NOT occurred and the Commodity Price increases by 0.5% from the Initial Commodity Price to the Final Commodity Price.

In this example, the Commodity Price has remained less than or equal to the Upper Barrier on each Observation Day during the Observation Period. Therefore, a Barrier Event has not occurred, and you receive at maturity the Principal Amount of $1,000 per Note plus $1,000 times the Underlying Commodity Return.

$1,000 + ($1,000 x Underlying Commodity Return)

$1,000 + ($1,000 x 0.5%)

$1,000 + $5 = $1,005

Even though the Underlying Commodity Return is positive and the Final Commodity Price is below the Upper Barrier, your Payment at Maturity will be less than your Payment at Maturity if a Barrier Event had occurred.

Example 5 — A Barrier Event HAS NOT occurred and the Commodity Price decreases by 30% from the Initial Commodity Price to the Final Commodity Price.

In this example, the Commodity Price has remained less than or equal to the Upper Barrier on each Observation Day during the Observation Period. Because the Commodity Price is negative and a Barrier Event has not occurred, you receive at maturity the Principal Amount of $1,000 per Note plus a return equal to the hypothetical Conditional Return.

$1,000 + ($1,000 x Conditional Return)

$1,000 + ($1,000 x 1.0%)

$1,000 + $10 = $1,010

Because the Commodity Price has decreased from the Initial Commodity Price to the Final Commodity price, your return will be limited to the hypothetical Conditional Return.

All payments are subject to our credit risk. If we default on our obligations, you could lose some or all of your investment.

Subject to the discussion below regarding the occurrence of a Barrier 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 prospectus supplement called “United States Federal Taxation—Tax Consequences to U.S. Holders—Long-Term Notes.” 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 prospectus 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 2.7204% 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 $1,058.0022 due at maturity.

You should read the discussion under “United States Federal Taxation” in the accompanying prospectus 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.

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 Barrier 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 Barrier Event occurs 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 prospectus supplement for a discussion of the rules.

If you are a non-U.S. investor, please also read the section of the accompanying prospectus supplement called “United States Federal Taxation—Tax Consequences to Non-U.S. Holders.”

In addition, as discussed in the accompanying prospectus 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. Moreover, neither this document nor the accompanying prospectus supplement addresses the consequences to taxpayers subject to special tax accounting rules under Section 451(b) of the Internal Revenue Code of 1986, as amended.

The discussion in the preceding paragraphs under “Tax considerations” and the discussion contained in the section entitled “United States Federal Taxation” in the accompanying prospectus 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.

The following table presents the published high and low prices of gold, as well as end-of-quarter prices of gold, for each quarter in the period from January 1, 2014 through June 14, 2019. The Commodity Price on June 14, 2019 was $1,351.25. The related graph sets forth the daily prices of gold for the same time period. We obtained the prices of gold and other information below from Bloomberg Financial Markets (Ticker Symbol: GOLDLNPM), without independent verification. The actual Commodity Price will be determined as described in the “Indicative Terms” on page 4 rather than the prices published by Bloomberg Financial Markets, and the Bloomberg ticker symbol is provided for reference purposes only. The Underlying Commodity experiences periods of high volatility, and you should not take the historical values of the Underlying Commodity as an indication of future performance, and no assurance can be given as to the Commodity Price on any Observation Day, including the Determination Date.

*       Available information for the indicated period includes data for less than the entire calendar quarter and accordingly, the “Quarterly High,” “Quarterly Low” and “Quarterly Close” data indicated are for this shortened period only.

The graph below illustrates the performance of gold from January 1, 2014 through June 14, 2019, based on information from Bloomberg. Past performance of the Underlying Commodity is not indicative of the future performance of the Underlying Commodity.

Determination Date

In the section entitled “Description of Commodity-Linked Notes—General Terms of the Notes—Some Definitions—“determination date” or “determination dates”” in the accompanying prospectus supplement for commodity-linked notes, the references to “three consecutive trading days” and “third succeeding trading day” shall be replaced with “five consecutive trading days” and “fifth succeeding trading day” respectively.

Acceleration Amount in Case of an Event of Default

The following section replaces the section entitled “Payment at Maturity—Alternate Exchange Calculation in the Case of an Event of Default” in the accompanying prospectus supplement for Commodity-Linked Notes.

In case an event of default with respect to the Notes shall have occurred and be continuing, the amount declared due and payable per Security upon any acceleration of the Notes shall be an amount in cash equal to the value of such Note on the day that is two business days prior to the date of such acceleration, as determined by the Calculation Agent (acting in good faith and in a commercially reasonable manner) by reference to factors that the Calculation Agent considers relevant, including, without limitation: (i) then-current market interest rates; (ii) our credit spreads as of the Trade Date, without adjusting for any subsequent changes to our creditworthiness; and (iii) the then-current value of the performance-based component of such Note. Because the Calculation Agent will take into account movements in market interest rates, any increase in market interest rates since the Trade Date will lower the value of your claim in comparison to if such movements were not taken into account.

Notwithstanding the foregoing, if a voluntary or involuntary liquidation, bankruptcy or insolvency of, or any analogous proceeding is filed with respect to the Issuer, then depending on applicable bankruptcy law, your claim may be limited to an amount that could be less than the default amount.