August 2019
Preliminary Terms No. 2,412
Registration Statement Nos.
333-221595; 333-221595-01
Dated August 19, 2019
Filed pursuant to Rule 433
M
organ
S
tanley
F
inance
LLC
Structured Investments
Opportunities in U.S. Equities
Worst of Fixed Coupon Auto-Callable RevCons
SM
due February 23, 2021
Payments on the RevCons Based on the Worst Performing
of the Common Stock of Microsoft Corporation, the Common Stock of Hilton Worldwide Holdings Inc. and the Common Stock of HP Inc.
Fully and Unconditionally Guaranteed by Morgan
Stanley
Principal at Risk
Securities
The Worst of Fixed Coupon Auto-Callable RevCons
SM
due February 23, 2021 Payments on the RevCons Based on the Worst Performing of the Common Stock of Microsoft Corporation, the Common
Stock of Hilton Worldwide Holdings Inc. and the Common Stock of HP Inc., which we refer to as the securities, are unsecured obligations
of Morgan Stanley Finance LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley. The securities
do not guarantee the repayment of any principal. Instead, the securities offer the opportunity for investors to earn a fixed monthly
coupon at an annual rate of 7.80%. In addition, if the determination closing price of
each of
the common stock of Microsoft
Corporation, the common stock of Hilton Worldwide Holdings Inc. and the common stock of HP Inc. is greater than or equal to its
respective redemption threshold level on any monthly determination date (beginning after four months), the securities will be automatically
redeemed for an amount per security equal to the stated principal amount and the related monthly coupon. However, if the securities
are not automatically redeemed prior to maturity, the payment at maturity due on the securities will be, in addition to the final
monthly coupon, either (i) if the final share price of
each underlying stock
is
greater than or equal to
its respective
downside threshold level, the stated principal amount, or (ii) if the final share price of
any underlying stock
is
less
than
its respective downside threshold level, investors will be exposed to the decline in the worst performing underlying stock
on a 1-to-1 basis and will receive a payment at maturity that reflects the full depreciation in the price of the worst performing
underlying stock and that is significantly less than the principal amount of the securities and could be zero. As a result, investors
must be willing to accept the risk of receiving a payment at maturity that is significantly less than the stated principal amount
of the securities and could be zero.
Accordingly, investors could lose their entire initial investment in the securities.
The securities are for investors who are willing to risk their principal based on the worst performing of three underlying stocks
in exchange for the opportunity to earn interest at a potentially above-market rate. Investors will not participate in the appreciation
of any of the underlying stocks. Because the payment at maturity on the securities is based on the worst performing underlying
stock, a decline beyond the respective downside threshold level of
any underlying stock
will result in a significant loss
of your investment even if one or both of the other underlying stocks have appreciated or have not declined as much. Investors
will therefore be exposed to the risks related to
each underlying stock
. The securities are issued as part of MSFL’s
Series A Global Medium-Term Notes program.
All payments are subject to our credit risk. If we default
on our obligations, you could lose some or all of your investment. These securities are not secured obligations and you will not
have any security interest in, or otherwise have any access to, any underlying reference asset or assets.
SUMMARY
TERMS
|
|
Issuer:
|
Morgan Stanley Finance LLC
|
Guarantor:
|
Morgan Stanley
|
Underlying
stocks:
|
Microsoft Corporation common stock (the “MSFT Stock”), Hilton Worldwide Holdings Inc. common stock (the “HLT Stock”) and HP Inc. common stock (the “HPQ Stock”)
|
Aggregate
principal amount:
|
$
|
Stated
principal amount:
|
$1,000 per security
|
Issue
price:
|
$1,000 per security
|
Pricing
date:
|
August 19, 2019
|
Original
issue date:
|
August 23, 2019 (4 business days after the pricing date)
|
Maturity
date:
|
February 23, 2021
|
Early
redemption:
|
The securities are not
subject to automatic early redemption until December 23, 2019. Following this initial 4-month non-call period, if
, on any
determination date other than the final determination date, the determination closing price of
each underlying stock
is
greater than or equal to
its respective redemption threshold level, the securities will be automatically redeemed for an
early redemption payment on the related early redemption date;
provided
that if, due to a market disruption event or otherwise,
such determination date is postponed, the early redemption payment shall be made on the fifth business day following such determination
date as postponed. No further payments will be made on the securities once they have been redeemed.
The securities will not be redeemed early if the
determination closing price of any underlying stock is less than the respective redemption threshold level for such underlying
stock on the related determination date.
|
Early
redemption payment:
|
The early redemption payment will be an amount equal to (i) the stated principal amount
plus
(ii) the monthly coupon for the related monthly interest period.
|
Early
redemption dates:
|
Starting after four months, monthly, on December 23, 2019, January 23, 2020, February 24, 2020, March 23, 2020, April 23, 2020, May 22, 2020, June 23, 2020, July 23, 2020, August 24, 2020, September 23, 2020, October 23, 2020, November 23, 2020, December 23, 2020 and January 22, 2021;
provided
that if any such day is not a business day, the related payment will be made on the next succeeding business day and no adjustment will be made to any payment made on that succeeding business day.
|
Determination
closing price:
|
With respect to each underlying stock, the closing price of such underlying stock on any determination date other than the final determination date
times
the adjustment factor for such underlying stock on such determination date
|
Monthly
coupon:
|
Unless the securities have been previously redeemed, a monthly coupon at an annual rate of 7.80% (corresponding to approximately $6.50 per month per security) is paid on each coupon payment date.
|
Coupon
payment dates:
|
Monthly, on September 23, 2019, October 23, 2019, November 22, 2019, December 23, 2019, January 23, 2020, February 24, 2020, March 23, 2020, April 23, 2020, May 22, 2020, June 23, 2020, July 23, 2020, August 24, 2020, September 23, 2020, October 23, 2020, November 23, 2020, December 23, 2020, January 22, 2021 and the maturity date;
provided
that if any such day is not a business day, that coupon payment will be made on the next succeeding business day and no adjustment will be made to any coupon payment made on that succeeding business day.
|
Payment
at maturity:
|
·
If the final share price of
each underlying stock
is
greater than or equal to
its respective downside threshold level:
|
(i) the stated principal amount
plus
(ii) the monthly coupon for the final monthly interest period
|
|
·
If the final share price of
any underlying stock
is
less than
its respective downside threshold level:
|
(i) the monthly coupon for the final interest period
plus
(ii) the
product of
(a) the stated principal amount and (b) the share performance factor of the worst performing
underlying stock.
Under these circumstances, investors will lose a
significant portion, and may lose all, of their principal.
|
Share
performance factor:
|
With respect to each underlying stock, the final share price
divided by
the initial share price
|
Adjustment
factor:
|
With respect to each underlying stock, 1.0, subject to adjustment in the event of certain corporate events affecting such underlying stock
|
|
Terms continued on the following page
|
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:
|
Approximately $962.10 per security, or within $10.00 of that estimate. See “Investment Summary” on page 3.
|
Commissions
and issue price:
|
|
Price to public
|
Agent’s commissions
(1)
|
Proceeds to us
(2)
|
Per security
|
|
$1,000
|
$20.00
|
$980.00
|
Total
|
|
$
|
$
|
$
|
|
|
|
|
|
|
|
(1)
|
Selected
dealers and their financial advisors will collectively receive from the agent, MS &
Co., a fixed sales commission of $20.00 for each security they sell. 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.
|
|
(2)
|
See
“Use of proceeds and hedging” on page 27.
|
The securities involve risks not associated with an investment
in ordinary debt securities. See “Risk Factors” beginning on page 8.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these securities, or determined if this document or the accompanying product supplement
and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The securities are not deposits or savings accounts and are
not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they obligations
of, or guaranteed by, a bank.
You should read this document together with the related product
supplement and prospectus, each of which can be accessed via the hyperlinks below. Please also see “Additional Terms of the
Securities” and “Additional Information About the Securities” at the end of this document.
As used in this document, “we,” “us”
and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Product Supplement for Auto-Callable Securities dated November 16, 2017
Prospectus dated November 16, 2017
Morgan Stanley Finance LLC
Worst of Fixed
Coupon Auto-Callable RevCons
SM
due due February 23, 2021
Payments on the RevCons Based on the Worst
Performing of the Common Stock of Microsoft Corporation, the Common Stock of Hilton Worldwide Holdings Inc. and the Common Stock
of HP Inc.
Principal at
Risk Securities
Terms continued from previous page:
|
Determination dates:
|
Starting after four months, monthly, on December 16, 2019, January 16, 2020, February 18, 2020, March 16, 2020, April 16, 2020, May 18, 2020, June 16, 2020, July 16, 2020, August 17, 2020, September 16, 2020, October 16, 2020, November 16, 2020, December 16, 2020 and January 19, 2021, subject to postponement for non-trading days and certain market disruption events.
|
Final determination date:
|
February 16, 2021, subject to postponement for non-trading days and certain market disruption events.
|
Redemption threshold level:
|
With respect to the MSFT Stock, $129.324, which is equal
to approximately 95% of its initial share price
With respect to the HLT Stock, $88.36, which is equal
to approximately 95% of its initial share price
With respect to the HPQ Stock, $18.126, which is equal
to 95% of its initial share price
|
Downside threshold level:
|
With respect to the MSFT Stock, $74.872, which is equal
to approximately 55% of its initial share price
With respect to the HLT Stock, $51.156, which is equal
to approximately 55% of its initial share price
With respect to the HPQ Stock, $10.494, which is equal
to 55% of its initial share price
|
Initial share price:
|
With respect to the MSFT Stock, $136.13, which is its
closing price on August 16, 2019
With respect to the HLT Stock, $93.01, which is its
closing price on August 16, 2019
With respect to the HPQ Stock, $19.08, which is its
closing price on August 16, 2019
|
Final share price:
|
With respect to each underlying stock, the closing price of such underlying stock on the final determination date
times
the adjustment factor for such underlying stock on such date
|
Worst performing underlying stock:
|
The underlying stock with the largest percentage decrease from the respective initial share price to the respective final share price
|
CUSIP
/ ISIN:
|
61769HRB3 / US61769HRB32
|
Listing:
|
The securities will not be listed on any securities exchange.
|
Morgan Stanley Finance LLC
Worst of Fixed Coupon Auto-Callable RevCons
SM
due due February 23, 2021
Payments on the RevCons Based on the Worst Performing of the Common Stock of Microsoft Corporation, the Common Stock of Hilton Worldwide Holdings Inc. and the Common Stock of HP Inc.
Principal at Risk Securities
Investment Summary
Worst of Fixed Coupon Auto-Callable RevCons
Principal at
Risk Securities
The Worst of Fixed Coupon Auto-Callable RevCons
SM
due February 23, 2021 Payments on the RevCons Based on the Worst Performing of the Common Stock of Microsoft Corporation, the Common
Stock of Hilton Worldwide Holdings Inc. and the Common Stock of HP Inc., which we refer to as the securities, provide an opportunity
for investors to earn a fixed monthly coupon at an annual rate of 7.80%. In addition, if the determination closing price of
each
of
the common stock of Microsoft Corporation, the common stock of Hilton Worldwide Holdings Inc. and the common stock of HP
Inc. is greater than or equal to its respective redemption threshold level on any monthly determination date (beginning after four
months), the securities will be automatically redeemed for an amount per security equal to the stated principal amount and the
related monthly coupon. However, if the securities are not automatically redeemed prior to maturity, the payment at maturity due
on the securities will be, in addition to the final monthly coupon, either (i) if the final share price of
each underlying stock
is
greater than or equal to
its respective downside threshold level, the stated principal amount, or (ii) if the final share
price of
any underlying stock
is
less than
its respective downside threshold level, investors will be exposed to
the decline in the worst performing underlying stock on a 1-to-1 basis and will receive a payment at maturity that reflects the
full depreciation in the price of the worst performing underlying stock and that is significantly less than the stated principal
amount of the securities and could be zero.
Accordingly, investors could lose their entire initial investment in the securities.
In addition, investors will not participate in the appreciation of any of the underlying stocks.
The original issue price of each security is
$1,000. This price includes costs associated with issuing, selling, structuring and hedging the securities, which are borne by
you, and, consequently, the estimated value of the securities on the pricing date will be less than $1,000. We estimate that the
value of each security on the pricing date will be approximately $962.10, or within $10.00 of that estimate. Our estimate of the
value of the securities as determined on the pricing date will be set forth in the final pricing supplement.
What goes into the estimated value on the pricing date?
In valuing the securities on the pricing date,
we take into account that the securities comprise both a debt component and a performance-based component linked to the underlying
stocks. The estimated value of the securities is determined using our own pricing and valuation models, market inputs and assumptions
relating to the underlying stocks, instruments based on the underlying stocks, volatility and other factors including current and
expected interest rates, as well as an interest rate related to our secondary market credit spread, which is the implied interest
rate at which our conventional fixed rate debt trades in the secondary market.
What determines the economic terms of the securities?
In determining the economic terms of the securities,
including the monthly coupon rate, the redemption threshold levels and the downside threshold levels, we use an internal funding
rate, which is likely to be lower than our secondary market credit spreads and therefore advantageous to us. If the issuing, selling,
structuring and hedging costs borne by you were lower or if the internal funding rate were higher, one or more of the economic
terms of the securities would be more favorable to you.
What is the relationship between the estimated value on the
pricing date and the secondary market price of the securities?
The price at which MS & Co. purchases the
securities in the secondary market, absent changes in market conditions, including those related to the underlying stocks, may
vary from, and be lower than, the estimated value on the pricing date, because the secondary market price takes into account our
secondary market credit spread as well as the bid-offer spread that MS & Co. would charge in a secondary market transaction
of this type and other factors. However, because the costs associated with issuing, selling, structuring and hedging the securities
are not fully deducted upon issuance, for a period of up to 5 months following the issue date, to the extent that MS & Co.
may buy or sell the securities in the secondary market, absent changes in market conditions, including those related to the underlying
stocks, and to our secondary market credit spreads, it would do so based on values higher than the estimated value. We expect that
those higher values will also be reflected in your brokerage account statements.
MS & Co. may, but is not obligated to,
make a market in the securities, and, if it once chooses to make a market, may cease doing so at any time.
Morgan Stanley Finance LLC
Worst of Fixed Coupon Auto-Callable RevCons
SM
due due February 23, 2021
Payments on the RevCons Based on the Worst Performing of the Common Stock of Microsoft Corporation, the Common Stock of Hilton Worldwide Holdings Inc. and the Common Stock of HP Inc.
Principal at Risk Securities
Key Investment Rationale
The securities offer investors an opportunity to earn a fixed
monthly coupon at an annual rate of 7.80%. The securities may be redeemed prior to maturity for the stated principal amount per
security
plus
the applicable monthly coupon, and the payment at maturity will vary depending on the final share price of
each underlying stock, as follows:
Scenario 1
|
On any determination date (beginning after
four months) other than the final determination date, the determination closing price of
each underlying stock
is
greater
than or equal to
its respective redemption threshold level.
§
The
securities will be automatically redeemed for (i) the stated principal amount
plus
(ii) the monthly coupon for the related
monthly interest period. No further payments will be made on the securities once they have been redeemed.
§
Investors
will not participate in any appreciation of any underlying stock.
|
Scenario 2
|
The securities are not automatically redeemed
prior to maturity, and the final share price of
each underlying stock
is
greater than or equal to
its respective
downside threshold level.
§
The
payment due at maturity will be (i) the stated principal amount
plus
(ii) the monthly coupon for the final monthly interest
period.
§
Investors
will not participate in any appreciation of any underlying stock.
|
Scenario 3
|
The securities are not automatically redeemed
prior to maturity, and the final share price of
any underlying stock
is
less than
its respective downside threshold
level.
§
The
payment due at maturity will be(i) the monthly coupon for the final interest period plus (ii)
the product of
(a) the stated
principal amount and (b) the share performance factor of the worst performing underlying stock.
§
Investors
will lose a significant portion, and may lose all, of their principal in this scenario.
|
Morgan Stanley Finance LLC
Worst of Fixed Coupon Auto-Callable RevCons
SM
due due February 23, 2021
Payments on the RevCons Based on the Worst Performing of the Common Stock of Microsoft Corporation, the Common Stock of Hilton Worldwide Holdings Inc. and the Common Stock of HP Inc.
Principal at Risk Securities
Hypothetical Examples
The following hypothetical examples illustrate how to determine
whether the securities are redeemed early and the payment at maturity. The following examples are for illustrative purposes only.
Whether the securities are redeemed early will be determined by reference to the determination closing price of each underlying
stock on each monthly determination date (beginning after four months) other than the final determination date, and the payment
at maturity will be determined by reference to the final share price of each underlying stock on the final determination date.
The actual initial share price, applicable redemption threshold levels and downside threshold level for each underlying stock are
set forth on the cover of this document. All payments on the securities are subject to our credit risk. The below examples are
based on the following terms:
Monthly coupon:
|
7.80% per annum (corresponding to approximately $6.50 per month per security)
1
|
Payment at Maturity:
|
·
If
the final share price of
each underlying stock
is
greater than or equal to
its respective downside threshold level:
(i) the stated principal amount
plus
(ii) the monthly coupon for the final monthly interest period.
·
If
the final share price of
any underlying stock
is
less than
its respective downside threshold level: (i) the monthly
coupon for the final interest period
plus
(ii) the product of (a) the stated principal amount and (b) the share performance
factor of the worst performing underlying stock.
Under these circumstances, the payment at maturity will be significantly less
than the stated principal amount of the securities and could be zero
|
Stated Principal Amount:
|
$1,000 per security
|
Hypothetical Initial Share Price:
|
With respect to the MSFT Stock: $110.00
With respect to the HLT Stock: $85.00
With respect to the HPQ Stock: $20.00
|
Hypothetical Redemption Threshold Level:
|
With respect to the MSFT Stock: $104.50, which is 95%
of its hypothetical initial share price
With respect to the HLT Stock: $80.75, which is 95%
of its hypothetical initial share price
With respect to the HPQ Stock: $19.00, which is 95%
of its hypothetical initial share price
|
Hypothetical Downside Threshold Level:
|
With respect to the MSFT Stock: $60.50, which is 55%
of its hypothetical initial share price
With respect to the HLT Stock: $46.75, which is 55%
of its hypothetical initial share price
With respect to the HPQ Stock: $11.00, which is 55%
of its hypothetical initial share price
|
Hypothetical Adjustment Factor:
|
With respect to each underlying stock, 1.0
|
1
The actual monthly coupon will be an amount determined
by the calculation agent based on the number of days in the applicable payment period, calculated on a 30/360 day count basis.
The monthly coupon of $6.50 is used in these examples for ease of analysis.
How to determine whether the securities are redeemed
early:
|
Determination Closing Price
|
Early Redemption Amount*
|
|
MSFT Stock
|
HLT Stock
|
HPQ Stock
|
|
Hypothetical Determination Date 1
|
$100.00 (
below
its redemption threshold level)
|
$70.00 (
below
its redemption threshold level)
|
$15.00 (
below
its redemption threshold level)
|
N/A
|
Hypothetical Determination Date 4
|
$120.00 (
at or above
its redemption threshold level)
|
$86.00 (
at or above
its redemption threshold level)
|
$17.00 (
below
its redemption threshold level)
|
N/A
|
Hypothetical Determination Date 8
|
$125.00 (
at or above
its redemption threshold level)
|
$88.00 (
at or above
its redemption threshold level)
|
$25.00 (
at or above
its redemption threshold level)
|
$1,006.50 (the stated principal amount
plus
the monthly coupon for the related monthly interest period)
|
* The Early Redemption Amount includes the unpaid monthly
coupon for the related monthly interest period.
If, on any determination date (beginning after four months) other
than the final determination date, the determination closing price of
each underlying stock
is
greater than or equal
to
its respective redemption threshold level, the securities will be automatically redeemed for an early redemption payment
on the related early redemption date.
Morgan Stanley Finance LLC
Worst of Fixed Coupon Auto-Callable RevCons
SM
due due February 23, 2021
Payments on the RevCons Based on the Worst Performing of the Common Stock of Microsoft Corporation, the Common Stock of Hilton Worldwide Holdings Inc. and the Common Stock of HP Inc.
Principal at Risk Securities
On hypothetical determination date 1, the MSFT Stock, the HLT
Stock and the HPQ Stock all close below their respective redemption threshold levels. Therefore, the securities are not redeemed
early on such determination date.
On hypothetical determination date 4, two underlying stocks close
at or above their respective redemption threshold levels but the other underlying stock closes below its respective redemption
threshold level. Therefore, the securities are not redeemed early on such determination date.
On hypothetical determination date 8, each underlying stock closes
at or above its respective redemption threshold level. Accordingly, the securities are automatically redeemed following such determination
date. You receive the early redemption payment, calculated as follows:
stated principal amount
+ monthly coupon = $1,000 + $6.50 = $1,006.50
No further payments will be made on the securities once they
have been redeemed. Additionally, investors will not participate in any appreciation of the underlying stock.
The securities will not be redeemed early if the determination
closing price of any underlying stock is less than the redemption threshold level for such underlying stock on the related determination
date.
How to determine the payment at maturity:
In the following examples, the determination
closing price of one or more underlying stocks is less than its respective redemption threshold level on each determination date
prior to the final determination date, and, consequently, the securities are not automatically redeemed prior to, and remain outstanding
until, maturity.
|
Final Share Price
|
Payment at Maturity
(in addition to the monthly coupon
of $6.50 with respect to the final monthly interest period)
|
|
MSFT Stock
|
HLT Stock
|
HPQ Stock
|
|
Example 1:
|
$112.00 (
at or above
its downside threshold level)
|
$90.00 (
at or above
its downside threshold level)
|
$30.00 (
at or above
its downside threshold level)
|
$1,000 (the stated principal amount)
|
Example 2:
|
$44.00 (
below
its downside threshold level)
|
$50.00 (
at or above
its downside threshold level)
|
$33.65 (
at or above
its downside threshold level)
|
$1,000 x share performance factor
of the worst performing underlying stock=
$1,000 x ($44.00 / $110.00) = $400.00
|
Example 3:
|
$80.50 (
at or above
its downside threshold level)
|
$34.00 (
below
its downside threshold level)
|
$4.00 (
below
its downside threshold level)
|
$1,000 x share performance factor
of the worst performing underlying stock=
$1,000 x ($4.00 / $20.00) = $200.00
|
Example 4:
|
$49.50 (
below
its downside threshold level)
|
$25.50 (
below
its downside threshold level)
|
$15.00 (
at or above
its downside threshold level)
|
$1,000 x share performance factor
of the worst performing underlying stock=
$1,000 x ($25.50 / $85.00) = $300.00
|
Example 5:
|
$33.00 (
below
its downside threshold
|
$34.00 (
below
its downside threshold
|
$4.00 (
below
its downside threshold
|
$1,000 x share performance factor
of the worst performing
|
Morgan Stanley Finance LLC
Worst of Fixed Coupon Auto-Callable RevCons
SM
due due February 23, 2021
Payments on the RevCons Based on the Worst Performing of the Common Stock of Microsoft Corporation, the Common Stock of Hilton Worldwide Holdings Inc. and the Common Stock of HP Inc.
Principal at Risk Securities
|
level)
|
level)
|
level)
|
underlying stock=
$1,000 x ($4.00 / $20.00) = $200.00
|
In
example 1
, the final share prices of the MSFT Stock,
the HLT Stock and the HPQ Stock are all at or above their respective downside threshold levels. Therefore, investors receive the
stated principal amount of the securities at maturity. Investors do not participate in the appreciation of any underlying stock.
In
example 2
, the final share prices of the HLT Stock
and the HPQ Stock are above their respective downside threshold levels, but the final share price of the MSFT Stock is below its
downside threshold level. Therefore, even though the HLT Stock and the HPQ Stock have appreciated in their values, investors are
exposed to the downside performance of the MSFT Stock, which is the worst performing underlying stock in this example, and receive
a payment at maturity that is significantly less than the stated principal amount.
In
examples 3 and 4
, the final share price of one underlying
stock is at or above its downside threshold level, but the final share prices of the other underlying stocks are below their respective
downside threshold levels. Therefore, investors are exposed to the downside performance of the worst performing underlying stock
at maturity.
In
example 3
, the HLT Stock has declined 60% from its
initial share price to its final share price while the HPQ Stock has declined 80% from its initial share price to its final share
price. Therefore, investors are exposed to the downside performance of the HPQ Stock, which is the worst performing underlying
stock in this example, and receive a payment at maturity that is significantly less than the stated principal amount.
In
example 4
, the MSFT Stock has declined 55% from its
initial share price to its final share price while the HLT Stock has declined 70% from its initial share price to its final share
price. Therefore, investors are exposed to the downside performance of the HLT Stock, which is the worst performing underlying
stock in this example, and receive a payment at maturity that is significantly less than the stated principal amount.
In
example 5
, the final share prices of the MSFT Stock,
the HLT Stock and the HPQ Stock are all below their respective downside threshold levels. In this example, the MSFT Stock has declined
70% from its initial share price to its final share price, the HLT Stock has declined 60% from its initial share price to its final
share price while the HPQ Stock has declined 80% from its initial share price. Therefore, investors are exposed to the downside
performance of the HPQ Stock, which is the worst performing underlying stock in this example, and receive a payment at maturity
that is significantly less than the stated principal amount.
If the final share price of any underlying stock is below
its respective downside threshold level, you will be exposed to the downside performance of the worst performing underlying stock
at maturity. Under these circumstances, the payment at maturity will be significantly less than the principal amount of the securities
and that could be zero.
Morgan Stanley Finance LLC
Worst of Fixed Coupon Auto-Callable RevCons
SM
due due February 23, 2021
Payments on the RevCons Based on the Worst Performing of the Common Stock of Microsoft Corporation, the Common Stock of Hilton Worldwide Holdings Inc. and the Common Stock of HP Inc.
Principal at Risk Securities
Risk Factors
The following is a non-exhaustive list of certain key risk
factors for investors in the securities. For further discussion of these and other risks, you should read the section entitled
“Risk Factors” in the accompanying product supplement and prospectus. You should also consult your investment, legal,
tax, accounting and other advisers in connection with your investment in the securities.
|
§
|
The securities do not guarantee the return of any principal.
The terms of the securities
differ from those of ordinary debt securities in that the securities do not guarantee the return of any of the principal amount
at maturity. Instead, if the securities have not been automatically redeemed prior to maturity and if the final share price of
any underlying stock
is
less than
its respective downside threshold level, you will be exposed to the decline in
the closing price of the worst performing underlying stock, as compared to the initial share price, on a 1-to-1 basis and you will
receive a payment at maturity that is less than 55% of the stated principal amount and could be zero.
|
|
§
|
You are exposed to the price risk of each underlying stock.
Your
return on the securities is not linked to a basket consisting of the three underlying stocks. Rather, it will be contingent upon
the independent performance of each underlying stock. Unlike an instrument with a return linked to a basket of underlying assets,
in which risk is mitigated and diversified among all the components of the basket, you will be exposed to the risks related to
each underlying stock. Poor performance by
any underlying stock
over the term of
the securities may negatively affect your return and will not be offset or mitigated by any positive performance by the other underlying
stocks. If the securities are not automatically redeemed prior to maturity and
any underlying stock
has
declined to below its respective downside threshold level as of the final determination date, you will be
fully exposed
to the decline in the worst performing underlying stock over the term of the securities on a
1-to-1 basis, even if the other underlying stocks have appreciated or have not declined as much. Under this scenario, the value
of the payment at maturity will be less than 55% of the stated principal amount and could be zero. Accordingly, your investment
is subject to the price risk of each underlying stock.
|
|
§
|
Investors will not participate in any appreciation in the price of any underlying stock.
Investors
will not participate in any appreciation in the price of any underlying stock from its respective initial share price, and the
return on the securities will be limited to the monthly coupon that is paid for each monthly interest period.
|
|
§
|
The automatic early redemption feature may limit the term of your investment to approximately
four months.
If the securities are redeemed early, you may not be able to reinvest at comparable
terms or returns. The term of your investment in the securities may be limited to as short as approximately four months by the
automatic early redemption feature of the securities. The securities will be redeemed when the determination closing price of
each
underlying stock is
greater than equal to its respective redemption threshold level
on any monthly determination date (beginning after four months).
If the securities are redeemed
prior to maturity, you will receive no more monthly coupons and may be forced to invest in a lower interest rate environment and
may not be able to reinvest at comparable terms or returns.
|
|
§
|
The market price will be influenced by many unpredictable factors.
Several
factors will influence the value of the securities in the secondary market and the price at which MS & Co. may be willing to
purchase or sell the securities in the secondary market. Although we expect that generally the closing prices of the underlying
stocks on any day, including in relation to the respective downside threshold levels, will affect the value of the securities more
than any other single factor, other factors that may influence the value of the securities include:
|
|
o
|
the trading price and volatility (frequency and magnitude of changes in value) of the underlying stocks,
|
|
o
|
dividend rates on the underlying stocks,
|
|
o
|
interest and yield rates in the market,
|
|
o
|
time remaining until the securities mature,
|
|
o
|
geopolitical conditions and economic, financial, political, regulatory or judicial events that affect the underlying stocks
and which may affect the final share prices of the underlying stocks,
|
|
o
|
the occurrence of certain events affecting the underlying stock that may or may not require an adjustment to the adjustment
factor, and
|
Morgan Stanley Finance LLC
Worst of Fixed Coupon Auto-Callable RevCons
SM
due due February 23, 2021
Payments on the RevCons Based on the Worst Performing of the Common Stock of Microsoft Corporation, the Common Stock of Hilton Worldwide Holdings Inc. and the Common Stock of HP Inc.
Principal at Risk Securities
|
o
|
any actual or anticipated changes in our credit ratings or credit spreads.
|
The
prices of the underlying stocks may be, and have recently been, volatile, and we can give you no assurance that the volatility
will lessen. See “Microsoft Corporation Overview,” “Hilton Worldwide Holdings Inc. Overview” and “HP
Inc. Overview” below. You may receive less, and possibly significantly less, than the stated principal amount per security
if you try to sell your securities prior to maturity.
|
§
|
The securities are subject to our credit risk, and any actual or anticipated changes to our
credit ratings or credit spreads may adversely affect the market value of the securities.
You are dependent on our ability
to pay all amounts due on the securities on each coupon payment date, upon automatic redemption or at maturity, and therefore you
are subject to our credit risk. If we default on our obligations under the securities, your investment would be at risk and you
could lose some or all of your investment. As a result, the market value of the securities prior to maturity will be affected by
changes in the market’s view of our creditworthiness. Any actual or anticipated decline in our credit ratings or increase
in the credit spreads charged by the market for taking our credit risk is likely to adversely affect the market value of the securities.
|
|
§
|
As a finance subsidiary, MSFL has no independent operations and will have no independent assets.
As a finance subsidiary, MSFL has no independent operations beyond the issuance and administration
of its securities and will have no independent assets available for distributions to holders of MSFL securities if they make claims
in respect of such securities in a bankruptcy, resolution or similar proceeding. Accordingly, any recoveries by such holders will
be limited to those available under the related guarantee by Morgan Stanley and that guarantee will rank
pari passu
with
all other unsecured, unsubordinated obligations of Morgan Stanley. Holders will have recourse only to a single claim against Morgan
Stanley and its assets under the guarantee. Holders of securities issued by MSFL should accordingly assume that in any such proceedings
they would not have any priority over and should be treated
pari passu
with the claims of other unsecured, unsubordinated
creditors of Morgan Stanley, including holders of Morgan Stanley-issued securities.
|
|
§
|
Investing in the securities is not equivalent to investing in the underlying stocks.
Investors
in the securities will not participate in any appreciation in the underlying stocks, and will not have voting rights or rights
to receive dividends or other distributions or any other rights with respect to the underlying stocks. As a result, any return
on the securities will not reflect the return you would realize if you actually owned shares of the underlying stocks and received
the dividends paid or distributions made on them.
|
|
§
|
No affiliation with the underlying stock issuers.
The underlying stock issuers are not
affiliates of ours, are not involved with this offering in any way, and have no obligation to consider your interests in taking
any corporate actions that might affect the value of the securities. We have not made any due diligence inquiry with respect to
the underlying stock issuers in connection with this offering.
|
|
§
|
We may engage in business with or involving the underlying stock issuers without regard to
your interests.
We or our affiliates may presently or from time to time engage in business with the underlying stock issuers
without regard to your interests and thus may acquire non-public information about the underlying issuers. Neither we nor any of
our affiliates undertakes to disclose any such information to you. In addition, we or our affiliates from time to time have published
and in the future may publish research reports with respect to the underlying stock issuers, which may or may not recommend that
investors buy or hold the underlying stocks.
|
|
§
|
The antidilution adjustments the calculation agent is required to make do not cover every
corporate event that could affect the underlying stocks.
MS & Co., as calculation agent, will adjust the adjustment factors
for certain corporate events affecting the underlying stocks, such as stock splits, stock dividends and extraordinary dividends,
and certain other corporate actions involving the issuers of the underlying stocks, such as mergers. However, the calculation agent
will not make an adjustment for every corporate event that can affect the underlying stocks. For example, the calculation agent
is not required to make any adjustments if the issuers of the underlying stocks or anyone else makes a partial tender or partial
exchange offer for the underlying stocks, nor will adjustments be made following the final determination date. In addition, no
adjustments will be made for regular cash dividends, which are expected to reduce the price of the underlying stocks by the amount
of such dividends. If an event occurs that does not require the calculation agent to adjust an adjustment factor, such as a regular
cash dividend, the market price of the securities and your return on the securities may be materially and adversely affected. For
example, if the record date for a regular cash dividend were to
|
Morgan Stanley Finance LLC
Worst of Fixed Coupon Auto-Callable RevCons
SM
due due February 23, 2021
Payments on the RevCons Based on the Worst Performing of the Common Stock of Microsoft Corporation, the Common Stock of Hilton Worldwide Holdings Inc. and the Common Stock of HP Inc.
Principal at Risk Securities
occur
on or shortly before the final determination date, this may decrease the final share price of an underlying stock to be less than
the downside threshold level (resulting in a loss of a significant portion of all of your investment in the securities), materially
and adversely affecting your return.
|
§
|
The securities will not be listed on any securities exchange and secondary trading may be
limited.
The securities will not be listed on any securities exchange. Therefore, there may be little or no secondary market
for the securities. MS & Co. may, but is not obligated to, make a market in the securities and, if it once chooses to make
a market, may cease doing so at any time. When it does make a market, it will generally do so for transactions of routine secondary
market size at prices based on its estimate of the current value of the securities, taking into account its bid/offer spread, our
credit spreads, market volatility, the notional size of the proposed sale, the cost of unwinding any related hedging positions,
the time remaining to maturity and the likelihood that it will be able to resell the securities. Even if there is a secondary market,
it may not provide enough liquidity to allow you to trade or sell the securities easily. Since other broker-dealers may not participate
significantly in the secondary market for the securities, the price at which you may be able to trade your securities is likely
to depend on the price, if any, at which MS & Co. is willing to transact. If, at any time, MS & Co. were to cease making
a market in the securities, it is likely that there would be no secondary market for the securities. Accordingly, you should be
willing to hold your securities to maturity.
|
|
§
|
The rate we are willing to pay for securities of this type, maturity and issuance size is
likely to be lower than the rate implied by our secondary market credit spreads and advantageous to us. Both the lower rate and
the inclusion of costs associated with issuing, selling, structuring and hedging the securities in the original issue price reduce
the economic terms of the securities, cause the estimated value of the securities to be less than the original issue price and
will adversely affect secondary market prices.
Assuming no change in market conditions or any other relevant factors, the prices,
if any, at which dealers, including MS & Co., may be willing to purchase the securities in secondary market transactions will
likely be significantly lower than the original issue price, because secondary market prices will exclude the issuing, selling,
structuring and hedging-related costs that are included in the original issue price and borne by you and because the secondary
market prices will reflect our secondary market credit spreads and the bid-offer spread that any dealer would charge in a secondary
market transaction of this type as well as other factors.
|
The inclusion of the costs of issuing,
selling, structuring and hedging the securities in the original issue price and the lower rate we are willing to pay as issuer
make the economic terms of the securities less favorable to you than they otherwise would be.
However, because the costs associated
with issuing, selling, structuring and hedging the securities are not fully deducted upon issuance, for a period of up to 5 months
following the issue date, to the extent that MS & Co. may buy or sell the securities in the secondary market, absent changes
in market conditions, including those related to the underlying stocks, and to our secondary market credit spreads, it would do
so based on values higher than the estimated value, and we expect that those higher values will also be reflected in your brokerage
account statements.
|
§
|
The estimated value of the securities is determined by reference to our pricing and valuation
models, which may differ from those of other dealers and is not a maximum or minimum secondary market price.
These pricing
and valuation models are proprietary and rely in part on subjective views of certain market inputs and certain assumptions about
future events, which may prove to be incorrect. As a result, because there is no market-standard way to value these types of securities,
our models may yield a higher estimated value of the securities than those generated by others, including other dealers in the
market, if they attempted to value the securities. In addition, the estimated value on the pricing date does not represent a minimum
or maximum price at which dealers, including MS & Co., would be willing to purchase your securities in the secondary market
(if any exists) at any time. The value of your securities at any time after the date of this document will vary based on many factors
that cannot be predicted with accuracy, including our creditworthiness and changes in market conditions. See also “The market
price will be influenced by many unpredictable factors” above.
|
|
§
|
Hedging and trading activity by our affiliates could potentially adversely affect the value
of the securities.
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 securities (and to other instruments linked to the underlying stocks), including trading in the
underlying stocks. As a result, these entities may be unwinding or adjusting hedge positions during the term of the securities,
and the hedging strategy may involve greater and more frequent dynamic adjustments to the hedge as the final determination date
approaches. Some of our affiliates also trade the underlying stocks and other financial instruments related to the underlying
|
Morgan Stanley Finance LLC
Worst of Fixed Coupon Auto-Callable RevCons
SM
due due February 23, 2021
Payments on the RevCons Based on the Worst Performing of the Common Stock of Microsoft Corporation, the Common Stock of Hilton Worldwide Holdings Inc. and the Common Stock of HP Inc.
Principal at Risk Securities
stocks
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 August 16, 2019 could have increased the initial share price of an underlying stock, and, as a result, could have
increased (i) the applicable redemption threshold levels for such underlying stock, which are the levels at or above which such
underlying stock must close on the determination dates in order for the securities to be redeemed (depending also on the performance
of the other underlying stocks), and (ii) the downside threshold level for such underlying stock, which, if the securities are
not redeemed prior to maturity, is the price at or above which the underlying stock must close in order for you to avoid being
exposed to the negative price performance of the worst
performing underlying stock at maturity (depending also on the performance
of the other underlying stocks). Additionally, such hedging or trading activities during the term of the securities could potentially
affect the price of any underlying stock on the determination dates, and, accordingly, whether the securities are automatically
called prior to maturity, and, if the securities are not called prior to maturity, the payout to you at maturity, if any.
|
§
|
The calculation agent, which is a subsidiary of
Morgan Stanley and an affiliate of MSFL
,
will make determinations with respect to the securities.
As calculation agent, MS & Co. has determined the initial share
prices, the redemption threshold levels and the downside threshold levels, and will determine the final share prices, whether the
securities will be redeemed following any determination date, whether a market disruption event has occurred, whether to make any
adjustments to the adjustment factors and the payment that you will receive upon an automatic early redemption or at maturity,
if any. Moreover, certain determinations made by MS & Co., in its capacity as calculation agent, may require it to exercise
discretion and make subjective judgments, such as with respect to the occurrence or nonoccurrence of market disruption events and
certain adjustments to the adjustment factors. These potentially subjective determinations may affect the payout to you upon an
automatic early redemption or at maturity, if any. For further information regarding these types of determinations, see “Description
of Auto-Callable Securities—Auto-Callable Securities Linked to Underlying Shares” and “—Calculation Agent
and Calculations” in the accompanying product supplement. In addition, MS & Co. has determined the estimated value of
the securities on the pricing date.
|
|
§
|
The U.S. federal income tax consequences of an investment in the securities are uncertain.
There is no direct legal
authority as to the proper treatment of the securities for U.S. federal income tax purposes, and, therefore, significant aspects
of the tax treatment of the securities are uncertain.
|
Please read the discussion under
“Additional Information―Tax considerations” in this document concerning the U.S. federal income tax consequences
of an investment in the securities. We intend to treat a security for U.S. federal income tax purposes as a unit consisting of
(i) a Put Right (as defined below under “Additional Information―Tax considerations”) written by you to us that,
if exercised, requires you to pay to us an amount equal to the Deposit (as defined below under “Additional Information―Tax
considerations”), in exchange for a cash amount based on the performance of the worst performing underlying stock, and (ii)
a Deposit with us of a fixed amount of cash to secure your obligation under the Put Right. Alternative U.S. federal income tax
treatments of the securities are possible, and if the Internal Revenue Service (the “IRS”) were successful in asserting
such an alternative tax treatment for the securities the timing and the character of income on the securities might differ significantly
from the tax treatment described herein. We do not plan to request a ruling from the IRS regarding the tax treatment of the securities,
and the IRS or a court may not agree with the tax treatment described herein.
In 2007, the U.S. Treasury Department
and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts”
and similar instruments. While it is not clear whether the securities would be viewed as similar to the prepaid forward contracts
described in the notice, it is possible that any Treasury regulations or other guidance issued after consideration of these issues
could materially and adversely affect the tax consequences of an investment in the securities, possibly with retroactive effect.
The notice focuses on a number of issues, the most relevant of which for holders of the securities are the character and timing
of income or loss (including whether the entire coupon on the securities should be required to be included currently as ordinary
income) and the degree, if any, to which income realized by non-U.S. investors should be subject to withholding tax.
Non-U.S. Holders should note that
we currently do not intend to withhold on any payments made with respect to the securities to Non-U.S. Holders (subject to compliance
by such holders with certification necessary to establish an exemption from withholding and to the discussion under “Additional
Information―Tax considerations—FATCA”).
Morgan Stanley Finance LLC
Worst of Fixed Coupon Auto-Callable RevCons
SM
due due February 23, 2021
Payments on the RevCons Based on the Worst Performing of the Common Stock of Microsoft Corporation, the Common Stock of Hilton Worldwide Holdings Inc. and the Common Stock of HP Inc.
Principal at Risk Securities
However, in the event of a change
of law or any formal or informal guidance by the IRS, the U.S. Treasury Department or Congress, we may decide to withhold on payments
made with respect to the securities to Non-U.S. Holders and will not be required to pay any additional amounts with respect to
amounts withheld.
Both U.S. and Non-U.S. Holders should
consult their tax advisers regarding the U.S. federal income tax consequences of an investment in the securities, including possible
alternative treatments, the issues presented by the IRS notice and any tax consequences arising under the laws of any state, local
or non-U.S. taxing jurisdiction.
Morgan Stanley Finance LLC
Worst of Fixed Coupon Auto-Callable RevCons
SM
due due February 23, 2021
Payments on the RevCons Based on the Worst Performing of the Common Stock of Microsoft Corporation, the Common Stock of Hilton Worldwide Holdings Inc. and the Common Stock of HP Inc.
Principal at Risk Securities
Microsoft Corporation Overview
Microsoft Corporation develops, licenses and supports a range
of software products and services, designs, manufactures and sells devices and delivers online advertising to a global customer
audience. The MSFT Stock is registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Information provided to or filed with the Securities and Exchange Commission by Microsoft Corporation pursuant to the Exchange
Act can be located by reference to the Securities and Exchange Commission file number 001-37845 through the Securities and Exchange
Commission’s website at .www.sec.gov. In addition, information regarding Microsoft Corporation may be obtained from other
sources including, but not limited to, press releases, newspaper articles and other publicly disseminated documents.
Neither
the issuer nor the agent makes any representation that such publicly available documents or any other publicly available information
regarding the issuer of the MSFT Stock is accurate or complete.
Information as of market close on August 16, 2019:
Bloomberg Ticker Symbol:
|
MSFT
|
Exchange:
|
Nasdaq
|
Current Stock Price:
|
$136.13
|
52 Weeks Ago:
|
$107.64
|
52 Week High (on 7/26/2019):
|
$141.34
|
52 Week Low (on 12/24/2018):
|
$94.13
|
Current Dividend Yield:
|
1.35%
|
The following table sets forth the published
high and low closing prices of, as well as dividends on, the MSFT Stock for each quarter from January 1, 2016 through August 16,
2019. The closing price of the MSFT Stock on August 16, 2019 was $136.13. The associated graph shows the closing prices of the
MSFT Stock for each day from January 1, 2014 through
August 16, 2019
. We obtained the information
in the table and graph below from Bloomberg Financial Markets, without independent verification. The historical performance of
the MSFT Stock should not be taken as an indication of its future performance, and no assurance can be given as to the price of
the MSFT Stock at any time, including on the determination dates.
Common Stock of Microsoft Corporation (CUSIP 594918104)
|
High ($)
|
Low ($)
|
Dividends ($)
|
2016
|
|
|
|
First Quarter
|
55.23
|
49.28
|
0.36
|
Second Quarter
|
56.46
|
48.43
|
0.36
|
Third Quarter
|
58.30
|
51.16
|
0.36
|
Fourth Quarter
|
63.62
|
56.92
|
0.39
|
2017
|
|
|
|
First Quarter
|
65.86
|
62.30
|
0.39
|
Second Quarter
|
72.52
|
64.95
|
0.39
|
Third Quarter
|
75.44
|
68.17
|
0.39
|
Fourth Quarter
|
86.85
|
74.26
|
0.42
|
2018
|
|
|
|
First Quarter
|
96.77
|
85.01
|
0.42
|
Second Quarter
|
102.49
|
88.52
|
0.42
|
Third Quarter
|
114.67
|
99.05
|
0.42
|
Fourth Quarter
|
115.61
|
94.13
|
0.46
|
2019
|
|
|
|
First Quarter
|
120.22
|
97.40
|
0.46
|
Second Quarter
|
137.78
|
119.02
|
0.46
|
Third Quarter (through August 16, 2019)
|
141.34
|
132.21
|
0.46
|
Morgan Stanley Finance LLC
Worst of Fixed Coupon Auto-Callable RevCons
SM
due due February 23, 2021
Payments on the RevCons Based on the Worst Performing of the Common Stock of Microsoft Corporation, the Common Stock of Hilton Worldwide Holdings Inc. and the Common Stock of HP Inc.
Principal at Risk Securities
We make no representation as to the amount
of dividends, if any, that Microsoft Corporation may pay in the future. In any event, as an investor in the Worst of Fixed Coupon
Auto-Callable RevCons, you will not be entitled to receive dividends, if any, that may be payable on the common stock of Microsoft
Corporation.
Common Stock of Microsoft Corporation – Daily Closing Prices
January 1, 2014 to August 16, 2019
|
|
This document relates only to the securities
offered hereby and does not relate to the MSFT Stock or other securities of Microsoft Corporation. We have derived all disclosures
contained in this document regarding Microsoft Corporation stock from the publicly available documents described above. In connection
with the offering of the securities, neither we nor the agent has participated in the preparation of such documents or made any
due diligence inquiry with respect to Microsoft Corporation. Neither we nor the agent makes any representation that such publicly
available documents or any other publicly available information regarding Microsoft Corporation is accurate or complete. Furthermore,
we cannot give any assurance that all events occurring prior to the date hereof (including events that would affect the accuracy
or completeness of the publicly available documents described above) that would affect the trading price of the MSFT Stock (and
therefore the price of the MSFT Stock at the time we price the securities) have been publicly disclosed. Subsequent disclosure
of any such events or the disclosure of or failure to disclose material future events concerning Microsoft Corporation could affect
the value received with respect to the securities and therefore the value of the securities.
Neither the issuer nor any of its affiliates
makes any representation to you as to the performance of the MSFT Stock.
Morgan Stanley Finance LLC
Worst of Fixed Coupon Auto-Callable RevCons
SM
due due February 23, 2021
Payments on the RevCons Based on the Worst Performing of the Common Stock of Microsoft Corporation, the Common Stock of Hilton Worldwide Holdings Inc. and the Common Stock of HP Inc.
Principal at Risk Securities
Hilton Worldwide Holdings Inc. Overview
Hilton Worldwide Holdings Inc. is a hospitality company. The
HLT Stock is registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Information
provided to or filed with the Securities and Exchange Commission by Hilton Worldwide Holdings Inc. pursuant to the Exchange Act
can be located by reference to the Securities and Exchange Commission file number 001-36243 through the Securities and Exchange
Commission’s website at .www.sec.gov. In addition, information regarding Hilton Worldwide Holdings Inc. may be obtained
from other sources including, but not limited to, press releases, newspaper articles and other publicly disseminated documents.
Neither the issuer nor the agent makes any representation that such publicly available documents or any other publicly available
information regarding the issuer of the HLT Stock is accurate or complete.
Information as of market close on August 16, 2019:
Bloomberg Ticker Symbol:
|
HLT
|
Exchange:
|
NYSE
|
Current Stock Price:
|
$93.01
|
52 Weeks Ago:
|
$77.24
|
52 Week High (on 7/11/2019):
|
$100.70
|
52 Week Low (on 10/24/2018):
|
$63.82
|
Current Dividend Yield:
|
0.65%
|
The following table sets forth the published
high and low closing prices of, as well as dividends on, the HLT Stock for each quarter from January 1, 2016 through August 16,
2019. The closing price of the HLT Stock on August 16, 2019 was
$93.01
. The associated graph
shows the closing prices of the HLT Stock for each day from January 1, 2014 through
August 16, 2019
.
We obtained the information in the table and graph below from Bloomberg Financial Markets, without independent verification. The
historical performance of the HLT Stock should not be taken as an indication of its future performance, and no assurance can be
given as to the price of the HLT Stock at any time, including on the determination dates.
Common Stock of Hilton Worldwide Holdings Inc. (CUSIP 43300A203)
|
High ($)
|
Low ($)
|
Dividends ($)
|
2016
|
|
|
|
First Quarter
|
46.64
|
35.25
|
0.21
|
Second Quarter
|
48.07
|
42.06
|
0.21
|
Third Quarter
|
50.00
|
45.92
|
0.21
|
Fourth Quarter
|
56.91
|
45.65
|
0.21
|
2017
|
|
|
|
First Quarter
|
59.46
|
55.40
|
0.15
|
Second Quarter
|
67.41
|
56.60
|
0.15
|
Third Quarter
|
69.50
|
60.82
|
0.15
|
Fourth Quarter
|
80.45
|
68.86
|
0.15
|
2018
|
|
|
|
First Quarter
|
87.69
|
78.17
|
0.15
|
Second Quarter
|
84.68
|
75.01
|
0.15
|
Third Quarter
|
82.96
|
75.31
|
0.15
|
Fourth Quarter
|
78.39
|
63.82
|
0.15
|
2019
|
|
|
|
First Quarter
|
86.21
|
67.30
|
0.15
|
Second Quarter
|
97.74
|
84.15
|
0.15
|
Third Quarter (through August 16, 2019)
|
100.70
|
91.35
|
0.15
|
We make no representation as to the amount
of dividends, if any, that Hilton Worldwide Holdings Inc. may pay in the future. In any event, as an investor in the Worst of Fixed
Coupon Auto-Callable RevCons, you will not be entitled to receive dividends, if any, that may be payable on the common stock of
Hilton Worldwide Holdings Inc.
Morgan Stanley Finance LLC
Worst of Fixed Coupon Auto-Callable RevCons
SM
due due February 23, 2021
Payments on the RevCons Based on the Worst Performing of the Common Stock of Microsoft Corporation, the Common Stock of Hilton Worldwide Holdings Inc. and the Common Stock of HP Inc.
Principal at Risk Securities
Common Stock of Hilton Worldwide Holdings Inc. – Daily Closing Prices
January 1, 2014 to August 16, 2019
|
|
This document relates only to the securities
offered hereby and does not relate to the HLT Stock or other securities of Hilton Worldwide Holdings Inc. We have derived all disclosures
contained in this document regarding Hilton Worldwide Holdings Inc. stock from the publicly available documents described above.
In connection with the offering of the securities, neither we nor the agent has participated in the preparation of such documents
or made any due diligence inquiry with respect to Hilton Worldwide Holdings Inc. Neither we nor the agent makes any representation
that such publicly available documents or any other publicly available information regarding Hilton Worldwide Holdings Inc. is
accurate or complete. Furthermore, we cannot give any assurance that all events occurring prior to the date hereof (including events
that would affect the accuracy or completeness of the publicly available documents described above) that would affect the trading
price of the HLT Stock (and therefore the price of the HLT Stock at the time we price the securities) have been publicly disclosed.
Subsequent disclosure of any such events or the disclosure of or failure to disclose material future events concerning Hilton Worldwide
Holdings Inc. could affect the value received with respect to the securities and therefore the value of the securities.
Neither the issuer nor any of its affiliates
makes any representation to you as to the performance of the HLT Stock.
Morgan Stanley Finance LLC
Worst of Fixed Coupon Auto-Callable RevCons
SM
due due February 23, 2021
Payments on the RevCons Based on the Worst Performing of the Common Stock of Microsoft Corporation, the Common Stock of Hilton Worldwide Holdings Inc. and the Common Stock of HP Inc.
Principal at Risk Securities
HP Inc. Overview
HP Inc. is a provider of
personal computing and other access devices, imaging and printing products and related technologies, solutions and services. The
HPQ Stock is registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Information provided
to or filed with the Securities and Exchange Commission by HP Inc. pursuant to the Exchange Act can be located by reference to
the Securities and Exchange Commission file number 001-04423 through the Securities and Exchange Commission’s website at
.www.sec.gov.
In addition, information regarding HP Inc. may be obtained from other sources including, but not limited to,
press releases, newspaper articles and other publicly disseminated documents.
Neither the issuer nor the agent makes any representation
that such publicly available documents or any other publicly available information regarding the issuer of the HPQ Stock is accurate
or complete.
Information as of market close on August 16, 2019:
Bloomberg Ticker Symbol:
|
HPQ
|
Exchange:
|
NYSE
|
Current Stock Price:
|
$19.08
|
52 Weeks Ago:
|
$24.14
|
52 Week High (on 10/4/2018):
|
$26.42
|
52 Week Low (on 5/13/2019):
|
$18.27
|
Current Dividend Yield:
|
3.36%
|
The following
table sets forth the published high and low closing prices of, as well as dividends on, the underlying stock for each quarter from
January 1, 2016 through August 16, 2019. The closing price of the HPQ Stock on August 16, 2019 was $19.08. The
associated graph shows the closing prices of the HPQ Stock for each day from January 1, 2014 through August 16, 2019. We
obtained the information in the table and graph below from Bloomberg Financial Markets, without independent verification.
The historical performance of the underlying stock should not be taken as an indication of its future performance, and no assurance
can be given as to the price of the HPQ Stock at any time, including on the determination dates.
Common Stock of HP Inc. (CUSIP 40434L105)
|
High ($)
|
Low ($)
|
Dividends ($)
|
2016
|
|
|
|
First Quarter
|
12.32
|
9.02
|
0.124
|
Second Quarter
|
13.87
|
11.43
|
0.124
|
Third Quarter
|
15.53
|
12.36
|
0.124
|
Fourth Quarter
|
16.16
|
13.80
|
0.1327
|
2017
|
|
|
|
First Quarter
|
17.88
|
14.58
|
0.1327
|
Second Quarter
|
19.47
|
17.27
|
0.1327
|
Third Quarter
|
19.97
|
17.19
|
0.1327
|
Fourth Quarter
|
22.46
|
20.09
|
0.1393
|
2018
|
|
|
|
First Quarter
|
24.65
|
19.92
|
0.1393
|
Second Quarter
|
24.01
|
20.78
|
0.1393
|
Third Quarter
|
25.97
|
22.59
|
0.1393
|
Fourth Quarter
|
26.42
|
19.38
|
0.1602
|
2019
|
|
|
|
First Quarter
|
23.91
|
18.74
|
0.1602
|
Second Quarter
|
20.86
|
18.27
|
0.1602
|
Third Quarter (through August 16, 2019)
|
21.63
|
18.63
|
0.1602
|
We make no representation as to the amount of dividends, if any,
that HP Inc. may pay in the future. In any event, as an investor in the Worst of Fixed Coupon Auto-Callable RevCons, you will not
be entitled to receive dividends, if any, that may be payable on the common stock of HP Inc.
Morgan Stanley Finance LLC
Worst of Fixed Coupon Auto-Callable RevCons
SM
due due February 23, 2021
Payments on the RevCons Based on the Worst Performing of the Common Stock of Microsoft Corporation, the Common Stock of Hilton Worldwide Holdings Inc. and the Common Stock of HP Inc.
Principal at Risk Securities
Common Stock of HP Inc. – Daily Closing Prices
January 1, 2014 to August 16, 2019
|
|
This document relates only to the securities
offered hereby and does not relate to the HPQ Stock or other securities of HP Inc. We have derived all disclosures contained in
this document regarding HP Inc. stock from the publicly available documents described above. In connection with the offering of
the securities, neither we nor the agent has participated in the preparation of such documents or made any due diligence inquiry
with respect to HP Inc. Neither we nor the agent makes any representation that such publicly available documents or any other publicly
available information regarding HP Inc. is accurate or complete. Furthermore, we cannot give any assurance that all events occurring
prior to the date hereof (including events that would affect the accuracy or completeness of the publicly available documents described
above) that would affect the trading price of the HPQ Stock (and therefore the price of the HPQ Stock at the time we price the
securities) have been publicly disclosed. Subsequent disclosure of any such events or the disclosure of or failure to disclose
material future events concerning HP Inc. could affect the value received with respect to the securities and therefore the value
of the securities.
Neither the issuer nor any of its affiliates makes any representation
to you as to the performance of the HPQ Stock.
Morgan Stanley Finance LLC
Worst of Fixed Coupon Auto-Callable RevCons
SM
due due February 23, 2021
Payments on the RevCons Based on the Worst Performing of the Common Stock of Microsoft Corporation, the Common Stock of Hilton Worldwide Holdings Inc. and the Common Stock of HP Inc.
Principal at Risk Securities
Additional Terms of the Securities
Please read this information in conjunction with the summary
terms on the front cover of this document.
Additional
Terms:
|
|
If the terms described herein are inconsistent with those described in the accompanying product supplement or prospectus, the terms described herein shall control.
|
Day
count convention:
|
Interest will be computed on the basis of a 360-day year of twelve 30-day months.
|
Interest
period:
|
The monthly period from and including the original issue date (in the case of the first interest period) or the previously scheduled coupon payment date, as applicable, to but excluding the following scheduled coupon payment date, with no adjustment for any postponement thereof.
|
Record
date:
|
The record date for each coupon payment date shall be the date one business day prior to such scheduled coupon payment date; provided, however, that any monthly coupon payable at maturity or upon redemption shall be payable to the person to whom the payment at maturity or early redemption payment, as the case may be, shall be payable.
|
Underlying
stock:
|
The accompanying product supplement refers to each underlying stock as the “underlying shares.”
|
Underlying
stock issuer:
|
With respect to the MSFT Stock, Microsoft Corporation
With respect to the HLT Stock, Hilton Worldwide Holdings Inc.
With respect to the HPQ Stock, HP Inc.
The accompanying product supplement refers to each underlying
stock issuer as the “underlying company.”
|
Downside
threshold level:
|
The accompanying product supplement refers to the downside threshold level as the “trigger level.”
|
Postponement
of maturity date:
|
If the scheduled final determination date is not a trading day or if a market disruption event with respect to any underlying stock occurs on that day so that the final determination date for any underlying stock is postponed and falls less than two business days prior to the scheduled maturity date, the maturity date of the securities will be postponed to the second business day following that final determination date as postponed.
|
Postponement
of coupon payment dates:
|
If a coupon payment date (including the maturity date) is postponed, no adjustment shall be made to any monthly coupon paid on that postponed date.
|
Antidilution
adjustments:
|
The following replaces in its entirety the portion of the
section entitled “Antidilution Adjustments” in the accompanying product supplement for auto-callable securities from
the start of paragraph 5 to the end of such section.
5. If, with respect to one or more underlying stocks, (i) there
occurs any reclassification or change of such underlying stock, including, without limitation, as a result of the issuance of any
tracking stock by the underlying stock issuer for such underlying stock, (ii) such underlying stock issuer or any surviving entity
or subsequent surviving entity of such underlying stock issuer (the “successor corporation”) has been subject to a
merger, combination or consolidation and is not the surviving entity, (iii) any statutory exchange of securities of such underlying
stock issuer or any successor corporation with another corporation occurs (other than pursuant to clause (ii) above), (iv) such
underlying stock issuer is liquidated, (v) such underlying stock issuer issues to all of its shareholders equity securities of
an issuer other than such underlying stock issuer (other than in a transaction described in clause (ii), (iii) or (iv) above) (a
“spin-off event”) or (vi) a tender or exchange offer or going-private transaction is consummated for all the outstanding
shares of such underlying stock (any such event in clauses (i) through (vi), a “reorganization event”), the method
of determining whether an early redemption has occurred and the amount payable upon an early redemption or at maturity for each
security will be as follows:
·
Upon
any determination date following the effective date of a reorganization event and prior to the final determination date: If the
exchange property value (as defined below) is greater than or equal to the redemption threshold level for the affected underlying
stock, and the determination closing prices (or exchange property values, if applicable) of the other underlying stocks are also
greater than or equal to their respective redemption threshold levels, the securities will be automatically redeemed for an early
redemption payment.
·
Upon
the final determination date, if the securities have not previously been automatically redeemed: You will receive for each security
that you hold a payment at maturity equal to:
Ø
If
the exchange property value on the final determination date is greater than or equal to the respective downside threshold level,
and the final share prices of the other underlying stocks (or exchange property values, as applicable) are also greater than their
respective downside threshold levels:
(i) the stated principal amount plus (ii) the monthly coupon for the final monthly interest
period.
Ø
If
the exchange property value on the final determination date is less than the respective downside threshold level, or if the final
share price(s) (or exchange property value(s), if applicable) of any other underlying stock is less than its respective downside
threshold level:
the monthly coupon for the final
|
Morgan Stanley Finance LLC
Worst of Fixed Coupon Auto-Callable RevCons
SM
due due February 23, 2021
Payments on the RevCons Based on the Worst Performing of the Common Stock of Microsoft Corporation, the Common Stock of Hilton Worldwide Holdings Inc. and the Common Stock of HP Inc.
Principal at Risk Securities
|
interest period plus:
Ø
If
the worst performing underlying stock has not undergone a reorganization event as described in paragraph 5 above:
(i) the stated
principal amount multiplied by the (ii) share performance factor of the worst performing underlying stock.
Ø
If
the worst performing underlying stock has undergone a reorganization event as described in paragraph 5 above:
(i) the stated
principal amount multiplied by (ii) the share performance factor of the worst performing underlying stock. For purposes of determining
the share performance factor of the worst performing underlying stock, the final share price of such worst performing underlying
stock will be deemed to equal the per-share cash value, determined as of the final determination date, of the securities, cash
or any other assets distributed to holders of the worst performing underlying stock in or as a result of any such reorganization
event, including (A) in the case of the issuance of tracking stock, the reclassified share of such worst performing underlying
stock, (B) in the case of a spin-off event, the share of such worst performing underlying stock with respect to which the spun-off
security was issued, and (C) in the case of any other reorganization event where such worst performing underlying stock continues
to be held by the holders receiving such distribution, such worst performing underlying stock (collectively, the “exchange
property”).
If exchange property includes a cash component, investors will
not receive any interest accrued on such cash component. In the event exchange property consists of securities, those securities
will, in turn, be subject to the antidilution adjustments set forth in paragraphs 1 through 5.
For purposes of determining whether or not
the exchange property value is less than the redemption threshold level or less than the downside threshold level, or for determining
the worst performing underlying stock, “exchange property value” means (x) for any cash received in any reorganization
event, the value, as determined by the calculation agent, as of the date of receipt, of such cash received for one share of such
underlying stock, as adjusted by the adjustment factor at the time of such reorganization event, (y) for any property other than
cash or securities received in any such reorganization event, the market value, as determined by the calculation agent in its sole
discretion, as of the date of receipt, of such exchange property received for one share of such underlying stock, as adjusted by
the adjustment factor at the time of such reorganization event and (z) for any security received in any such reorganization event,
an amount equal to the determination closing price, as of the day on which the exchange property value is determined, per share
of such security multiplied by the quantity of such security received for each share of such underlying stock, as adjusted by the
adjustment factor at the time of such reorganization event.
For purposes of paragraph 5 above, in the case
of a consummated tender or exchange offer or going-private transaction involving consideration of particular types, exchange property
shall be deemed to include the amount of cash or other property delivered by the offeror in the tender or exchange offer (in an
amount determined on the basis of the rate of exchange in such tender or exchange offer or going-private transaction). In the event
of a tender or exchange offer or a going-private transaction with respect to exchange property in which an offeree may elect to
receive cash or other property, exchange property shall be deemed to include the kind and amount of cash and other property received
by offerees who elect to receive cash.
Following the occurrence of any reorganization
event referred to in paragraph 5 above, all references in this offering document and in the related product supplement with respect
to the securities to such “underlying stock” shall be deemed to refer to the exchange property and references to a
“share” or “shares” of such underlying stock shall be deemed to refer to the applicable unit or units of
such exchange property, unless the context otherwise requires.
No adjustment to an adjustment factor will
be required unless such adjustment would require a change of at least 0.1% in the adjustment factor then in effect. The adjustment
factor resulting from any of the adjustments specified above will be rounded to the nearest one hundred-thousandth, with five one-millionths
rounded upward. Adjustments to an adjustment factor will be made up to the close of business on the final determination date.
No adjustments to an adjustment factor or method
of calculating the adjustment factor will be required other than those specified above. The adjustments specified above do not
cover all events that could affect the determination closing price or the final share price of such underlying stock, including,
without limitation, a partial tender or exchange offer for such underlying stock.
The calculation agent shall be solely responsible
for the determination and calculation of any adjustments to an adjustment factor or method of calculating an adjustment factor
and of any related determinations and calculations with respect to any distributions of stock, other securities or other property
or assets (including cash) in connection with any corporate event described in paragraphs 1 through 5 above, and its determinations
and calculations with respect thereto shall be conclusive in the absence of manifest error.
The calculation agent will provide information as to
any adjustments to an adjustment factor or to the method of calculating the amount payable at maturity of the securities made
pursuant to paragraph 5 above upon
|
Morgan Stanley Finance LLC
Worst of Fixed Coupon Auto-Callable RevCons
SM
due due February 23, 2021
Payments on the RevCons Based on the Worst Performing of the Common Stock of Microsoft Corporation, the Common Stock of Hilton Worldwide Holdings Inc. and the Common Stock of HP Inc.
Principal at Risk Securities
|
written request by any investor in the securities.
|
Trustee:
|
The Bank of New York Mellon
|
Calculation
agent:
|
MS & Co.
|
Issuer
notices to registered security holders, the trustee and the depositary:
|
In the event that the maturity date is postponed due to postponement
of the final determination date, the issuer shall give notice of such postponement and, once it has been determined, of the date
to which the maturity date has been rescheduled (i) to each registered holder of the securities by mailing notice of such postponement
by first class mail, postage prepaid, to such registered holder’s last address as it shall appear upon the registry books,
(ii) to the trustee by facsimile, confirmed by mailing such notice to the trustee by first class mail, postage prepaid, at its
New York office and (iii) to The 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 securities in the manner herein provided shall be conclusively presumed to have been duly given to such registered holder,
whether or not such registered holder receives the notice. The issuer shall give such notice as promptly as possible, and in no
case later than (i) with respect to notice of postponement of the maturity date, the business day immediately preceding the scheduled
maturity date and (ii) with respect to notice of the date to which the maturity date has been rescheduled, the business day immediately
following the final determination date as postponed.
In the event that the securities are subject to early redemption,
the issuer shall, (i) on the business day following the applicable determination date, give notice of the early redemption and
the early redemption payment, including specifying the payment date of the amount due upon the early redemption, (x) to each registered
holder of the securities by mailing notice of such early redemption by first class mail, postage prepaid, to such registered holder’s
last address as it shall appear upon the registry books, (y) to the trustee by facsimile confirmed by mailing such notice to the
trustee by first class mail, postage prepaid, at its New York office and (z) to the depositary by telephone or facsimile confirmed
by mailing such notice to the depositary by first class mail, postage prepaid, and (ii) on or prior to the early redemption date,
deliver the aggregate cash amount due with respect to the securities to the trustee for delivery to the depositary, as holder of
the securities. Any notice that is mailed to a registered holder of the securities in the manner herein provided shall be conclusively
presumed to have been duly given to such registered holder, whether or not such registered holder receives the notice. This notice
shall be given by the issuer or, at the issuer’s request, by the trustee in the name and at the expense of the issuer, with
any such request to be accompanied by a copy of the notice to be given.
The issuer shall, or shall cause the
calculation agent to, (i) provide written notice to the trustee, on which notice the trustee may conclusively rely, and to the
depositary of the amount of cash to be delivered as monthly coupon with respect to each security on or prior to 10:30 a.m. (New
York City time) on the business day preceding each coupon payment date, and (ii) deliver the aggregate cash amount due with respect
to the monthly coupon to the trustee for delivery to the depositary, as holder of the securities, on the applicable coupon payment
date.
The issuer shall, or shall cause the calculation agent
to, (i) provide written notice to the trustee, on which notice the trustee may conclusively rely, and to the depositary of the
amount of cash to be delivered with respect to each stated principal amount of the securities, on or prior to 10:30 a.m. (New
York City time) on the business day preceding the maturity date, and (ii) deliver the aggregate cash amount due with respect to
the securities to the trustee for delivery to the depositary, as holder of the securities, on the maturity date.
|
Morgan Stanley Finance LLC
Worst of Fixed Coupon Auto-Callable RevCons
SM
due due February 23, 2021
Payments on the RevCons Based on the Worst Performing of the Common Stock of Microsoft Corporation, the Common Stock of Hilton Worldwide Holdings Inc. and the Common Stock of HP Inc.
Principal at Risk Securities
Additional Information About the Securities
Additional Information:
|
|
Listing:
|
The securities will not be listed on any securities exchange.
|
Minimum ticketing size:
|
$1,000 / 1 security
|
Tax considerations:
|
Prospective
investors should note that the discussion under the section called “United States Federal Taxation” in the
accompanying product supplement does not apply to the securities issued under this document and is superseded by the following
discussion.
The following is a general discussion of the
material U.S. federal income tax consequences and certain estate tax consequences of ownership and disposition of the securities.
This discussion applies only to initial investors in the securities who:
•
purchase
the securities at their “issue price,” which will equal the first price at which a substantial amount of the securities
is sold to the public (not including bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters,
placement agents or wholesalers); and
•
hold
the securities as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”).
This discussion does not describe all of the
tax consequences that may be relevant to a holder in light of the holder’s particular circumstances or to holders subject
to special rules, such as:
•
certain
financial institutions;
•
insurance
companies;
•
certain
dealers and traders in securities or commodities;
•
investors
holding the securities as part of a “straddle,” wash sale, conversion transaction, integrated transaction or constructive
sale transaction;
•
U.S.
Holders (as defined below) whose functional currency is not the U.S. dollar;
•
partnerships
or other entities classified as partnerships for U.S. federal income tax purposes;
•
regulated
investment companies;
•
real
estate investment trusts; or
•
tax-exempt
entities, including “individual retirement accounts” or “Roth IRAs” as defined in Section 408 or 408A of
the Code, respectively.
If an entity that is classified as a partnership for U.S. federal
income tax purposes holds the securities, the U.S. federal income tax treatment of a partner will generally depend on the status
of the partner and the activities of the partnership. If you are a partnership holding the securities or a partner in such a partnership,
you should consult your tax adviser as to the particular U.S. federal tax consequences of holding and disposing of the securities
to you.
As the law applicable to the U.S. federal income taxation of
instruments such as the securities is technical and complex, the discussion below necessarily represents only a general summary.
The effect of any applicable state, local or non-U.S. tax laws is not discussed, nor are any alternative minimum tax consequences
or consequences resulting from the Medicare tax on investment income. Moreover, the discussion below does not address the consequences
to taxpayers subject to special tax accounting rules under Section 451(b) of the Code.
This discussion is based on the Code, administrative
pronouncements, judicial decisions and final, temporary and proposed Treasury regulations, all as of the date hereof, changes to
any of which subsequent to the date hereof may affect the tax consequences described herein. Persons considering the purchase of
the securities should consult their tax advisers with regard to the application of the U.S. federal income tax laws to their particular
situations as well as any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
General
Due to the lack of any controlling
legal authority, there is substantial uncertainty regarding the U.S. federal income tax consequences of an investment in the securities.
We intend to treat a security, under current law,
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Morgan Stanley Finance LLC
Worst of Fixed Coupon Auto-Callable RevCons
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Payments on the RevCons Based on the Worst Performing of the Common Stock of Microsoft Corporation, the Common Stock of Hilton Worldwide Holdings Inc. and the Common Stock of HP Inc.
Principal at Risk Securities
|
for U.S. federal income tax purposes, as a
unit consisting of the following:
(i) a
put right (the “Put Right”) written by you to us that, if exercised, requires you to pay us an amount equal to the
Deposit (as defined below) in exchange for a cash amount based on the performance of the worst performing underlying stock; and
(ii) a
deposit with us of a fixed amount of cash, equal to the issue price, to secure your obligation under the Put Right (the “Deposit”)
that pays interest based on our cost of borrowing at the time of issuance (the “Yield on the Deposit”).
Based on the treatment set forth above, a portion of the coupon
on the securities will be treated as the Yield on the Deposit, and the remainder will be attributable to the premium on the Put
Right (the “Put Premium”). The Yield on the Deposit will be determined by us as of the pricing date and set forth in
the applicable pricing supplement.
We will allocate 100% of the issue price of the securities to
the Deposit and none to the Put Right. Our allocation of the issue price between the Put Right and the Deposit will be binding
on you, unless you timely and explicitly disclose to the Internal Revenue Service (the “IRS”) that your allocation
is different from ours. This allocation is not, however, binding on the IRS or a court.
No statutory, judicial or administrative authority
directly addresses the treatment of the securities or instruments similar to the securities for U.S. federal income tax purposes,
and no ruling is being requested from the IRS with respect to the securities.
Significant aspects of the U.S. federal income
tax consequences of an investment in the securities are uncertain, and no assurance can be given that the IRS or a court will agree
with the tax treatment described herein.
In the opinion of our counsel, Davis Polk & Wardwell LLP, the treatment of the
securities described above is reasonable under current law; however, our counsel has advised us that it is unable to conclude affirmatively
that this treatment is more likely than not to be upheld, and that alternative treatments are possible. Moreover, our counsel’s
opinion is based on market conditions as of the date of this preliminary pricing supplement and is subject to confirmation on the
pricing date.
Accordingly, you should consult your tax adviser regarding the U.S. federal income tax consequences of an investment
in the securities (including alternative treatments of the securities). Unless otherwise stated, the following discussion is based
on the treatment and the allocation described above.
Tax Consequences to U.S. Holders
This section applies to you only if you are
a U.S. Holder. As used herein, the term “U.S. Holder” means a beneficial owner of a security that is, for U.S. federal
income tax purposes:
•
a
citizen or individual resident of the United States;
•
a
corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state
thereof or the District of Columbia; or
•
an
estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.
Tax Treatment of the Securities
Assuming the treatment of the securities and
allocation of the issue price as set forth above are respected, the following U.S. federal income tax consequences should result.
Coupon Payments on the Securities.
Under the characterization described above under “—General,” only a portion of the coupon payments on the securities
will be attributable to the Yield on the Deposit. The remainder of the coupon payments will represent payments attributable to
the Put Premium. To the extent attributable to the Yield on the Deposit, coupon payments on the securities should generally be
taxable to a U.S. Holder as ordinary interest income at the time accrued or received, in accordance with the U.S. Holder’s
method of accounting for U.S. federal income tax purposes.
The Put Premium will not be taxable to a U.S.
Holder upon receipt but will be accounted for as described below.
Tax Basis.
Based on our determination
set forth above, the U.S. Holder’s initial tax basis in the Deposit will be 100% of the issue price. The determination of
gain or loss with respect to the Put Right is described below.
Receipt of Stated Principal
Amount in Cash upon Settlement of the Securities.
If a U.S. Holder receives the stated principal amount of a security in cash
(excluding cash attributable to coupon payments on the
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Morgan Stanley Finance LLC
Worst of Fixed Coupon Auto-Callable RevCons
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Payments on the RevCons Based on the Worst Performing of the Common Stock of Microsoft Corporation, the Common Stock of Hilton Worldwide Holdings Inc. and the Common Stock of HP Inc.
Principal at Risk Securities
|
security,
which would be taxed as described above under “—Coupon Payments on the Securities”), the Put Right will be deemed
to have expired unexercised. In such case, the U.S. Holder will not recognize any gain upon the return of the Deposit, but will
recognize the total amount of Put Premium received by the U.S. Holder over the term of the securities (including Put Premium received
upon settlement) as short-term capital gain at such time.
Receipt of a Cash Amount Based on the
Performance of the Underlying Stock upon Maturity of the Securities.
If a U.S. Holder receives an amount of cash (excluding
cash attributable to coupon payments on the securities, which would be taxed as described above under “—Coupon Payments
on the Securities”) that is less than the stated principal amount of the securities, the Put Right will be deemed to have
been exercised and the U.S. Holder will be deemed to have applied the Deposit toward the cash settlement of the Put Right. In such
case, the U.S. Holder will not recognize any gain or loss in respect of the Deposit, but will recognize short-term capital gain
or loss in an amount equal to the difference between (i) the amount of cash received by the U.S. Holder at maturity (excluding
cash attributable to coupon payments on the securities), plus the total Put Premium received by the U.S. Holder over the term of
the securities (including the Put Premium received at maturity) and (ii) the Deposit.
Sale or Exchange of the Securities Prior
to Settlement.
Upon the sale or exchange of a security, a U.S. Holder will generally recognize long-term capital gain or loss
with respect to the Deposit if the U.S. Holder has held the securities for more than one year at the time of such sale or exchange
and short-term capital gain or loss otherwise. The U.S. Holder will also generally recognize short-term capital gain or loss with
respect to the Put Right. For the purpose of determining such gain or loss, a U.S. Holder should apportion the amount realized
on the sale or exchange of a security (excluding any amount attributable to accrued but unpaid Yield on the Deposit, which would
be taxed as described under “—Coupon Payments on the Securities”) between the Deposit and the Put Right based
on their respective values on the date of such sale or exchange. The amount of capital gain or loss on the Deposit will equal the
amount realized that is attributable to the Deposit, less the U.S. Holder’s adjusted tax basis in the Deposit. The amount
realized that is attributable to the Put Right, together with the total Put Premium received by the U.S. Holder over the term of
the security, will be treated as short-term capital gain.
If the value of the Deposit on the date of
such sale or exchange exceeds the total amount realized on the sale or exchange of the security, the U.S. Holder will be treated
as having (i) sold or exchanged the Deposit for an amount equal to its value on that date and (ii) made a payment (the “Put
Right Assumption Payment”) to the purchaser of the security equal to the amount of such excess, in exchange for the purchaser’s
assumption of the U.S. Holder’s rights and obligations under the Put Right. In such a case, the U.S. Holder will recognize
short-term capital gain or loss in respect of the Put Right in an amount equal to the total Put Premium received by the U.S. Holder
over the term of the security, less the amount of the Put Right Assumption Payment deemed to be made by the U.S. Holder.
Possible Alternative Tax Treatments of
an Investment in the Securities
Due to the absence of authorities that directly address the proper
characterization of the securities, no assurance can be given that the IRS will accept, or that a court will uphold, the treatment
described above. In particular, the IRS could seek to treat a security or the Deposit as a debt instrument subject to Treasury
regulations governing contingent payment debt instruments (the “Contingent Debt Regulations”).
If the IRS were successful in asserting that the Contingent Debt
Regulations applied to the securities or to the Deposit, the timing and character of income thereon would be significantly affected.
Among other things, a U.S. Holder would be required to accrue interest income annually as original issue discount, subject to adjustments,
at a “comparable yield” based on our cost of borrowing. Furthermore, if the securities or Deposit were treated as contingent
payment debt instruments, any gain realized with respect to the securities or the Deposit would generally be treated as ordinary
income. The risk that financial instruments providing for buffers, triggers or similar downside protection features, such as the
securities, would be recharacterized as debt is greater than the risk of recharacterization for comparable financial instruments
that do not have such features.
Even if the Contingent Debt Regulations do not apply to the securities,
other alternative U.S. federal income tax characterizations or treatments of the securities are also possible, which if applied
could significantly affect the timing and character of the income or loss with respect to the securities. It is possible, for example,
that a security could be treated as constituting an “open transaction” with the result that the coupon payments on
the securities might not be accounted for separately as giving rise to income to U.S. Holders until the sale, exchange or settlement
of the securities. Alternatively, the entire coupon on the securities could be required to be included in income by a U.S. Holder
at the time received or accrued. Other alternative characterizations are also possible. Accordingly, prospective purchasers should
consult their tax advisers regarding the U.S. federal income tax consequences of an investment in the securities.
In 2007, the U.S. Treasury Department
and the IRS released a notice requesting comments on the U.S.
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federal income tax treatment of “prepaid
forward contracts” and similar instruments. While it is not clear whether the securities would be viewed as similar to the
prepaid forward contracts described in the notice, it is possible that any Treasury regulations or other guidance promulgated after
consideration of these issues could materially and adversely affect the tax consequences of an investment in the securities, possibly
with retroactive effect. The notice focuses on a number of issues, the most relevant of which for U.S. Holders of the securities
is the character and timing of income or loss realized with respect to these instruments (including whether the Put Premium might
be required to be included currently as ordinary income). Accordingly, prospective investors should consult their tax advisers
regarding all aspects of the U.S. federal income tax consequences of an investment in the securities, including the possible implications
of this notice.
Backup Withholding and Information Reporting
Backup withholding may apply in respect of
payments on the securities and the payment of proceeds from a sale, exchange or other disposition of the securities, unless a U.S.
Holder provides proof of an applicable exemption or a correct taxpayer identification number, and otherwise complies with applicable
requirements of the backup withholding rules. The amounts withheld under the backup withholding rules are not an additional tax
and may be refunded, or credited against the U.S. Holder’s U.S. federal income tax liability, provided that the required
information is timely furnished to the IRS. In addition, information returns will be filed with the IRS in connection with payments
on the securities and the payment of proceeds from a sale, exchange or other disposition of the securities, unless the U.S. Holder
provides proof of an applicable exemption from the information reporting rules.
Tax Consequences to Non-U.S. Holders
This section applies to you only if you are
a Non-U.S. Holder. As used herein, the term “Non-U.S. Holder” means a beneficial owner of a security that is, for U.S.
federal income tax purposes:
•
an
individual who is classified as a nonresident alien;
•
a
foreign corporation; or
•
a
foreign trust or estate.
The term “Non-U.S. Holder” does
not include any of the following holders:
•
a
holder who is an individual present in the United States for 183 days or more in the taxable year of disposition and who is not
otherwise a resident of the United States for U.S. federal income tax purposes;
•
certain
former citizens or residents of the United States; or
•
a
holder for whom income or gain in respect of the securities is effectively connected with the conduct of a trade or business in
the United States.
Such holders should consult their tax advisers regarding the
U.S. federal income tax consequences of an investment in the securities.
General
Assuming the treatment of the securities as
set forth above is respected and subject to the discussions below regarding the potential application of Section 871(m) of the
Code and FATCA, payments with respect to a security, and gain realized on the sale, exchange or other disposition of such security,
should not be subject to U.S. federal income or withholding tax under current law, provided that:
•
the
Non-U.S. Holder does not own, directly or by attribution, ten percent or more of the total combined voting power of all classes
of our stock entitled to vote;
•
the
Non-U.S. Holder is not a controlled foreign corporation related, directly or indirectly, to us through stock ownership;
•
the
Non-U.S. Holder is not a bank receiving interest under Section 881(c)(3)(A) of the Code; and
•
the
certification requirement described below has been fulfilled with respect to the beneficial owner.
Certification Requirement.
The
certification requirement referred to in the preceding paragraph will be fulfilled if the beneficial owner of a security (or a
financial institution holding a security on behalf of the beneficial owner) furnishes to the applicable withholding agent an IRS
Form W-8BEN (or other appropriate form), on which the beneficial owner certifies under penalties of perjury that it is not a U.S.
person.
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Payments on the RevCons Based on the Worst Performing of the Common Stock of Microsoft Corporation, the Common Stock of Hilton Worldwide Holdings Inc. and the Common Stock of HP Inc.
Principal at Risk Securities
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Possible Alternative Tax Treatments of
an Investment in the Securities
As described above under “—Tax Consequences to U.S.
Holders—Possible Alternative Tax Treatments of an Investment in the Securities,” the IRS may seek to apply a different
characterization and tax treatment from the treatment described herein. While the U.S. federal income and withholding tax consequences
to a Non-U.S. Holder of ownership and disposition of a security under current law should generally be the same as those described
immediately above, it is possible that a Non-U.S. Holder could be subject to withholding tax under certain recharacterizations
of the securities.
Moreover, among the issues addressed in the
IRS notice described in “—Tax Consequences to U.S. Holders” is the degree, if any, to which income realized by
Non-U.S. Holders should be subject to withholding tax. It is possible that any Treasury regulations or other guidance issued after
consideration of this issue could materially and adversely affect the withholding tax consequences of ownership and disposition
of the securities, possibly with retroactive effect. Accordingly, prospective investors should consult their tax advisers regarding
all aspects of the U.S. federal income tax consequences of an investment in the securities, including the possible implications
of the notice discussed above. Prospective investors should note that we currently do not intend to withhold on any of the payments
made with respect to the securities to Non-U.S. Holders (subject to compliance by such holders with the certification requirement
described above and to the discussion below regarding FATCA). However, in the event of a change of law or any formal or informal
guidance by the IRS, the U.S. Treasury Department or Congress, we (or any financial intermediary) may decide to withhold on payments
made with respect to the securities to Non-U.S. Holders and we will not be required to pay any additional amounts with respect
to amounts withheld.
Section 871(m) Withholding Tax on Dividend
Equivalents
Section 871(m) of 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, pursuant to an 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 the terms of the securities and current market conditions, we expect that the securities will
not have a delta of one with respect to any Underlying Security on the pricing date. However, we will provide an updated determination
in the final pricing supplement. Assuming that the securities do not have a delta of one with respect to any Underlying Security,
our counsel is of the opinion that the securities should not be Specified Securities and, therefore, should not be subject to Section
871(m).
Our determination is not binding on the IRS, and the IRS may
disagree with this determination. Section 871(m) is complex and its application may depend on your particular circumstances, including
whether you enter into other transactions with respect to an Underlying Security. If Section 871(m) withholding is required, we
will not be required to pay any additional amounts with respect to the amounts so withheld. You should consult your tax adviser
regarding the potential application of Section 871(m) to the securities.
U.S. Federal Estate Tax
Individual Non-U.S. Holders and entities the
property of which is potentially includible in such an individual’s gross estate for U.S. federal estate tax purposes (for
example, a trust funded by such an individual and with respect to which the individual has retained certain interests or powers),
should note that, absent an applicable treaty exemption, the securities may be treated as U.S. situs property subject to U.S. federal
estate tax. Prospective investors that are non-U.S. individuals, or are entities of the type described above, should consult their
tax advisers regarding the U.S. federal estate tax consequences of an investment in the securities.
Backup Withholding and Information Reporting
Information returns will be filed
with the IRS in connection with any coupon payment and may be filed with the IRS in connection with the payment at maturity on
the securities and the payment of proceeds from a sale, exchange or other disposition of the securities. A Non-U.S. Holder may
be subject to backup withholding in respect of amounts paid to the Non-U.S. Holder, unless such Non-U.S. Holder complies with
certification procedures to establish that it is not a U.S. person for U.S. federal income tax purposes or otherwise establishes
an exemption. Compliance with the certification procedures described under “—General—Certification Requirement”
will satisfy the certification requirements necessary to avoid backup withholding as well. The amount of any backup withholding
from a payment to a Non-U.S. Holder will be allowed as a credit against the Non-U.S. Holder’s U.S. federal income tax liability
and may entitle the Non-U.S. Holder to a refund, provided that the required information is timely furnished to the IRS.
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Morgan Stanley Finance LLC
Worst of Fixed Coupon Auto-Callable RevCons
SM
due due February 23, 2021
Payments on the RevCons Based on the Worst Performing of the Common Stock of Microsoft Corporation, the Common Stock of Hilton Worldwide Holdings Inc. and the Common Stock of HP Inc.
Principal at Risk Securities
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FATCA
Legislation commonly referred to as “FATCA”
generally imposes a withholding tax of 30% on payments to certain non-U.S. entities (including financial intermediaries) with respect
to certain financial instruments, unless various U.S. information reporting and due diligence requirements have been satisfied.
An intergovernmental agreement between the United States and the non-U.S. entity’s jurisdiction may modify these requirements.
FATCA generally applies to certain financial instruments that are treated as paying U.S.-source interest or other U.S.-source “fixed
or determinable annual or periodical” income (“FDAP income”). Withholding (if applicable) applies to payments
of U.S.-source FDAP income and to payments of gross proceeds of the disposition (including upon retirement) of certain financial
instruments treated as providing for U.S.-source interest or dividends. Under recently proposed regulations (the preamble to which
specifies that taxpayers are permitted to rely on them pending finalization), no withholding will apply on payments of gross proceeds.
While the treatment of the securities is unclear, you should assume that the yield on the Deposit will be subject to the FATCA
rules. It is also possible in light of this uncertainty that an applicable withholding agent will treat the entire amount of the
coupon payments as being subject to the FATCA rules. If withholding applies to the securities, we will not be required to pay any
additional amounts with respect to amounts withheld. Both U.S. and Non-U.S. Holders should consult their tax advisers regarding
the potential application of FATCA to the securities.
The discussion in the preceding
paragraphs, insofar as it purports to describe provisions of U.S. federal income tax laws or legal conclusions with respect thereto,
constitutes the full opinion of Davis Polk & Wardwell LLP regarding the material U.S. federal tax consequences of an investment
in the securities.
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Use
of proceeds and hedging:
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The proceeds from the sale of the securities will be used by
us for general corporate purposes. We will receive, in aggregate, $1,000 per security issued, because, when we enter into hedging
transactions in order to meet our obligations under the securities, our hedging counterparty will reimburse the cost of the agent’s
commissions. The costs of the securities borne by you and described on page 3 above comprise the agent’s commissions and
the cost of issuing, structuring and hedging the securities.
On or prior to August 16, 2019, we hedged our anticipated
exposure in connection with the securities by entering into hedging transactions with our affiliates and/or third party dealers.
We expect our hedging counterparties to have taken positions in the underlying stocks, in futures and/or options contracts on
the underlying stocks. Such purchase activity could have increased the initial share price of an underlying stock, and, as a result,
could have increased (i) the applicable redemption threshold levels for such underlying stock, which are the levels at or above
which such underlying stock must close on the determination date in order for the securities to be redeemed (depending also on
the performance of the other underlying stocks), and (ii) the downside threshold level, for such underlying stock which, if the
securities are not redeemed prior to maturity, is the price at or above which the underlying stock must close on each determination
date in order for you to avoid being exposed to the negative price performance of the worst performing underlying stock at maturity
(depending also on the performance of the other underlying stocks). In addition, through our subsidiaries, we are likely to modify
our hedge position throughout the term of the securities, including on the determination dates, by purchasing and selling the
underlying stocks, options contracts relating to the underlying stocks or any other available securities or instruments that we
may wish to use in connection with such hedging activities. These entities may be unwinding or adjusting hedge positions during
the term of the securities, and the hedging strategy may involve greater and more frequent dynamic adjustments to the hedge as
the final determination date approaches. We cannot give any assurance that our hedging activities will not affect the value of
any underlying stock, and, therefore, adversely affect the value of the securities or the payment you will receive at maturity,
if any.
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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 securities. 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 securities 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 securities 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.
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Morgan Stanley Finance LLC
Worst of Fixed Coupon Auto-Callable RevCons
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due due February 23, 2021
Payments on the RevCons Based on the Worst Performing of the Common Stock of Microsoft Corporation, the Common Stock of Hilton Worldwide Holdings Inc. and the Common Stock of HP Inc.
Principal at Risk Securities
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The U.S. Department of Labor has issued five prohibited transaction
class exemptions (“PTCEs”) that may provide exemptive relief for direct or indirect prohibited transactions resulting
from the purchase or holding of the securities. 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 Code Section 4975(d)(20) 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 securities.
Because we may be considered a party in interest with respect
to many Plans, the securities 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 securities will be deemed to have represented, in its corporate and its fiduciary capacity, by its purchase and holding
of the securities that either (a) it is not a Plan or a Plan Asset Entity and is not purchasing such securities 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 securities will not constitute or result
in a non-exempt 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 securities on behalf of or with “plan assets” of any Plan consult with their counsel
regarding the availability of exemptive relief.
The securities are contractual financial instruments. The financial
exposure provided by the securities is not a substitute or proxy for, and is not intended as a substitute or proxy for, individualized
investment management or advice for the benefit of any purchaser or holder of the securities. The securities have not been designed
and will not be administered in a manner intended to reflect the individualized needs and objectives of any purchaser or holder
of the securities.
Each purchaser or holder of any securities acknowledges and agrees
that:
(i) the
purchaser or holder or its fiduciary has made and shall make all investment decisions for the purchaser or holder and the purchaser
or holder has not relied and shall not rely in any way upon us or our affiliates to act as a fiduciary or adviser of the purchaser
or holder with respect to (A) the design and terms of the securities, (B) the purchaser or holder’s investment in the securities,
or (C) the exercise of or failure to exercise any rights we have under or with respect to the securities;
(ii) we
and our affiliates have acted and will act solely for our own account in connection with (A) all transactions relating to the securities
and (B) all hedging transactions in connection with our obligations under the securities;
(iii) any
and all assets and positions relating to hedging transactions by us or our affiliates are assets and positions of those entities
and are not assets and positions held for the benefit of the purchaser or holder;
(iv) our
interests are adverse to the interests of the purchaser or holder; and
(v) neither
we nor any of our affiliates is a fiduciary or adviser of the purchaser or holder in connection with any such assets, positions
or transactions, and any information that we or any of our affiliates may provide is not intended to be impartial investment advice.
Each purchaser and holder of the securities has exclusive
responsibility for ensuring that its purchase, holding and disposition of the securities do not violate the prohibited transaction
rules of ERISA or the Code or any Similar Law. The sale of any securities 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 securities
should consult and rely on their own counsel and advisers as to whether an investment in these securities is suitable.
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Morgan Stanley Finance LLC
Worst of Fixed Coupon Auto-Callable RevCons
SM
due due February 23, 2021
Payments on the RevCons Based on the Worst Performing of the Common Stock of Microsoft Corporation, the Common Stock of Hilton Worldwide Holdings Inc. and the Common Stock of HP Inc.
Principal at Risk Securities
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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 securities 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 securities by the account, plan or annuity.
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Additional considerations:
|
Client accounts over which Morgan Stanley, Morgan Stanley Wealth Management or any of their respective subsidiaries have investment discretion are not permitted to purchase the securities, either directly or indirectly.
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Supplemental information regarding plan of distribution; conflicts of interest:
|
Selected dealers and their financial advisors will
collectively receive from the Agent, Morgan Stanley & Co. LLC, a fixed sales commission of $20.00 for each security they sell.
MS & Co. is an affiliate of MSFL and a wholly owned
subsidiary of Morgan Stanley, and it and other affiliates of ours expect to make a profit by selling, structuring and, when applicable,
hedging the securities. When MS & Co. prices this offering of securities, it will determine the economic terms of the securities
such that for each security the estimated value on the pricing date will be no lower than the minimum level described in “Investment
Summary” on page 3.
MS & Co. will conduct this offering in compliance
with the requirements of FINRA Rule 5121 of the Financial Industry Regulatory Authority, Inc., which is commonly referred to as
FINRA, regarding a FINRA member firm’s distribution of the securities of an affiliate and related conflicts of interest.
MS & Co. or any of our other affiliates may not make sales in this offering to any discretionary account. See “Plan
of Distribution (Conflicts of Interest)” and “Use of Proceeds and Hedging” in the accompanying product supplement
for auto-callable securities.
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Where
you can find more information:
|
MSFL and Morgan Stanley have filed a registration statement (including
a prospectus, as supplemented by the product supplement for auto-callable securities) with the Securities and Exchange Commission,
or SEC, for the offering to which this communication relates. You should read the prospectus in that registration statement, the
product supplement for auto-callable securities and any other documents relating to this offering that MSFL and Morgan Stanley
have filed with the SEC for more complete information about MSFL, Morgan Stanley and this offering. You may get these documents
without cost by visiting EDGAR on the SEC web site at www.sec.gov. Alternatively, MSFL, Morgan Stanley, any underwriter or any
dealer participating in the offering will arrange to send you the prospectus and the product supplement for auto-callable securities
if you so request by calling toll-free 1-(800)-584-6837.
You may access these documents on the SEC web site at
.
www.sec.gov
as follows:
Product Supplement for Auto-Callable Securities dated November 16, 2017
Prospectus dated November 16, 2017
Terms used but not defined in this document are defined
in the product supplement for auto-callable securities or in the prospectus.
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