September 2019
Preliminary Terms
No. 2,478
Registration Statement
Nos. 333-221595; 333-221595-01
Dated August 30, 2019
Filed pursuant to
Rule 433
Morgan
Stanley Finance LLC
Structured
Investments
Opportunities in International Equities
Market-Linked Notes due April 3, 2025
Based on the Value of the EURO STOXX 50®
Index
Fully and Unconditionally Guaranteed by Morgan
Stanley
The notes are unsecured obligations of Morgan Stanley Finance
LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley. The notes will pay no interest and will
have the terms described in the accompanying product supplement, index supplement and prospectus, as supplemented and modified
by this document. At maturity, we will pay per note the stated principal amount of $10 plus a supplemental redemption amount, if
any, based on the value of the underlying index on the determination date, subject to the maximum payment at maturity. These long-dated
notes are for investors who are concerned about principal risk but seek an equity index-based return, and who are willing to forgo
current income and upside beyond the maximum payment at maturity in exchange for the repayment of principal at maturity plus the
potential to receive a supplemental redemption amount, if any. The notes are notes issued as part of MSFL’s Series A Global
Medium-Term Notes program.
All payments are subject to our credit risk. If we default
on our obligations, you could lose some or all of your investment. These notes are not secured obligations and you will not have
any security interest in, or otherwise have any access to, any underlying reference asset or assets.
Summary Terms
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Issuer:
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Morgan Stanley Finance LLC
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Guarantor:
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Morgan Stanley
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Issue price:
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$10 per note
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Stated principal amount:
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$10 per note
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Aggregate principal amount:
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$
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Pricing date:
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September 30, 2019
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Original issue date:
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October 3, 2019 (3 business days after the pricing date)
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Maturity date:
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April 3, 2025
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Interest:
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None
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Underlying index:
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EURO STOXX 50® Index
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Payment at maturity:
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The payment due at maturity per $10 stated principal amount will
equal:
$10 + supplemental redemption amount, if any.
In no event will the payment due at maturity be less than
the stated principal amount or greater than the maximum payment at maturity
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Supplemental redemption amount:
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(i) $10 times (ii) the index percent change times (iii) the participation rate, provided that the supplemental redemption amount will not be less than $0 or greater than $8.20 per note.
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Participation rate:
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120%
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Maximum payment at maturity:
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$18.20 per note (182% of the stated principal amount)
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Index percent change:
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(final index value – initial index value) / initial index value
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Initial index value:
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, which is the index closing value on the pricing date
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Final index value:
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The index closing value on the determination date
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Determination date:
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March 31, 2025, subject to postponement for non-index business days and certain market disruption events
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CUSIP:
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61769Q881
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ISIN:
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US61769Q8814
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Listing:
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The notes will not be listed on any securities exchange.
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Agent:
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Morgan Stanley & Co. LLC (“MS & Co.”), an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley. See “Supplemental information regarding plan of distribution; conflicts of interest.”
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Estimated value on the pricing date:
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Approximately $9.543 per note, or within $0.30 of that estimate. See “Investment Summary” beginning on page 2.
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Commissions and issue price:
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Price to public
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Agent’s commissions and fees
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Proceeds to us(3)
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Per note
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$10
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$0.30(1)
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$0.05(2)
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$9.65
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Total
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$
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$
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$
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(1)
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Selected dealers, including Morgan Stanley Wealth Management (an affiliate of the agent), and their financial advisors will
collectively receive from the agent, MS & Co., a fixed sales commission of $0.30 for each note 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 for equity-linked notes.
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(2)
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Reflects a structuring fee payable to Morgan Stanley Wealth Management by the agent or its affiliates of $0.05 for each note.
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(3)
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See “Use of proceeds and hedging” on page 11.
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The notes involve risks not
associated with an investment in ordinary debt securities. See “Risk Factors” beginning on page 5.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these notes, or determined if this document or the accompanying product supplement,
index supplement and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The notes are not deposits or savings accounts and are not
insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they obligations
of, or guaranteed by, a bank.
You should read this document together with the related
product supplement, index supplement and prospectus, each of which can be accessed via the hyperlinks below. Please also see “Additional
Terms of the Notes” and “Additional Information About the Notes” at the end of this document.
As used in this document, “we,” “us”
and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Product
Supplement for Equity-Linked Notes dated November 16, 2017 Index
Supplement dated November 16, 2017
Prospectus
dated November 16, 2017
Morgan Stanley Finance LLC
Market-Linked Notes due April 3, 2025
Based on the Value of the EURO STOXX 50® Index
Investment Summary
Market-Linked Notes
The Market-Linked Notes due April 3, 2025 Based on the Value
of the EURO STOXX 50® Index (the “notes”) offer 120% participation in the positive performance of the
underlying index, subject to the maximum payment at maturity. The notes provide investors:
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§
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an opportunity to gain exposure to the EURO STOXX 50® Index
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§
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the repayment of principal at maturity, subject to our creditworthiness
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§
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120% participation in any appreciation of the underlying index over the term of the notes, subject to the maximum payment at
maturity of $18.20 per note (182% of the stated principal amount)
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§
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no exposure to any decline of the underlying index if the notes are held to maturity.
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At maturity, if the underlying index has depreciated or has not
appreciated at all, you will receive the stated principal amount of $10 per note, without any positive return on your investment.
All payments on the notes, including the repayment of principal at maturity, are subject to our credit risk.
Maturity:
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5.5 years
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Participation rate:
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120%
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Maximum payment at maturity:
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$18.20 per note (182% of the stated principal amount)
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Interest:
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None
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The original issue price of each note is $10. This price includes
costs associated with issuing, selling, structuring and hedging the notes, which are borne by you, and, consequently, the estimated
value of the notes on the pricing date will be less than $10. We estimate that the value of each note on the pricing date will
be approximately $9.543, or within $0.30 of that estimate. Our estimate of the value of the notes 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 notes on the pricing date, we take into account
that the notes comprise both a debt component and a performance-based component linked to the underlying index. The estimated value
of the notes is determined using our own pricing and valuation models, market inputs and assumptions relating to the underlying
index, instruments based on the underlying index, volatility and other factors including current and expected interest rates, as
well as an interest rate related to our secondary market credit spread, which is the implied interest rate at which our conventional
fixed rate debt trades in the secondary market.
What determines the economic terms of the notes?
In determining the economic terms of the notes, including the
participation rate and the maximum payment at maturity, we use an internal funding rate, which is likely to be lower than our secondary
market credit spreads and therefore advantageous to us. If the issuing, selling, structuring and hedging costs borne by you were
lower or if the internal funding rate were higher, one or more of the economic terms of the notes would be more favorable to you.
What is the relationship between the estimated value on the
pricing date and the secondary market price of the notes?
The price at which MS & Co. purchases the notes in the secondary
market, absent changes in market conditions, including those related to the underlying index, may vary from, and be lower than,
the estimated value on the pricing date, because the secondary market price takes into account our secondary market credit spread
as well as the bid-offer spread that MS & Co. would charge in a secondary market transaction of this type and other factors.
However, because the costs associated with issuing, selling, structuring and hedging the notes are not fully deducted upon issuance,
for a period of up to 6 months following the issue date, to the extent that MS & Co. may buy or sell the notes in the secondary
market, absent changes in market conditions, including those related to the underlying index, and to our secondary market credit
spreads, it would do so based on values higher than the estimated value. We expect that those higher values will also be reflected
in your brokerage account statements.
MS & Co. may, but is not obligated to, make a market in the
notes, and, if it once chooses to make a market, may cease doing so at any time.
Morgan Stanley Finance LLC
Market-Linked Notes due April 3, 2025
Based on the Value of the EURO STOXX 50® Index
Key Investment Rationale
Market-Linked Notes offer investors exposure to the performance
of equities or equity indices and provide for the repayment of principal at maturity. They are for investors who are concerned
about principal risk but seek an equity index-based return, and who are willing to forgo yield in exchange for the repayment of
principal at maturity plus the potential to receive a supplemental redemption amount, if any, based on the performance of the underlying
index, subject to the maximum payment at maturity.
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Repayment of Principal
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The notes offer investors 120% upside exposure to the performance of the underlying index up to the maximum payment at maturity, while providing for the repayment of principal in full at maturity.
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Upside Scenario
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The underlying index increases in value significantly, and, at maturity, the investor receives a return reflecting 120% of the appreciation of the underlying index, subject to the maximum payment at maturity of $18.20 per note (182% of the stated principal amount).
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Par Scenario
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The underlying index declines or does not appreciate in value, and, at maturity, the notes pay only the stated principal amount of $10.
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Morgan Stanley Finance LLC
Market-Linked Notes due April 3, 2025
Based on the Value of the EURO STOXX 50® Index
Hypothetical Payout on the Notes
At maturity, for each $10 stated principal amount of notes that
you hold, you will receive the stated principal amount of $10 plus a supplemental redemption amount, if any, subject to
the maximum payment at maturity. The supplemental redemption amount will be calculated on the determination date as follows:
(i) $10 times (ii) the index percent change times
(iii) the participation rate of 120%, provided that the supplemental redemption amount will not be less than $0 or greater than
$8.20 per note.
In no event will the payment at maturity be less than the stated
principal amount or greater than the maximum payment at maturity of $18.20 per note (182% of the stated principal amount).
The table below illustrates the payment at maturity for each
note for a hypothetical range of index percent change and does not cover the complete range of possible payouts at maturity. The
table assumes a hypothetical initial index value of 3,500.00. The actual initial index value will be determined on the pricing
date.
Index percent change
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Final index value
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Stated principal amount
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Supplemental redemption amount
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Payment at maturity
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Return on $10 note
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80.00%
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6,300.00
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$10
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$8.20
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$18.20
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82.00%
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70.00%
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5,950.00
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$10
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$8.20
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$18.20
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82.00%
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68.33%
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5,891.67
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$10
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$8.20
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$18.20
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82.00%
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60.00%
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5,600.00
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$10
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$7.20
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$17.20
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72.00%
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50.00%
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5,250.00
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$10
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$6.00
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$16.00
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60.00%
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40.00%
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4,900.00
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$10
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$4.80
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$14.80
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48.00%
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30.00%
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4,550.00
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$10
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$3.60
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$13.60
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36.00%
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20.00%
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4,200.00
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$10
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$2.40
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$12.40
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24.00%
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10.00%
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3,850.00
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$10
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$1.20
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$11.20
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12.00%
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5.00%
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3,675.00
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$10
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$0.60
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$10.60
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6.00%
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0.00%
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3,500.00
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$10
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$0.00
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$10.00
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0.00%
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-10.00%
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3,150.00
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$10
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$0.00
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$10.00
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0.00%
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-20.00%
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2,800.00
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$10
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$0.00
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$10.00
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0.00%
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-30.00%
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2,450.00
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$10
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$0.00
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$10.00
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0.00%
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-40.00%
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2,100.00
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$10
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$0.00
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$10.00
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0.00%
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-50.00%
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1,750.00
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$10
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$0.00
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$10.00
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0.00%
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-60.00%
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1,400.00
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$10
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$0.00
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$10.00
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0.00%
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-70.00%
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1,050.00
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$10
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$0.00
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$10.00
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0.00%
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-80.00%
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700.00
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$10
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$0.00
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$10.00
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0.00%
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-90.00%
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350.00
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$10
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$0.00
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$10.00
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0.00%
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-100.00%
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0.00
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$10
|
$0.00
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$10.00
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0.00%
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Morgan Stanley Finance LLC
Market-Linked Notes due April 3, 2025
Based on the Value of the EURO STOXX 50® Index
Risk Factors
The following is a non-exhaustive list of certain key risk
factors for investors in the notes. For further discussion of these and other risks, you should read the section entitled “Risk
Factors” in the accompanying product supplement, index supplement and prospectus. We also urge you to consult your investment,
legal, tax, accounting and other advisers in connection with your investment in the notes.
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§
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The notes do not pay interest and may not pay more than the stated principal amount at maturity. If the index percent
change is less than or equal to 0%, you will receive only the stated principal amount of $10 for each note you hold at maturity.
As the notes do not pay any interest, if the underlying index does not appreciate sufficiently over the term of the notes, the
overall return on the notes (the effective yield to maturity) may be less than the amount that would be paid on a conventional
debt security of ours of comparable maturity. The notes have been designed for investors who are willing to forgo market floating
interest rates in exchange for a supplemental redemption amount, if any, based on the performance of the underlying index.
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§
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The appreciation potential of the notes is limited by the maximum payment at maturity. The appreciation potential of
the notes is limited by the maximum payment at maturity of $18.20 per note, or 182% of the stated principal amount. Because the
payment at maturity will be limited to 182% of the stated principal amount for the notes, any increase in the level of the index
beyond approximately 168.33% of the initial index value will not further increase the return on the notes.
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§
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The market price of the notes will be influenced by many unpredictable factors. Several factors will influence the value
of the notes in the secondary market and the price at which MS & Co. may be willing to purchase or sell the notes in the secondary
market, including the value of the underlying index at any time and, in particular, on the determination date, the volatility (frequency
and magnitude of changes in value) of the underlying index, dividend rate on the stocks underlying the index, interest and yield
rates in the market, time remaining until the notes mature, geopolitical conditions and economic, financial, political, regulatory
or judicial events that affect the underlying index or equities markets generally and which may affect the final index value of
the underlying index and any actual or anticipated changes in our credit ratings or credit spreads. Generally, the longer the time
remaining to maturity, the more the market price of the notes will be affected by the other factors described above. The value
of the underlying index may be, and has recently been, volatile, and we can give you no assurance that the volatility will lessen.
See “EURO STOXX 50® Index Overview” below. You may receive less, and possibly significantly less, than
the stated principal amount per note if you try to sell your notes prior to maturity.
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§
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There are risks associated with investments in securities linked to the value of foreign equity securities. The
notes are linked to the value of foreign equity securities. Investments in securities linked to the value of foreign equity securities
involve risks associated with the securities markets in those countries, including risks of volatility in those markets, governmental
intervention in those markets and cross-shareholdings in companies in certain countries. Also, there is generally less publicly
available information about foreign companies than about U.S. companies that are subject to the reporting requirements of the United
States Securities and Exchange Commission, and foreign companies are subject to accounting, auditing and financial reporting standards
and requirements different from those applicable to U.S. reporting companies. The prices of securities issued in foreign markets
may be affected by political, economic, financial and social factors in those countries, or global regions, including changes in
government, economic and fiscal policies and currency exchange laws. Local securities markets may trade a small number of securities
and may be unable to respond effectively to increases in trading volume, potentially making prompt liquidation of holdings difficult
or impossible at times. Moreover, the economies in such countries may differ favorably or unfavorably from the economy in the United
States in such respects as growth of gross national product, rate of inflation, capital reinvestment, resources, self-sufficiency
and balance of payment positions between countries.
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§
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The notes are subject to our credit risk, and any actual or anticipated changes to our credit ratings or credit spreads
may adversely affect the market value of the notes. You are dependent on our ability to pay all amounts due on the notes at
maturity and therefore you are subject to our credit risk. The notes are not guaranteed by any other entity. If we default on our
obligations under the notes, your investment would be at risk and you could lose some or all of your investment. As a result, the
market value of the notes prior to maturity will be affected by changes in the market’s view of our creditworthiness. Any
actual or anticipated decline in our credit ratings or increase in the credit spreads charged by the market for taking our credit
risk is likely to adversely affect the market value of the notes.
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§
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As a finance subsidiary, MSFL has no independent operations and will have no independent assets. As a finance subsidiary,
MSFL has no independent operations beyond the issuance and administration of its securities and will have no independent assets
available for distributions to holders of MSFL securities if they make claims in respect of such securities in a bankruptcy, resolution
or similar proceeding. Accordingly, any recoveries by such holders will be limited to those available under the related guarantee
by Morgan Stanley and that guarantee will rank pari passu with all other unsecured, unsubordinated obligations of Morgan
Stanley. Holders will have recourse only to a single claim against Morgan Stanley and its assets under the guarantee. Holders of
securities issued by MSFL should accordingly assume that in any such proceedings they would not have
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Morgan Stanley Finance LLC
Market-Linked Notes due April 3, 2025
Based on the Value of the EURO STOXX 50® Index
any priority over and should be
treated pari passu with the claims of other unsecured, unsubordinated creditors of Morgan Stanley, including holders of
Morgan Stanley-issued securities.
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§
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The amount payable on the notes is not linked to the value of the underlying index at any time other than the determination
date. The final index value will be based on the index closing value on the determination date, subject to postponement for
non-index business days and certain market disruption events. Even if the value of the underlying index appreciates prior to the
determination date but then drops by the determination date, the payment at maturity may be less, and may be significantly less,
than it would have been had the payment at maturity been linked to the value of the underlying index prior to such drop. Although
the actual value of the underlying index on the stated maturity date or at other times during the term of the notes may be higher
than the index closing value on the determination date, the payment at maturity will be based solely on the index closing value
on the determination date.
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§
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The rate we are willing to pay for securities of this type, maturity and issuance size is likely to be lower than the rate
implied by our secondary market credit spreads and advantageous to us. Both the lower rate and the inclusion of costs associated
with issuing, selling, structuring and hedging the notes in the original issue price reduce the economic terms of the notes, cause
the estimated value of the notes to be less than the original issue price and will adversely affect secondary market prices. Assuming
no change in market conditions or any other relevant factors, the prices, if any, at which dealers, including MS & Co., may
be willing to purchase the notes in secondary market transactions will likely be significantly lower than the original issue price,
because secondary market prices will exclude the issuing, selling, structuring and hedging-related costs that are included in the
original issue price and borne by you and because the secondary market prices will reflect our secondary market credit spreads
and the bid-offer spread that any dealer would charge in a secondary market transaction of this type as well as other factors.
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The inclusion of the costs of issuing, selling, structuring
and hedging the notes in the original issue price and the lower rate we are willing to pay as issuer make the economic terms of
the notes less favorable to you than they otherwise would be.
However, because the costs associated with issuing,
selling, structuring and hedging the notes are not fully deducted upon issuance, for a period of up to 6 months following the issue
date, to the extent that MS & Co. may buy or sell the notes in the secondary market, absent changes in market conditions, including
those related to the underlying index, and to our secondary market credit spreads, it would do so based on values higher than the
estimated value, and we expect that those higher values will also be reflected in your brokerage account statements.
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§
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The estimated value of the notes is determined by reference to our pricing and valuation models, which may differ from those
of other dealers and is not a maximum or minimum secondary market price. These pricing and valuation models are proprietary
and rely in part on subjective views of certain market inputs and certain assumptions about future events, which may prove to be
incorrect. As a result, because there is no market-standard way to value these types of securities, our models may yield a higher
estimated value of the notes than those generated by others, including other dealers in the market, if they attempted to value
the notes. In addition, the estimated value on the pricing date does not represent a minimum or maximum price at which dealers,
including MS & Co., would be willing to purchase your notes in the secondary market (if any exists) at any time. The value
of your notes at any time after the date of this document will vary based on many factors that cannot be predicted with accuracy,
including our creditworthiness and changes in market conditions. See also “The market price of the notes will be influenced
by many unpredictable factors” above.
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§
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Adjustments to the underlying index could adversely affect the value of the notes. The publisher of the underlying index
can add, delete or substitute the stocks underlying the index, and can make other methodological changes required by certain events
relating to the underlying stocks, such as stock dividends, stock splits, spin-offs, rights offerings and extraordinary dividends,
that could change the value of the underlying index. Any of these actions could adversely affect the value of the notes. The publisher
of the underlying index may also discontinue or suspend calculation or publication of the underlying index at any time. In these
circumstances, MS & Co., as the calculation agent, will have the sole discretion to substitute a successor index that is comparable
to the discontinued index. MS & Co. could have an economic interest that is different than that of investors in the notes insofar
as, for example, MS & Co. is permitted to consider indices that are calculated and published by MS & Co. or any of its
affiliates. If MS & Co. determines that there is no appropriate successor index on such determination date, the index closing
value on the determination date will be an amount based on the values of the stocks underlying the discontinued index at the time
of such discontinuance, without rebalancing or substitution, computed by MS & Co, as calculation agent, in accordance with
the formula for calculating the index closing value last in effect prior to discontinuance of the underlying index.
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§
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Investing in the notes is not equivalent to investing in the underlying index. Investing in the notes is not equivalent
to investing in the underlying index or its component stocks. As an investor in the notes, you will not have voting rights or rights
to receive dividends or other distributions or any other rights with respect to stocks that constitute the underlying index. See
“Hypothetical Payout on the Notes” above.
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Morgan Stanley Finance LLC
Market-Linked Notes due April 3, 2025
Based on the Value of the EURO STOXX 50® Index
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§
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The notes will not be listed on any securities exchange and secondary trading may be limited. The notes will not be
listed on any securities exchange. Therefore, there may be little or no secondary market for the notes. MS & Co. may, but is
not obligated to, make a market in the notes and, if it once chooses to make a market, may cease doing so at any time. When it
does make a market, it will generally do so for transactions of routine secondary market size at prices based on its estimate of
the current value of the notes, taking into account its bid/offer spread, our credit spreads, market volatility, the notional size
of the proposed sale, the cost of unwinding any related hedging positions, the time remaining to maturity and the likelihood that
it will be able to resell the notes. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade
or sell the notes easily. Since other broker-dealers may not participate significantly in the secondary market for the notes, the
price at which you may be able to trade your notes is likely to depend on the price, if any, at which MS & Co. is willing to
transact. If, at any time, MS & Co. were to cease making a market in the notes, it is likely that there would be no secondary
market for the notes. Accordingly, you should be willing to hold your notes to maturity.
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§
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The calculation agent, which is a subsidiary of Morgan Stanley and an affiliate of MSFL, will make determinations with respect
to the notes. As calculation agent, MS & Co. will determine the initial index value and the final index value, and will
calculate the amount of cash you will receive at maturity. Moreover, certain determinations made by MS & Co., in its capacity
as calculation agent, may require it to exercise discretion and make subjective judgments, such as with respect to the occurrence
or non-occurrence of market disruption events and the selection of a successor index or calculation of the index closing value
in the event of a discontinuance of the underlying index. These potentially subjective determinations may adversely affect the
payout to you at maturity. For further information regarding these types of determinations, see “Description of Equity-Linked
Notes—Supplemental Redemption Amount,” “—Calculation Agent and Calculations,” “—Alternate
Exchange Calculation in the Case of an Event of Default” and “—Discontinuance of Any Underlying Index; Alteration
of Method of Calculation” in the accompanying product supplement for equity-linked notes. In addition, MS & Co. has determined
the estimated value of the notes on the pricing date.
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Hedging and trading activity by our affiliates could potentially adversely affect the value of the notes. One or more
of our affiliates and/or third-party dealers expect to carry out hedging activities related to the notes (and to other instruments
linked to the underlying index or its component stocks), including trading in the stocks that constitute the underlying index as
well as in other instruments related to the underlying index. As a result, these entities may be unwinding or adjusting hedge positions
during the term of the notes, and the hedging strategy may involve greater and more frequent dynamic adjustments to the hedge as
the determination date approaches. Some of our affiliates also trade the stocks that constitute the underlying index and other
financial instruments related to the underlying index on a regular basis as part of their general broker-dealer and other businesses.
Any of these hedging or trading activities on or prior to the pricing date could potentially increase the initial index value,
and, therefore, could increase the value at or above which the underlying index must close on the determination date before you
would receive at maturity a payment that exceeds the stated principal amount of the notes. Additionally, such hedging or trading
activities during the term of the notes, including on the determination date, could adversely affect the closing value of the underlying
index on the determination date, and, accordingly, the amount of cash an investor will receive at maturity.
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Morgan Stanley Finance LLC
Market-Linked Notes due April 3, 2025
Based on the Value of the EURO STOXX 50® Index
EURO STOXX 50® Index Overview
The EURO STOXX 50® Index was created by STOXX
Limited, which is owned by Deutsche Börse AG and SIX Group AG. Publication of the EURO STOXX 50® Index
began on February 26, 1998, based on an initial index value of 1,000 at December 31, 1991. The EURO STOXX 50® Index
is composed of 50 component stocks of market sector leaders from within the STOXX 600 Supersector Indices, which includes stocks
selected from the Eurozone. The component stocks have a high degree of liquidity and represent the largest companies across all
market sectors. For additional information about the EURO STOXX 50® Index, see the information set forth under “EURO
STOXX 50® Index” in the accompanying index supplement.
Information as of market close on August 27, 2019:
Bloomberg Ticker Symbol:
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SX5E
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Current Index Value:
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3,370.47
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52 Weeks Ago:
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3,456.01
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52 Week High (on 7/4/2019):
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3,544.15
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52 Week Low (on 12/27/2018):
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2,937.36
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The following graph sets forth the daily index closing values
of the underlying index for each quarter in the period from January 1, 2014 through August 27, 2019. The related table sets forth
the published high and low closing values, as well as end-of-quarter closing values, of the underlying index for each quarter in
the same period. The index closing value of the underlying index on August 27, 2019 was 3,370.47. We obtained the information in
the table and graph below from Bloomberg Financial Markets, without independent verification. The underlying index has at times
experienced periods of high volatility. You should not take the historical values of the underlying index as an indication of its
future performance, and no assurance can be given as to the index closing value of the underlying index on the determination date.
EURO STOXX 50®
Index Daily Index Closing Values
January 1, 2014 to August
27, 2019
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Morgan Stanley Finance LLC
Market-Linked Notes due April 3, 2025
Based on the Value of the EURO STOXX 50® Index
EURO STOXX 50® Index
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High
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Low
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Period End
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2014
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First Quarter
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3,172.43
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2,962.49
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3,161.60
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Second Quarter
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3,314.80
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3,091.52
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3,228.24
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Third Quarter
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3,289.75
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3,006.83
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3,225.93
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Fourth Quarter
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3,277.38
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2,874.65
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3,146.43
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2015
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First Quarter
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3,731.35
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3,007.91
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3,697.38
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Second Quarter
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3,828.78
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3,424.30
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3,424.30
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Third Quarter
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3,686.58
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3,019.34
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3,100.67
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Fourth Quarter
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3,506.45
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3,069.05
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3,267.52
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2016
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|
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First Quarter
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3,178.01
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2,680.35
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3,004.93
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Second Quarter
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3,151.69
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2,697.44
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2,864.74
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Third Quarter
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3,091.66
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2,761.37
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3,002.24
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Fourth Quarter
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3,290.52
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2,954.53
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3,290.52
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2017
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First Quarter
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3,500.93
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3,230.68
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3,500.93
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Second Quarter
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3,658.79
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3,409.78
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3,441.88
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Third Quarter
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3,594.85
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3,388.22
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3,594.85
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Fourth Quarter
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3,697.40
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3,503.96
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3,503.96
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2018
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First Quarter
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3,672.29
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3,278.72
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3,361.50
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Second Quarter
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3,592.18
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3,340.35
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3,395.60
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Third Quarter
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3,527.18
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3,293.36
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3,399.20
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Fourth Quarter
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3,414.16
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2,937.36
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3,001.42
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2019
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First Quarter
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3,409.00
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2,954.66
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3,351.71
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Second Quarter
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3,514.62
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3,280.43
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3,473.69
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Third Quarter (through August 27, 2019)
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3,544.15
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3,282.78
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3,370.47
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“EURO STOXX 50®”
and “STOXX®” are registered trademarks of STOXX Limited. See “EURO STOXX 50®
Index” in the accompanying index supplement.
Morgan Stanley Finance LLC
Market-Linked Notes due April 3, 2025
Based on the Value of the EURO STOXX 50® Index
Additional Terms of the Notes
Please read this information in conjunction with the summary
terms on the front cover of this document.
Additional Terms:
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If the terms described herein are inconsistent with those described in the accompanying product supplement, index supplement or prospectus, the terms described herein shall control.
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Underlying index publisher:
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STOXX Limited or any successor thereof
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Denominations:
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$10 and integral multiples thereof
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Interest:
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None
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Bull or bear notes:
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Bull notes
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Call right:
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The notes are not callable prior to the maturity date
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Postponement of maturity date:
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If the determination date is postponed so that it falls less than two business days prior to the scheduled maturity date, the maturity date will be postponed to the second business day following the determination date as postponed.
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Equity-linked notes:
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All references to “equity-linked notes” or related terms in the accompanying product supplement for equity-linked notes shall be deemed to refer to market-linked notes when read in conjunction with this document.
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Trustee:
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The Bank of New York Mellon
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Calculation agent:
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MS & Co.
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Issuer notice to registered note holders, the trustee and the depositary:
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In the event that the maturity date is postponed due to postponement
of the 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 notes by mailing notice of such postponement by first
class mail, postage prepaid, to such registered holder’s last address as it shall appear upon the registry books, (ii) to
the trustee by facsimile, confirmed by mailing such notice to the trustee by first class mail, postage prepaid, at its New York
office and (iii) to The Depository Trust Company (the “depositary”) by telephone or facsimile, confirmed by mailing
such notice to the depositary by first class mail, postage prepaid. Any notice that is mailed to a registered holder of the notes
in the manner herein provided shall be conclusively presumed to have been duly given to such registered holder, whether or not
such registered holder receives the notice. The issuer shall give such notice as promptly as possible, and in no case later than
(i) with respect to notice of postponement of the maturity date, the business day immediately preceding the scheduled maturity
date, and (ii) with respect to notice of the date to which the maturity date has been rescheduled, the business day immediately
following the actual determination date for determining the final index value.
The issuer shall,
or shall cause the calculation agent to, (i) provide written notice to the trustee at its New York office, on which notice
the trustee may conclusively rely, and to the depositary of the payment at maturity on or prior to 10:30 a.m. (New York
City time) on the business day preceding the maturity date and (ii) deliver the aggregate cash amount due with respect
to the notes to the trustee for delivery to the depositary, as a holder of the notes, on the maturity date.
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Morgan Stanley Finance LLC
Market-Linked Notes due April 3, 2025
Based on the Value of the EURO STOXX 50® Index
Additional Information About the Notes
Additional Information:
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Minimum ticketing size:
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$1,000 / 100 notes
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Tax considerations:
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In the opinion of our counsel, Davis Polk & Wardwell LLP,
the notes should be treated as “contingent payment debt instruments” for U.S. federal income tax purposes, as described
in the section of the accompanying product supplement called “United States Federal Taxation—Tax Consequences to U.S.
Holders.” Under this treatment, if you are a U.S. taxable investor, you generally will be subject to annual income tax based
on the “comparable yield” (as defined in the accompanying product supplement) of the notes, adjusted upward or downward
to reflect the difference, if any, between the actual and projected amount of the payments on the notes. The comparable yield will
be determined on the pricing date and may be significantly higher or lower than the comparable yield if the notes were priced on
the date hereof. The comparable yield and the projected payment schedule (or information about how to obtain them) will be provided
in the final pricing supplement. In addition, any gain recognized by U.S. taxable investors on the sale or exchange, or at maturity,
of the notes generally will be treated as ordinary income.
You should read the discussion under “United States Federal
Taxation” in the accompanying product supplement concerning the U.S. federal income tax consequences of an investment in
the notes.
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The comparable yield and the projected payment schedule will
not be provided for any purpose other than the determination of U.S. Holders’ accruals of interest income and adjustments
thereto in respect of the notes for U.S. federal income tax purposes, and we make no representation regarding the actual amount
of the payments that will be made on the notes.
If you are a non-U.S. investor, please also read the section
of the accompanying product supplement called “United States Federal Taxation—Tax Consequences to Non-U.S. Holders.”
As discussed in the accompanying product supplement, Section
871(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and Treasury regulations promulgated thereunder
(“Section 871(m)”) generally impose a 30% (or a lower applicable treaty rate) withholding tax on dividend equivalents
paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments linked to U.S. equities or indices that include
U.S. equities (each, an “Underlying Security”). Subject to certain exceptions, Section 871(m) generally applies to
securities that substantially replicate the economic performance of one or more Underlying Securities, as determined based on tests
set forth in the applicable Treasury regulations (a “Specified Security”). However, pursuant to an Internal Revenue
Service (“IRS”) notice, Section 871(m) will not apply to securities issued before January 1, 2021 that do not have
a delta of one with respect to any Underlying Security. Based on the terms of the notes and current market conditions, we expect
that the notes 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 notes do not have a delta of one with respect to any
Underlying Security, our counsel is of the opinion that the notes should not be Specified Securities and, therefore, should not
be subject to Section 871(m). Our determination is not binding on the IRS, and the IRS may disagree with this determination. Section
871(m) is complex and its application may depend on your particular circumstances, including whether you enter into other transactions
with respect to an Underlying Security. If withholding is required, we will not be required to pay any additional amounts with
respect to the amounts so withheld. You should consult your tax adviser regarding the potential application of Section 871(m)
to the notes.
In addition, as discussed in the accompanying product supplement,
withholding rules commonly referred to as “FATCA” apply to certain financial instruments (including the notes) with
respect to payments of amounts treated as interest and to any payment of gross proceeds of a disposition (including retirement)
of such an instrument. However, recently proposed regulations (the preamble to which specifies that taxpayers are permitted to
rely on them pending finalization) eliminate the withholding requirement on payments of gross proceeds of a taxable disposition
(other than amounts treated as interest or other “FDAP income,” as defined in the accompanying product supplement).
You should consult your tax adviser regarding all aspects
of the U.S. federal income tax consequences of an investment in the notes, as well as any tax consequences arising under the laws
of any state, local or non-U.S. taxing jurisdiction. Moreover, neither this document nor the accompanying product supplement addresses
the consequences to taxpayers subject to special tax accounting rules under Section 451(b) of the Code.
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The discussion in the preceding paragraphs under “Tax considerations” and the discussion contained in the section entitled “United States Federal Taxation” in the accompanying product supplement, insofar as they purport to describe provisions of U.S. federal income tax laws or legal conclusions with respect thereto, constitute the full opinion of Davis Polk & Wardwell LLP regarding the material U.S. federal tax consequences of an investment in the notes.
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Use of proceeds and hedging:
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The proceeds from the sale of the notes will be used by us for
general corporate purposes. We will receive, in aggregate, $10 per note issued, because, when we enter into hedging transactions
in order to meet our obligations under the notes, our hedging counterparty will reimburse the cost of the agent’s commissions.
The costs of the notes borne by you and described beginning on page 2 above comprise the agent’s commissions and the cost
of issuing, structuring and hedging the notes.
On or prior to the pricing date, we will hedge our anticipated
exposure in connection with the notes by entering
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Morgan Stanley Finance LLC
Market-Linked Notes due April 3, 2025
Based on the Value of the EURO STOXX 50® Index
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into hedging transactions with our affiliates
and/or third party dealers. We expect our hedging counterparties to take positions in stocks of the underlying index, futures and
options contracts on the underlying index and any component stocks of the underlying index listed on major securities markets or
positions in any other available securities or instruments that they may wish to use in connection with such hedging. Such purchase
activity could potentially increase the value of the underlying index on the pricing date, and, therefore, could increase the value
at or above which the underlying index must close on the determination date before you would receive at maturity a payment that
exceeds the stated principal amount of the notes. In addition, through our affiliates, we are likely to modify our hedge position
throughout the term of the notes, including on the determination date, by purchasing and selling the stocks constituting the underlying
index, futures or options contracts on the underlying index or its component stocks listed on major securities markets or positions
in any other available securities or instruments that we may wish to use in connection with such hedging activities. As a result,
these entities may be unwinding or adjusting hedge positions during the term of the notes, and the hedging strategy may involve
greater and more frequent dynamic adjustments to the hedge as the determination date approaches. We cannot give any assurance that
our hedging activities will not affect the value of the underlying index, and, therefore, adversely affect the value of the notes
or the payment you will receive at maturity. For further information on our use of proceeds and hedging, see “Use of Proceeds
and Hedging” in the accompanying product supplement.
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Benefit plan investor considerations:
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Each fiduciary of a pension, profit-sharing or other employee
benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (a “Plan”),
should consider the fiduciary standards of ERISA in the context of the Plan’s particular circumstances before authorizing
an investment in the notes. Accordingly, among other factors, the fiduciary should consider whether the investment would satisfy
the prudence and diversification requirements of ERISA and would be consistent with the documents and instruments governing the
Plan.
In addition, we and certain of our affiliates, including MS &
Co., may each be considered a “party in interest” within the meaning of ERISA, or a “disqualified person”
within the meaning of the Internal Revenue Code of 1986, as amended (the “Code”), with respect to many Plans, as well
as many individual retirement accounts and Keogh plans (such accounts and plans, together with other plans, accounts and arrangements
subject to Section 4975 of the Code, also “Plans”). ERISA Section 406 and Code Section 4975 generally prohibit transactions
between Plans and parties in interest or disqualified persons. Prohibited transactions within the meaning of ERISA or the Code
would likely arise, for example, if the notes are acquired by or with the assets of a Plan with respect to which MS & Co. or
any of its affiliates is a service provider or other party in interest, unless the notes are acquired pursuant to an exemption
from the “prohibited transaction” rules. A violation of these “prohibited transaction” rules could result
in an excise tax or other liabilities under ERISA and/or Section 4975 of the Code for those persons, unless exemptive relief is
available under an applicable statutory or administrative exemption.
The U.S. Department of Labor has issued five prohibited transaction
class exemptions (“PTCEs”) that may provide exemptive relief for direct or indirect prohibited transactions resulting
from the purchase or holding of the notes. Those class exemptions are PTCE 96-23 (for certain transactions determined by in-house
asset managers), PTCE 95-60 (for certain transactions involving insurance company general accounts), PTCE 91-38 (for certain transactions
involving bank collective investment funds), PTCE 90-1 (for certain transactions involving insurance company separate accounts)
and PTCE 84-14 (for certain transactions determined by independent qualified professional asset managers). In addition, ERISA Section
408(b)(17) and Section 4975(d)(20) of the Code provide an exemption for the purchase and sale of securities and the related lending
transactions, provided that neither the issuer of the securities nor any of its affiliates has or exercises any discretionary authority
or control or renders any investment advice with respect to the assets of the Plan involved in the transaction and provided further
that the Plan pays no more, and receives no less, than “adequate consideration” in connection with the transaction
(the so-called “service provider” exemption). There can be no assurance that any of these class or statutory exemptions
will be available with respect to transactions involving the notes.
Because we may be considered a party in interest with respect
to many Plans, the notes may not be purchased, held or disposed of by any Plan, any entity whose underlying assets include “plan
assets” by reason of any Plan’s investment in the entity (a “Plan Asset Entity”) or any person investing
“plan assets” of any Plan, unless such purchase, holding or disposition is eligible for exemptive relief, including
relief available under PTCEs 96-23, 95-60, 91-38, 90-1, 84-14 or the service provider exemption or such purchase, holding or disposition
is otherwise not prohibited. Any purchaser, including any fiduciary purchasing on behalf of a Plan, transferee or holder of the
notes will be deemed to have represented, in its corporate and its fiduciary capacity, by its purchase and holding of the notes
that either (a) it is not a Plan or a Plan Asset Entity and is not purchasing such notes on behalf of or with “plan assets”
of any Plan or with any assets of a governmental, non-U.S. or church plan that is subject to any federal, state, local or non-U.S.
law that is substantially similar to the provisions of Section 406 of ERISA or Section 4975 of the Code (“Similar Law”)
or (b) its purchase, holding and disposition of these notes will not constitute or result in a non-exempt are not prohibited transaction
under Section 406 of ERISA or Section 4975 of the Code or violate any Similar Law.
Due to the complexity of these rules and the penalties that may
be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries or other
persons considering purchasing the notes on behalf of or with “plan assets” of any Plan consult with their counsel
regarding the availability of exemptive relief.
Each purchaser and holder of the notes has exclusive
responsibility for ensuring that its purchase, holding and disposition of the notes do not violate the prohibited transaction
rules of ERISA or the Code or any Similar Law. The sale of any notes to any Plan or plan subject to Similar Law is in no respect
a representation by us or any of our affiliates or representatives that such an investment meets all relevant legal requirements
with respect to investments by plans generally or any particular plan, or that such an investment is appropriate for plans generally
or any particular plan. In this regard, neither this discussion nor anything provided in this document is
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Morgan Stanley Finance LLC
Market-Linked Notes due April 3, 2025
Based on the Value of the EURO STOXX 50® Index
|
or is intended to be investment advice directed at any potential
Plan purchaser or at Plan purchasers generally and such purchasers of these notes should consult and rely on their own counsel
and advisers as to whether an investment in these notes is suitable.
However, individual retirement accounts, individual retirement
annuities and Keogh plans, as well as employee benefit plans that permit participants to direct the investment of their accounts,
will not be permitted to purchase or hold the notes if the account, plan or annuity is for the benefit of an employee of Morgan
Stanley or Morgan Stanley Wealth Management or a family member and the employee receives any compensation (such as, for example,
an addition to bonus) based on the purchase of the notes by the account, plan or annuity.
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Additional considerations:
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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 notes, either directly or indirectly.
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Supplemental information regarding plan of distribution; conflicts of interest:
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The agent may distribute the securities through Morgan Stanley
Smith Barney LLC (“Morgan Stanley Wealth Management”), as selected dealer, or other dealers, which may include Morgan
Stanley & Co. International plc (“MSIP”) and Bank Morgan Stanley AG. Morgan Stanley Wealth Management, MSIP and
Bank Morgan Stanley AG are affiliates of ours. Selected dealers, including Morgan Stanley Wealth Management, and their financial
advisors will collectively receive from the Agent, Morgan Stanley & Co. LLC, a fixed sales commission of $0.30 for each note
they sell. In addition, Morgan Stanley Wealth Management will receive a structuring fee of $0.05 for each note.
MS & Co. is an affiliate of MSFL and a wholly owned subsidiary
of Morgan Stanley, and it and other affiliates of ours expect to make a profit by selling, structuring and, when applicable, hedging
the notes. When MS & Co. prices this offering of notes, it will determine the economic terms of the notes such that for each
note the estimated value on the pricing date will be no lower than the minimum level described in “Investment Summary”
beginning on page 2.
MS & Co. will conduct this offering in compliance with the
requirements of FINRA Rule 5121 of the Financial Industry Regulatory Authority, Inc., which is commonly referred to as FINRA, regarding
a FINRA member firm’s distribution of the securities of an affiliate and related conflicts of interest. MS & Co. or any
of our other affiliates may not make sales in this offering to any discretionary account. See “Plan of Distribution (Conflicts
of Interest)” and “Use of Proceeds and Hedging” in the accompanying product supplement.
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Where
you can find more information:
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Morgan Stanley and MSFL have filed a registration statement (including
a prospectus, as supplemented by the product supplement for Equity-Linked Notes and the index supplement) with the Securities and
Exchange Commission, or SEC, for the offering to which this communication relates. You should read the prospectus in that registration
statement, the product supplement for Equity-Linked Notes, the index supplement and any other documents relating to this offering
that Morgan Stanley and MSFL have filed with the SEC for more complete information about Morgan Stanley, MSFL and this offering.
You may get these documents without cost by visiting EDGAR on the SEC web site at.www.sec.gov. Alternatively, Morgan Stanley or
MSFL will arrange to send you the product supplement for Equity-Linked Notes, index supplement and prospectus if you so request
by calling toll-free 1-(800)-584-6837.
You may access these documents on the SEC web site at.www.sec.gov
as follows:
Product Supplement for Equity-Linked Notes dated November 16, 2017
Index Supplement dated November 16, 2017
Prospectus dated November 16, 2017
Terms used but not defined in this document are defined in the
product supplement for Equity-Linked Notes, in the index supplement or in the prospectus.
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