September 2019
Preliminary Terms No. 2,442
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 U.S. Equities
Dual Directional Trigger PLUS Based on the Performance
of the S&P 500® Index due October 5, 2022
Trigger Performance Leveraged Upside SecuritiesSM
Fully and Unconditionally Guaranteed by Morgan
Stanley
Principal at Risk Securities
The Dual Directional Trigger PLUS, or “Trigger PLUS,”
are unsecured obligations of Morgan Stanley Finance LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan
Stanley. The Trigger PLUS will pay no interest, do not guarantee any return of principal at maturity and have the terms described
in the accompanying product supplement for PLUS, index supplement and prospectus, as supplemented or modified by this document. At
maturity, if the S&P 500® Index, which we refer to as the underlying index, has appreciated in value,
investors will receive the stated principal amount of their investment plus leveraged upside performance of the underlying index,
subject to the maximum payment at maturity. If the underlying index has depreciated in value but by no more than
20%, investors will receive the stated principal amount of their investment plus an unleveraged positive return equal to the absolute
value of the percentage decline, which will effectively be limited to a positive 20% return. However, if the underlying
index has depreciated in value by more than 20%, investors will be negatively exposed to the full amount of the percentage
decline in the underlying index and will lose 1% of the stated principal amount for every 1% of decline, without any buffer. The
Trigger PLUS are for investors who seek an equity index-based return and who are willing to risk their principal and forgo current
income and upside above the maximum payment at maturity in exchange for the upside leverage and absolute return features that in
each case apply to a limited range of performance of the underlying index. Investors may lose their entire initial
investment in the Trigger PLUS. The Trigger PLUS are notes issued as part of MSFL’s Series A Global Medium-Term
Notes program.
The Trigger PLUS differ from the PLUS described in the accompanying
product supplement for PLUS in that the Trigger PLUS offer the potential for a positive return at maturity if the underlying index
depreciates by up to 20%. The Trigger PLUS are not the Buffered PLUS described in the accompanying product supplement
for PLUS. Unlike the Buffered PLUS, the Trigger PLUS do not provide any protection if the underlying index depreciates
by more than 20%.
All payments are subject to our credit risk. If
we default on our obligations, you could lose some or all of your investment. These Trigger PLUS 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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Maturity date:
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October 5, 2022
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Valuation date:
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September 30, 2022, subject to postponement for non-index business days and certain market disruption events
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Underlying index:
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S&P 500® Index
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Aggregate principal amount:
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$
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Payment at maturity:
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If the final index value is greater than the initial index
value:
$10 + leveraged upside payment
In no event will the payment at maturity
exceed the maximum payment at maturity.
If the final index value is less than or equal to the
initial index value but is greater than or equal to the trigger level:
$10 + ($10 x absolute index return)
In this scenario, you will receive a 1% positive
return on the Trigger PLUS for each 1% negative return on the underlying index. In no event will this amount exceed
the stated principal amount plus $2.00.
If the final index value is less than the trigger level:
$10 × index performance
factor
Under these circumstances, the payment at maturity
will be less than the stated principal amount of $10, and will represent a loss of more than 20%, and possibly all, of your investment.
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Leveraged upside payment:
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$10 x leverage factor x index percent change
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Leverage factor:
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200%
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Maximum payment at maturity:
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$12.50 per Trigger PLUS (125% 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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Absolute index return:
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The absolute value of the index percent change. For example, a –5% index percent change will result in a +5% absolute index return.
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Index performance factor:
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final 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 valuation date
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Trigger level:
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, which is 80% of the initial index value
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Stated principal amount / Issue price:
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$10 per Trigger PLUS (see “Commissions and issue price” below)
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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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CUSIP / ISIN:
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61769Q832 / US61769Q8327
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Listing:
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The Trigger PLUS will not be listed on any securities exchange.
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Agent:
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Morgan Stanley & Co. LLC (“MS & Co.”), a wholly owned subsidiary of Morgan Stanley and an affiliate of MSFL. 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 $9.587 per Trigger PLUS, or within $0.225 of that estimate. See “Investment Summary” 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 Trigger PLUS
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$10.00
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$0.25(1)
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$0.05(2)
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$9.70
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Total
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$
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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 $0.25 for each Trigger PLUS 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 PLUS.
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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 Trigger PLUS.
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(3)
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See “Use of proceeds and hedging” on page
14.
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The Trigger PLUS involve risks not associated with an investment
in ordinary debt securities. See “Risk Factors” beginning on page 6.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these securities, or determined if this document or the accompanying product supplement,
index supplement and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The Trigger PLUS 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 Trigger PLUS” and “Additional Information About the Trigger PLUS” at the end of
this document.
References to “we,” “us” and “our”
refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Morgan Stanley Finance LLC
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Dual Directional Trigger PLUS Based on the Performance of the S&P 500® Index due October 5, 2022
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
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Investment Summary
Trigger Performance Leveraged Upside Securities
Principal at Risk Securities
The Dual Directional Trigger PLUS Based on the Performance of
the S&P 500® Index due October 5, 2022 (the “Trigger PLUS”) can be used:
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As an alternative to direct exposure to the underlying
index that enhances returns for a certain range of positive performance of the underlying index, subject to the maximum payment
at maturity.
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To obtain an unleveraged positive return for a limited
range of negative performance of the underlying index.
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To enhance returns and potentially outperform the
underlying index in a moderately bullish or moderately bearish scenario.
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Maturity:
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Approximately 3 years
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Leverage factor:
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200% (applicable only if the final index value is greater than the initial index value).
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Maximum payment at maturity:
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$12.50 per Trigger PLUS (125% of the stated principal amount)
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Minimum payment at maturity:
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None. Investors may lose all their entire initial investment in the Trigger PLUS.
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Trigger level:
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80% of the initial index value
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Coupon:
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None
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Listing:
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The Trigger PLUS will not be listed on any securities exchange
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The original issue price of each Trigger PLUS is $10. This
price includes costs associated with issuing, selling, structuring and hedging the Trigger PLUS, which are borne by you, and, consequently,
the estimated value of the Trigger PLUS on the pricing date will be less than $10. We estimate that the value of each
Trigger PLUS on the pricing date will be approximately $9.587, or within $0.225 of that estimate. Our estimate of the
value of the Trigger PLUS 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 Trigger PLUS on the pricing date, we take into
account that the Trigger PLUS comprise both a debt component and a performance-based component linked to the underlying index. The
estimated value of the Trigger PLUS 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 Trigger PLUS?
In determining the economic terms of the Trigger PLUS, including
the leverage factor, the trigger level 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
Trigger PLUS 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 Trigger PLUS?
The price at which MS & Co. purchases the Trigger PLUS 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 Trigger PLUS
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 Trigger PLUS 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
Trigger PLUS, and, if it once chooses to make a market, may cease doing so at any time.
Morgan Stanley Finance LLC
|
Dual Directional Trigger PLUS Based on the Performance of the S&P 500® Index due October 5, 2022
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
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Key Investment Rationale
The Trigger PLUS offer the potential for a positive return at
maturity based on the absolute value of a limited range of percentage changes of the underlying index. At maturity,
if the underlying index has appreciated in value, investors will receive the stated principal amount of their investment
plus leveraged upside performance of the underlying index, subject to the maximum payment at maturity. If the underlying
index has depreciated in value but by no more than 20%, investors will receive the stated principal amount of their investment
plus an unleveraged positive return equal to the absolute value of the percentage decline, which will effectively be limited to
a positive 20% return. However, if the underlying index has depreciated in value by more than 20%, investors
will be negatively exposed to the full amount of the percentage decline in the underlying index and will lose 1% of the stated
principal amount for every 1% of decline, without any buffer. Investors may lose their entire initial investment
in the Trigger PLUS. All payments on the Trigger PLUS are subject to our credit risk.
Leveraged Upside Performance Up to a Cap
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The Trigger PLUS offer investors an opportunity to capture enhanced returns relative to a direct investment in the underlying index, subject to the maximum payment at maturity.
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Absolute Return Feature
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The Trigger PLUS enable investors to obtain an unleveraged positive return if the final index value is less than or equal to the initial index value but is greater than or equal to the trigger level.
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Upside Scenario if the Underlying Index Appreciates
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The final index value is greater than the initial index value, and, at maturity, you receive a full return of principal as well as 200% of the increase in the value of the underlying index, subject to the maximum payment at maturity. For example, if the final index value is 10% greater than the initial index value, the Trigger PLUS will provide a total return of 20% at maturity. The maximum payment at maturity is $12.50 per Trigger PLUS (125% of the stated principal amount).
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Absolute Return Scenario
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The final index value is less than or equal to the initial index value but is greater than or equal to the trigger level, which is 80% of the initial index value. In this case, you receive a 1% positive return on the Trigger PLUS for each 1% negative return on the underlying index. For example, if the final index value is 10% less than the initial index value, the Trigger PLUS will provide a total positive return of 10% at maturity. The maximum return you may receive in this scenario is a positive 20% return at maturity.
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Downside Scenario
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The final index value is less than the trigger level. In this case, the Trigger PLUS redeem for at least 20% less than the stated principal amount, and this decrease will be by an amount proportionate to the full decline in the value of the underlying index over the term of the Trigger PLUS. Under these circumstances, the payment at maturity will be less than 80% of the stated principal amount per Trigger PLUS. For example, if the final index value is 70% less than the initial index value, the Trigger PLUS will be redeemed at maturity for a loss of 70% of principal at $3.00, or 30% of the stated principal amount. There is no minimum payment at maturity on the Trigger PLUS, and you could lose your entire investment.
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Morgan Stanley Finance LLC
|
Dual Directional Trigger PLUS Based on the Performance of the S&P 500® Index due October 5, 2022
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
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How the Trigger PLUS Work
Payoff Diagram
The payoff diagram below illustrates the payment at maturity
on the Trigger PLUS based on the following terms:
Stated principal amount:
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$10 per Trigger PLUS
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Leverage factor:
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200%
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Trigger level:
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80% of the initial index value
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Maximum payment at maturity:
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$12.50 per Trigger PLUS (125% of the stated principal amount)
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Minimum payment at maturity:
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None
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Trigger PLUS Payoff Diagram
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See the next page for a description of how the Trigger PLUS work.
Morgan Stanley Finance LLC
|
Dual Directional Trigger PLUS Based on the Performance of the S&P 500® Index due October 5, 2022
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
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How it works
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Upside Scenario if the Underlying
Index Appreciates. If the final
index value is greater than the initial index value, the investor would receive the $10 stated principal amount plus 200% of the
appreciation of the underlying index over the term of the Trigger PLUS, subject to the maximum payment at maturity. Under the terms
of the Trigger PLUS, an investor would realize the maximum payment at maturity of $12.50 per Trigger PLUS (125% of the stated principal
amount) at a final index value of 112.50% of the initial index value.
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Given the leverage factor of 200%, if the underlying
index appreciates 10%, the investor would receive a 20% return, or $12.00 per Trigger PLUS.
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If the underlying index appreciates 70%, the investor
would receive only a 25.00% return or $12.50 per Trigger PLUS, due to the maximum payment at maturity.
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Absolute Return Scenario. If
the final index value is less than or equal to the initial index value and is greater than or equal to the trigger level of 80%
of the initial index value, the investor would receive a 1% positive return on the Trigger PLUS for each 1% negative return on
the underlying index.
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If the underlying index depreciates 10%, the investor
would receive a 10% return, or $11.00 per Trigger PLUS.
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The maximum return you may receive in this scenario
is a positive 20% return at maturity.
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Downside Scenario. If
the final index value is less than the trigger level of 80% of the initial index value, the investor would receive an amount less
than the $10 stated principal amount, based on a 1% loss of principal for each 1% decline in the underlying index. Under
these circumstances, the payment at maturity will be less than 80% of the stated principal amount per Trigger PLUS. There
is no minimum payment at maturity on the Trigger PLUS.
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If the underlying index depreciates 70%, the investor
would lose 70% of the investor’s principal and receive only $3.00 per Trigger PLUS at maturity, or 30% of the stated principal
amount.
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Morgan Stanley Finance LLC
|
Dual Directional Trigger PLUS Based on the Performance of the S&P 500® Index due October 5, 2022
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
|
Risk Factors
The following is a non-exhaustive list of certain key risk
factors for investors in the Trigger PLUS. For further discussion of these and other risks, you should read the section
entitled “Risk Factors” in the accompanying product supplement for PLUS, 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 Trigger
PLUS.
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The Trigger PLUS do not pay interest or guarantee
return of any principal. The terms of the Trigger PLUS differ from those of ordinary debt securities in that the
Trigger PLUS do not pay interest or guarantee the payment of any principal amount at maturity. If the final index value
is less than the trigger level (which is 80% of the initial index value), the absolute return feature will no longer be available
and the payout at maturity will be an amount in cash that is at least 20% less than the $10 stated principal amount of each Trigger
PLUS, and this decrease will be by an amount proportionate to the full amount of the decline in the value of the underlying index
over the term of the Trigger PLUS, without any buffer. There is no minimum payment at maturity on the Trigger PLUS,
and, accordingly, you could lose your entire initial investment in the Trigger PLUS.
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The appreciation potential
of the Trigger PLUS is limited by the maximum payment at maturity. The appreciation potential of the Trigger PLUS
is limited by the maximum payment at maturity of $12.50 per Trigger PLUS, or 125% of the stated principal amount. Although
the leverage factor provides 200% exposure to any increase in the final index value over the initial index value, because the payment
at maturity will be limited to 125% of the stated principal amount for the Trigger PLUS, any increase in the final index value
over the initial index value by more than 12.50% of the initial index value will not further increase the return on the Trigger
PLUS.
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The market price of the Trigger PLUS will be influenced
by many unpredictable factors. Several factors, many of which are beyond our control, will influence the value of
the Trigger PLUS in the secondary market and the price at which MS & Co. may be willing to purchase or sell the Trigger PLUS
in the secondary market, including the value (including whether the value is below the trigger level), volatility (frequency and
magnitude of changes in value) and dividend yield of the underlying index, interest and yield rates in the market, time remaining
until the Trigger PLUS mature, geopolitical conditions and economic, financial, political, regulatory or judicial events that affect
the underlying index or equities markets generally and which may affect the final index value of the underlying index, and any
actual or anticipated changes in our credit ratings or credit spreads. The level of the underlying index may be, and has recently
been, volatile, and we can give you no assurance that the volatility will lessen. See “S&P 500®
Index Overview” below. You may receive less, and possibly significantly less, than the stated principal amount
per Trigger PLUS if you try to sell your Trigger PLUS prior to maturity.
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The Trigger PLUS 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 Trigger
PLUS. You are dependent on our ability to pay all amounts due on the Trigger PLUS at maturity and therefore you
are subject to our credit risk. If we default on its obligations under the Trigger PLUS, your investment would be at
risk and you could lose some or all of your investment. As a result, the market value of the Trigger PLUS 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 Trigger PLUS.
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As a finance subsidiary, MSFL has no independent
operations and will have no independent assets. As a finance subsidiary, MSFL has no independent operations beyond
the issuance and administration of its securities and will have no independent assets available for distributions to holders of
MSFL securities if they make claims in respect of such securities in a bankruptcy, resolution or similar proceeding. Accordingly,
any recoveries by such holders will be limited to those available under the related guarantee by Morgan Stanley and that guarantee
will rank pari passu with all other unsecured, unsubordinated obligations of Morgan Stanley. Holders will have recourse
only to a single claim against Morgan Stanley and its assets under the guarantee. Holders of securities issued by MSFL should accordingly
assume that in any such proceedings they would not have any priority over and should be treated pari passu with the claims
of other unsecured, unsubordinated creditors of Morgan Stanley, including holders of Morgan Stanley-issued securities.
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The amount payable on the Trigger PLUS is not linked
to the value of the underlying index at any time other than the valuation date. The final index value will be based on the
index closing value on the valuation date,
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Morgan Stanley Finance LLC
|
Dual Directional Trigger PLUS Based on the Performance of the S&P 500® Index due October 5, 2022
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
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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 valuation date
but then drops by the valuation 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 Trigger PLUS may be higher than
the final index value, the payment at maturity will be based solely on the index closing value on the valuation date.
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Investing in the Trigger PLUS is not equivalent
to investing in the underlying index. Investing in the Trigger PLUS is not equivalent to investing in the underlying
index or its component stocks. Investors in the Trigger PLUS will not have voting rights or rights to receive dividends
or other distributions or any other rights with respect to the stocks that constitute the underlying index.
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Adjustments to the underlying index could adversely
affect the value of the Trigger PLUS. The underlying index publisher may add, delete or substitute the stocks constituting
the underlying index or make other methodological changes that could change the value of the underlying index. The underlying
index publisher may discontinue or suspend calculation or publication of the underlying index at any time. In these
circumstances, the calculation agent will have the sole discretion to substitute a successor index that is comparable to the discontinued
underlying index and will be permitted to consider indices that are calculated and published by the calculation agent or any of
its affiliates.
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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
Trigger PLUS in the original issue price reduce the economic terms of the Trigger PLUS, cause the estimated value of the Trigger
PLUS 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 Trigger PLUS 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 Trigger PLUS in the original issue price and the lower rate we are willing to pay as issuer make the economic terms
of the Trigger PLUS less favorable to you than they otherwise would be.
However, because the costs associated with issuing,
selling, structuring and hedging the Trigger PLUS 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 Trigger PLUS 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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The estimated value of the Trigger PLUS 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
Trigger PLUS than those generated by others, including other dealers in the market, if they attempted to value the Trigger PLUS. 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 Trigger PLUS in the secondary market (if any exists) at any time. The value
of your Trigger PLUS 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 Trigger
PLUS will be influenced by many unpredictable factors” above.
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The Trigger PLUS will not be listed on any securities
exchange and secondary trading may be limited. The Trigger PLUS will not be listed on any securities exchange. Therefore, there
may be little or no secondary market for the Trigger PLUS. MS & Co. may, but is not obligated to, make a market in the Trigger
PLUS 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 Trigger
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Morgan Stanley Finance LLC
|
Dual Directional Trigger PLUS Based on the Performance of the S&P 500® Index due October 5, 2022
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
|
PLUS, 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 Trigger PLUS. Even if there is
a secondary market, it may not provide enough liquidity to allow you to trade or sell the Trigger PLUS easily. Since
other broker-dealers may not participate significantly in the secondary market for the Trigger PLUS, the price at which you may
be able to trade your Trigger PLUS 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 Trigger PLUS, it is likely that there would be no secondary market
for the Trigger PLUS. Accordingly, you should be willing to hold your Trigger PLUS to maturity.
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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 Trigger PLUS. As calculation
agent, MS & Co. will determine the initial index value, the trigger level and the final index value, including whether the
value of the underlying index has decreased to below the trigger level, and will calculate the amount of cash you receive at maturity,
if any. Moreover, certain determinations made by MS & Co., in its capacity as calculation agent, may require it
to exercise discretion and make subjective judgments, such as with respect to the occurrence or non-occurrence of market disruption
events and the selection of a successor index or calculation of the final index value in the event of a market disruption event
or discontinuance of the underlying index. These potentially subjective determinations may adversely affect the payout to you at
maturity, if any. For further information regarding these types of determinations, see “Description of PLUS—Postponement
of Valuation Date(s),” “—Alternate Exchange Calculation in case of an Event of Default” and “—Calculation
Agent and Calculations” in the accompanying product supplement. In addition, MS & Co. has determined the estimated
value of the Trigger PLUS on the pricing date.
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Hedging and trading activity by our affiliates
could potentially adversely affect the value of the Trigger PLUS. One or more of our affiliates and/or third-party
dealers expect to carry out hedging activities related to the Trigger PLUS (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 Trigger PLUS, and the hedging strategy may involve greater and more frequent dynamic adjustments to the hedge as the
valuation date approaches. Some of our affiliates also trade the stocks that constitute the underlying index and other
financial instruments related to the underlying index on a regular basis as part of their general broker-dealer and other businesses. Any
of these hedging or trading activities on or prior to the pricing date could potentially increase the initial index value, and,
therefore, could increase the trigger level, which is the value at or above which the underlying index must close on the valuation
date so that investors do not suffer a significant loss on their initial investment in the Trigger PLUS. Additionally,
such hedging or trading activities during the term of the Trigger PLUS, including on the valuation date, could adversely affect
the value of the underlying index on the valuation date, and, accordingly, the amount of cash an investor will receive at maturity,
if any.
|
|
§
|
The U.S. federal income tax consequences of an
investment in the Trigger PLUS are uncertain. Please read the discussion under “Additional Information—Tax considerations”
in this document and the discussion under “United States Federal Taxation” in the accompanying product supplement for
PLUS (together, the “Tax Disclosure Sections”) concerning the U.S. federal income tax consequences of an investment
in the Trigger PLUS. If the Internal Revenue Service (the “IRS”) were successful in asserting an alternative
treatment, the timing and character of income on the Trigger PLUS might differ significantly from the tax treatment described in
the Tax Disclosure Sections. For example, under one possible treatment, the IRS could seek to recharacterize the Trigger PLUS as
debt instruments. In that event, U.S. Holders would be required to accrue into income original issue discount on the Trigger PLUS
every year at a “comparable yield” determined at the time of issuance and recognize all income and gain in respect
of the Trigger PLUS as ordinary income. Additionally, as discussed under “United States Federal Taxation—FATCA”
in the accompanying product supplement for PLUS, the withholding rules commonly referred to as “FATCA” would apply
to the Trigger PLUS if they were recharacterized as debt instruments. 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 “FDAP income,” as defined in the
accompanying product supplement for PLUS). The risk that financial instruments providing for buffers, triggers or similar
downside protection features, such as the Trigger PLUS, would be recharacterized as debt is greater than the risk of recharacterization
for comparable financial instruments that do not have such features. We do not plan to request a ruling from the IRS
regarding the tax
|
Morgan Stanley Finance LLC
|
Dual Directional Trigger PLUS Based on the Performance of the S&P 500® Index due October 5, 2022
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
|
treatment of the Trigger PLUS, and the IRS or a court
may not agree with the tax treatment described in the Tax Disclosure Sections.
In 2007, the U.S. Treasury Department and the IRS
released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar
instruments. The notice focuses in particular on whether to require holders of these instruments to accrue income over
the term of their investment. It also asks for comments on a number of related topics, including the character of income
or loss with respect to these instruments; whether short-term instruments should be subject to any such accrual regime; the relevance
of factors such as the exchange-traded status of the instruments and the nature of the underlying property to which the instruments
are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors should be subject
to withholding tax; and whether these instruments are or should be subject to the “constructive ownership” rule, which
very generally can operate to recharacterize certain long-term capital gain as ordinary income and impose an interest charge. While
the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated
after consideration of these issues could materially and adversely affect the tax consequences of an investment in the Trigger
PLUS, possibly with retroactive effect. 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 Trigger PLUS, including possible alternative treatments, the issues
presented by this notice and any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
Morgan Stanley Finance LLC
|
Dual Directional Trigger PLUS Based on the Performance of the S&P 500® Index due October 5, 2022
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
|
S&P 500® Index Overview
The S&P 500® Index, which is calculated, maintained
and published by S&P Dow Jones Indices LLC (“S&P”), consists of stocks of 500 component companies selected
to provide a performance benchmark for the U.S. equity markets. The calculation of the S&P 500® Index
is based on the relative value of the float adjusted aggregate market capitalization of the 500 component companies as of a particular
time as compared to the aggregate average market capitalization of 500 similar companies during the base period of the years 1941
through 1943. For additional information about the S&P 500® Index, see the information set forth under “S&P
500® Index” in the accompanying index supplement.
Information as of market close on August 26, 2019:
Bloomberg Ticker Symbol:
|
SPX
|
Current Index Value:
|
2,878.38
|
52 Weeks Ago:
|
2,874.69
|
52 Week High (on 7/26/2019):
|
3,025.86
|
52 Week Low (on 12/24/2018):
|
2,351.10
|
|
|
The following graph sets forth the daily index closing values
of the underlying index for each quarter in the period from January 1, 2014 through August 26, 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 26, 2019 was 2,878.38. 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 valuation date.
S&P 500®
Index
Daily Index Closing Values
January 1, 2014 to August
26, 2019
|
|
Morgan Stanley Finance LLC
|
Dual Directional Trigger PLUS Based on the Performance of the S&P 500® Index due October 5, 2022
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
|
S&P 500® Index
|
High
|
Low
|
Period End
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2014
|
|
|
|
First Quarter
|
1,878.04
|
1,741.89
|
1,872.34
|
Second Quarter
|
1,962.87
|
1,815.69
|
1,960.23
|
Third Quarter
|
2,011.36
|
1,909.57
|
1,972.29
|
Fourth Quarter
|
2,090.57
|
1,862.49
|
2,058.90
|
2015
|
|
|
|
First Quarter
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2,117.39
|
1,992.67
|
2,067.89
|
Second Quarter
|
2,130.82
|
2,057.64
|
2,063.11
|
Third Quarter
|
2,128.28
|
1,867.61
|
1,920.03
|
Fourth Quarter
|
2,109.79
|
1,923.82
|
2,043.94
|
2016
|
|
|
|
First Quarter
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2,063.95
|
1,829.08
|
2,059.74
|
Second Quarter
|
2,119.12
|
2,000.54
|
2,098.86
|
Third Quarter
|
2,190.15
|
2,088.55
|
2,168.27
|
Fourth Quarter
|
2,271.72
|
2,085.18
|
2,238.83
|
2017
|
|
|
|
First Quarter
|
2,395.96
|
2,257.83
|
2,362.72
|
Second Quarter
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2,453.46
|
2,328.95
|
2,423.41
|
Third Quarter
|
2,519.36
|
2,409.75
|
2,519.36
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Fourth Quarter
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2,690.16
|
2,529.12
|
2,673.61
|
2018
|
|
|
|
First Quarter
|
2,872.87
|
2,581.00
|
2,640.87
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Second Quarter
|
2,786.85
|
2,581.88
|
2,718.37
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Third Quarter
|
2,930.75
|
2,713.22
|
2,913.98
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Fourth Quarter
|
2,925.51
|
2,351.10
|
2,506.85
|
2019
|
|
|
|
First Quarter
|
2,854.88
|
2,447.89
|
2,834.40
|
Second Quarter
|
2,954.18
|
2,744.45
|
2,941.76
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Third Quarter (through August 26, 2019)
|
3,025.86
|
2,840.60
|
2,878.38
|
|
|
|
|
“Standard & Poor’s®,” “S&P®,”
“S&P 500®,” “Standard & Poor’s 500” and “500” are trademarks of
Standard and Poor’s Financial Services LLC. See “S&P 500® Index” in the accompanying
index supplement.
Morgan Stanley Finance LLC
|
Dual Directional Trigger PLUS Based on the Performance of the S&P 500® Index due October 5, 2022
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
|
Additional Terms of the Trigger PLUS
Please read this information in conjunction with the summary
terms on the front cover of this document.
If the terms described herein are inconsistent with those described in the accompanying product supplement, index supplement or prospectus, the terms described herein shall control.
|
Underlying index publisher:
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S&P Dow Jones Indices LLC or any successor thereof.
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Postponement of maturity date:
|
If, due to a market disruption event or otherwise, the valuation date is postponed so that it falls less than two business days prior to the scheduled maturity date, the maturity date will be postponed to the second business day following the valuation date as postponed.
|
Denominations:
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$10 per Trigger PLUS and integral multiples thereof
|
Trustee:
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The Bank of New York Mellon
|
Calculation agent:
|
MS & Co.
|
Issuer notice to registered security holders, the trustee and the depositary:
|
In the event that the maturity date is postponed due to postponement
of the valuation date, the issuer shall give notice of such postponement and, once it has been determined, of the date to which
the maturity date has been rescheduled (i) to each registered holder of the Trigger PLUS 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 Trigger
PLUS in the manner herein provided shall be conclusively presumed to have been duly given to such registered holder, whether or
not such registered holder receives the notice. The issuer shall give such notice as promptly as possible, and in no case later
than (i) with respect to notice of postponement of the maturity date, the business day immediately preceding the scheduled maturity
date and (ii) with respect to notice of the date to which the maturity date has been rescheduled, the business day immediately
following the actual valuation date for determining the final index value.
The issuer shall, or shall cause the calculation agent to, (i)
provide written notice to the trustee, on which notice the trustee may conclusively rely, and to the depositary of the amount of
cash to be delivered, if any, with respect to the Trigger PLUS, 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, if any, to the trustee for delivery to the depositary,
as holder of the Trigger PLUS, on the maturity date.
|
Morgan Stanley Finance LLC
|
Dual Directional Trigger PLUS Based on the Performance of the S&P 500® Index due October 5, 2022
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
|
Additional Information About the Trigger PLUS
Minimum ticketing size:
|
$1,000 / 100 Trigger PLUS
|
Tax considerations:
|
Although there is uncertainty regarding the U.S. federal income tax consequences of an investment in the Trigger PLUS due to the lack of governing authority, in the opinion of our counsel, Davis Polk & Wardwell LLP, under current law, and based on current market conditions, a Trigger PLUS should be treated as a single financial contract that is an “open transaction” for U.S. federal income tax purposes. However, because our counsel’s opinion is based in part on market conditions as of the date of this document, it is subject to confirmation on the pricing date.
|
|
Assuming this treatment of the Trigger PLUS is respected and subject to the discussion in “United States Federal Taxation” in the accompanying product supplement for PLUS, the following U.S. federal income tax consequences should result based on current law:
|
|
§
A U.S. Holder should not be required
to recognize taxable income over the term of the Trigger PLUS prior to settlement, other than pursuant to a sale or exchange.
|
|
§
Upon sale,
exchange or settlement of the Trigger PLUS, a U.S. Holder should recognize gain or loss equal to the difference between the amount
realized and the U.S. Holder’s tax basis in the Trigger PLUS. Such gain or loss should be long-term capital gain
or loss if the investor has held the Trigger PLUS for more than one year, and short-term capital gain or loss otherwise.
|
|
In 2007,
the U.S. Treasury Department and the Internal Revenue Service (the “IRS”) released a notice requesting comments on
the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments. The notice
focuses in particular on whether to require holders of these instruments to accrue income over the term of their investment. It
also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments;
whether short-term instruments should be subject to any such accrual regime; the relevance of factors such as the exchange-traded
status of the instruments and the nature of the underlying property to which the instruments are linked; the degree, if any, to
which income (including any mandated accruals) realized by non-U.S. investors should be subject to withholding tax; and whether
these instruments are or should be subject to the “constructive ownership” rule, which very generally can operate to
recharacterize certain long-term capital gain as ordinary income and impose an interest charge. While the notice requests
comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated after consideration
of these issues could materially and adversely affect the tax consequences of an investment in the Trigger PLUS, possibly with
retroactive effect.
As discussed
in the accompanying product supplement for PLUS, Section 871(m) of the Internal Revenue Code of 1986, as amended, and Treasury
regulations promulgated thereunder (“Section 871(m)”) generally impose a 30% (or a lower applicable treaty rate) withholding
tax on dividend equivalents paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments linked to U.S.
equities or indices that include U.S. equities (each, an “Underlying Security”). Subject to certain exceptions,
Section 871(m) generally applies to securities that substantially replicate the economic performance of one or more Underlying
Securities, as determined based on tests set forth in the applicable Treasury regulations (a “Specified Security”). However,
pursuant to an IRS notice, Section 871(m) will not apply to securities issued before January 1, 2021 that do not have a delta of
one with respect to any Underlying Security. Based on the terms of the Trigger PLUS and current market conditions, we
expect that the Trigger PLUS 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 Trigger PLUS do not have a delta of
one with respect to any Underlying Security, our counsel is of the opinion that the Trigger PLUS 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 Trigger
PLUS.
Both U.S.
and non-U.S. investors considering an investment in the Trigger PLUS should read the discussion under “Risk Factors”
in this document and the discussion under “United States Federal Taxation” in the accompanying product supplement for
PLUS and consult their tax advisers regarding all aspects of the U.S. federal income tax consequences of an investment in
|
Morgan Stanley Finance LLC
|
Dual Directional Trigger PLUS Based on the Performance of the S&P 500® Index due October 5, 2022
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
|
|
the Trigger PLUS, including possible
alternative treatments, the issues presented by the aforementioned notice and any tax consequences arising under the laws of any
state, local or non-U.S. taxing jurisdiction.
The discussion in the preceding paragraphs
under “Tax considerations” and the discussion contained in the section entitled “United States Federal Taxation”
in the accompanying product supplement for PLUS, 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 Trigger PLUS.
|
Use of proceeds and hedging:
|
The proceeds from the sale of the Trigger PLUS will be used by
us for general corporate purposes. We will receive, in aggregate, $10 per Trigger PLUS issued, because, when we enter
into hedging transactions in order to meet our obligations under the Trigger PLUS, our hedging counterparty will reimburse the
cost of the agent’s commissions. The costs of the Trigger PLUS borne by you and described on page 2 above comprise
the agent’s commissions and the cost of issuing, structuring and hedging the Trigger PLUS.
On or prior to the pricing date, we will hedge our anticipated
exposure in connection with the Trigger PLUS by entering into hedging transactions with our affiliates and/or third party dealers. We
expect our hedging counterparties to take positions in stocks of the underlying index, in futures and/or options contracts on the
underlying index or any component stocks of the underlying index listed on major securities markets, or in any other 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 trigger level, which is the value at
or above which the underlying index must close on the valuation date so that investors do not suffer a significant loss on their
initial investment in the Trigger PLUS. In addition, through our affiliates, we are likely to modify our hedge position
throughout the term of the Trigger PLUS, including on the valuation date, by purchasing and selling the stocks constituting the
underlying index, futures or options contracts on the underlying index or its component stocks listed on major securities markets
or positions in any other available securities or instruments that we may wish to use in connection with such hedging activities. As
a result, these entities may be unwinding or adjusting hedge positions during the term of the Trigger PLUS, and the hedging strategy
may involve greater and more frequent dynamic adjustments to the hedge as the valuation date approaches. We cannot give
any assurance that our hedging activities will not affect the value of the underlying index, and, therefore, adversely affect the
value of the Trigger PLUS or the payment you will receive at maturity, if any. For further information on our use of
proceeds and hedging, see “Use of Proceeds and Hedging” in the accompanying product supplement for PLUS.
|
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 Trigger PLUS. 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 Section 4975 of the Code 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 Trigger PLUS 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 Trigger
PLUS 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 Trigger PLUS. 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
|
Morgan Stanley Finance LLC
|
Dual Directional Trigger PLUS Based on the Performance of the S&P 500® Index due October 5, 2022
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
|
|
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
Trigger PLUS.
Because we may be considered a party in interest with respect
to many Plans, the Trigger PLUS 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 Trigger PLUS will be deemed to have represented, in its corporate and its fiduciary capacity, by its purchase
and holding of the Trigger PLUS that either (a) it is not a Plan or a Plan Asset Entity and is not purchasing such Trigger PLUS
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 Trigger PLUS 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 Trigger PLUS on behalf of or with “plan assets” of any Plan consult with their counsel
regarding the availability of exemptive relief.
The Trigger PLUS are contractual financial instruments. The
financial exposure provided by the Trigger PLUS 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 Trigger PLUS. The
Trigger PLUS 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 Trigger PLUS.
Each purchaser or holder of any Trigger PLUS 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 Trigger PLUS, (B) the purchaser or holder’s investment in the Trigger PLUS, or (C) the exercise of or failure
to exercise any rights we have under or with respect to the Trigger PLUS;
(ii)
we and our affiliates have acted
and will act solely for our own account in connection with (A) all transactions relating to the Trigger PLUS and (B) all hedging
transactions in connection with our obligations under the Trigger PLUS;
(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 Trigger PLUS has exclusive responsibility
for ensuring that its purchase, holding and disposition of the Trigger PLUS do not violate the prohibited transaction rules of
ERISA or the Code or any Similar Law. The sale of any Trigger PLUS 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 Trigger PLUS should consult and rely on their own counsel and advisers as to whether an investment in these Trigger PLUS
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 Trigger PLUS 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
|
Morgan Stanley Finance LLC
|
Dual Directional Trigger PLUS Based on the Performance of the S&P 500® Index due October 5, 2022
Trigger Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
|
|
purchase of the Trigger PLUS by the account, plan or annuity.
|
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 Trigger PLUS, either directly or indirectly.
|
Supplemental information regarding plan of distribution; conflicts of interest:
|
The agent may distribute the Trigger PLUS 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
$0.25 for each Trigger PLUS they sell. In addition, Morgan Stanley Wealth Management will receive a structuring fee
of $0.05 for each Trigger PLUS.
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 Trigger PLUS. When MS & Co. prices this offering of Trigger PLUS, it will determine the economic terms of the
Trigger PLUS such that for each Trigger PLUS the estimated value on the pricing date will be no lower than the minimum level described
in “Investment Summary” 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 for PLUS.
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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 PLUS 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 PLUS, 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 PLUS, index supplement and prospectus if you so request
by calling toll-free 800-584-6837.
You may access these documents on the SEC web site at.www.sec.gov.as
follows:
Product Supplement for PLUS 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 PLUS, in the index supplement or in the prospectus.
“Performance Leveraged Upside SecuritiesSM”
and “PLUSSM” are our service marks.
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