September
2019
Preliminary Terms No. 2,526
Registration Statement Nos.
333-221595; 333-221595-01
Dated September 5, 2019
Filed pursuant to Rule 433
Morgan
Stanley Finance LLC
Structured
Investments
Opportunities in U.S.
Equities
Contingent Income Auto-Callable Securities due
September 10, 2021
All Payments on the Securities Based on the Worst
Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale
Corporation
Fully and Unconditionally
Guaranteed by Morgan Stanley
Principal at Risk Securities
The securities
offered are unsecured obligations of Morgan Stanley Finance LLC (“MSFL”) and are fully and unconditionally guaranteed
by Morgan Stanley. The securities have the terms described in the accompanying
product supplement and prospectus, as supplemented or modified by this document. The securities do not guarantee the repayment
of principal and do not provide for the regular payment of interest. Instead, the securities will pay a contingent quarterly coupon
but only if the determination closing price of each of the common stock of Walmart Inc., the common stock of Target
Corporation and the common stock of Costco Wholesale Corporation, which we refer to collectively as the underlying stocks,
is at or above 50% of its respective initial share price,
which we refer to as the respective coupon threshold level, on the related
observation date. If, however, the determination closing price of any underlying stock is less than its respective coupon
threshold level on any observation date, we will pay no interest for the related quarterly period. In addition, the securities
will be automatically redeemed if the determination closing price of each underlying stock is greater than or
equal to its respective initial share price on any quarterly redemption
determination date (beginning after six months) for the early redemption payment equal to the sum of the stated principal amount
plus the related contingent quarterly coupon. At maturity, if the securities have not previously been redeemed and the final
share price of each underlying stock is greater than or equal to 60% of its respective initial share price, which
we refer to as the respective downside threshold level, the payment at maturity will be the stated principal amount and the related
contingent quarterly coupon. However, if the final share price of any underlying stock is less than its respective
downside threshold level, investors will be exposed to the decline in the worst performing underlying stock on a 1-to-1 basis and
will receive a payment at maturity that is less than 60% of the stated principal amount of the securities and could be zero. Accordingly,
investors in the securities must be willing to accept the risk of losing their entire initial investment and also the risk of
not receiving any contingent quarterly coupons throughout the 2-year term of the securities. The securities are for investors
who are willing to risk their principal and seek an opportunity to earn interest at a potentially above-market rate in exchange
for the risk of receiving no quarterly interest over the entire 2-year term and in exchange for the possibility of an automatic
early redemption prior to maturity. Because all payments on the securities are based on the worst performing of the underlying
stocks, the fact that the securities are linked to three underlying stocks does not provide any asset diversification benefits
and instead means that a decline beyond the respective coupon threshold level or respective downside threshold level, as applicable,
of any underlying stock will result in no contingent quarterly coupon payments or a significant loss of your investment, as applicable,
even if one or both of the other underlying stocks have appreciated or have not declined as much. Investors will not participate
in any appreciation of any underlying stock. The securities 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 securities are not secured obligations and you will not
have any security interest in, or otherwise have any access to, any underlying reference asset or assets.
SUMMARY TERMS
|
Issuer:
|
Morgan Stanley Finance LLC
|
Guarantor:
|
Morgan Stanley
|
Underlying stocks:
|
Walmart Inc. common stock (the “WMT Stock”), Target Corporation common stock (the “TGT Stock”) and Costco Wholesale Corporation common stock (the “COST Stock”)
|
Aggregate principal amount:
|
$
|
Stated principal amount:
|
$1,000 per security
|
Issue price:
|
$1,000 per security
|
Pricing date:
|
September 5, 2019
|
Original issue date:
|
September 10, 2019 (3 business days after the pricing date)
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Maturity date:
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September 10, 2021
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Early redemption:
|
The securities are not subject to automatic early redemption
until March 9, 2020. Following this initial 6-month non-call period, if, on any redemption determination date, beginning on March
4, 2020, the determination closing price of each underlying stock is greater than or equal to its respective initial share
price, the securities will be automatically redeemed for an early redemption payment on the related early redemption date. No further
payments will be made on the securities once they have been redeemed.
The securities will not be redeemed early on any early redemption
date if the determination closing price of any underlying stock is below its respective initial share price on the related redemption
determination date.
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Early redemption payment:
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The early redemption payment will be an amount equal to (i) the stated principal amount for each security you hold plus (ii) the contingent quarterly coupon with respect to the related observation date.
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Determination closing price:
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With respect to each underlying stock, the closing price of such underlying stock on any redemption determination date or observation date (other than the final observation date) times the adjustment factor on such determination date or observation date, as applicable
|
Redemption determination dates:
|
Starting after six months, quarterly, as set forth under “Observation Dates, Redemption Determination Dates, Coupon Payment Dates and Early Redemption Dates” below, subject to postponement for non-trading days and certain market disruption events
|
Early redemption dates:
|
Starting on March 9, 2020 (approximately six months after the original issue date), quarterly. See “Observation Dates, Redemption Determination Dates, Coupon Payment Dates and Early Redemption Dates” below. If any such day is not a business day, that early redemption payment will be made on the next succeeding business day and no adjustment will be made to any early redemption payment made on that succeeding business day.
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Contingent quarterly coupon:
|
A contingent quarterly coupon at an annual rate of at
least 10.15% (corresponding to at least approximately $25.375 per quarter per security) will be paid on the securities on each
coupon payment date but only if the determination closing price of each underlying stock is at or above its
respective coupon threshold level on the related observation date. The actual contingent quarterly coupon will be determined on
the pricing date.
If, on any observation date, the determination closing price
of any underlying stock is less than its respective coupon threshold level, no contingent quarterly coupon will be paid with respect
to that observation date. It is possible that one or more underlying stocks will remain below their respective coupon threshold
levels for extended periods of time or even throughout the entire 2-year term of the securities so that you will receive few or
no contingent quarterly coupons.
|
Payment at maturity:
|
If the securities are not redeemed prior to maturity, investors
will receive a payment at maturity determined as follows:
· If the final share price of each underlying stock is greater than or equal to its respective downside threshold level:
(i) the stated principal amount and the contingent quarterly coupon with respect to the final observation date
· If the final share price of any underlying stock is less than its respective downside threshold level: (i) the stated
principal amount multiplied by (ii) the share performance factor of the worst performing underlying stock. If the final
share price of each underlying stock is greater than or equal to its respective coupon threshold level, investors will also receive
the contingent quarterly coupon with respect to the final observation date.
Under these circumstances, the payment at maturity
will be significantly less than the stated principal amount of $1,000, and will represent a loss of more than 40%, and possibly
all, of your investment.
|
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Terms continued on the following page
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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 $979.50 per security, or within $10.00 of that estimate. See “Investment Summary” beginning on page 3.
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Commissions and issue price:
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Price to public
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Agent’s commissions(1)
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Proceeds to us(2)
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Per security
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$1,000
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$
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$
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Total
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$
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$
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$
|
|
|
|
|
|
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(1) Selected dealers and their financial advisors will collectively
receive from the agent, Morgan Stanley & Co. LLC, a fixed sales commission of $ for each security they sell. See “Supplemental
information regarding plan of distribution; conflicts of interest.” For additional information, see “Plan of Distribution
(Conflicts of Interest)” in the accompanying product supplement.
(2) See “Use of proceeds and hedging” on page
33.
The securities involve risks not associated
with an investment in ordinary debt securities. See “Risk Factors” beginning on page 13.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these securities, or determined if this document or the accompanying product supplement
and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The securities are not deposits or saving accounts and are
not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they obligations
of, or guaranteed by, a bank.
You should read this document together with the related product
supplement and prospectus, each of which can be accessed via the hyperlinks below. Please also see “Additional Terms of the
Securities” and “Additional Information About the Securities” at the end of this document.
As used in this document, “we,” “us”
and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Morgan Stanley Finance LLC
Contingent
Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the
Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale
Corporation
Principal at Risk Securities
Terms continued from previous page:
|
Initial share price:
|
With respect to the WMT Stock, $115.91, which is its closing
price on September 4, 2019
With respect to the TGT Stock, $107.36, which is its closing
price on September 4, 2019
With respect to the COST Stock, $296.12, which is its closing
price on September 4, 2019
|
Downside threshold level:
|
With respect to the WMT Stock, $69.546, which is equal to 60%
of its initial share price
With respect to the TGT Stock, $64.416, which is equal to 60%
of its initial share price
With respect to the COST Stock, $177.672, which is equal to 60%
of its initial share price
|
Coupon threshold level:
|
With respect to the WMT Stock, $57.955, which is equal to 50%
of its initial share price
With respect to the TGT Stock, $53.68, which is equal to 50%
of its initial share price
With respect to the COST Stock, $148.06, which is equal to 50%
of its initial share price
|
Coupon payment dates:
|
Quarterly, as set forth under “Observation Dates, Redemption Determination Dates, Coupon Payment Dates and Early Redemption Dates” below. If any such day is not a business day, that coupon payment will be made on the next succeeding business day and no adjustment will be made to any coupon payment made on that succeeding business day. The contingent quarterly coupon, if any, with respect to the final observation date shall be paid on the maturity date.
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Observation dates:
|
Quarterly, as set forth under “Observation Dates, Redemption Determination Dates, Coupon Payment Dates and Early Redemption Dates” below, subject, independently in the case of each underlying stock, to postponement for non-trading days and certain market disruption events. We also refer to September 7, 2021 as the final observation date.
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Final share price:
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With respect to each underlying stock, the closing price of such underlying stock on the final observation date times the adjustment factor on such date
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Adjustment factor:
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With respect to each underlying stock, 1.0, subject to adjustment in the event of certain corporate events affecting such underlying stock
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Worst performing underlying stock:
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The underlying stock with the largest percentage decrease from the respective initial share price to the respective final share price
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Share performance factor:
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Final share price divided by the initial share price
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CUSIP / ISIN:
|
61769HUX1 / US61769HUX15
|
Listing:
|
The securities will not be listed on any securities exchange.
|
Observation Dates, Redemption
Determination Dates, Coupon Payment Dates and Early Redemption Dates
Observation Dates / Redemption Determination Dates
|
Coupon Payment Dates / Early Redemption Dates
|
December 4, 2019*
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December 9, 2020*
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March 4, 2020
|
March 9, 2020
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June 4, 2020
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June 9, 2020
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September 4, 2020
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September 10, 2020
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December 4, 2020
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December 9, 2020
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March 4, 2021
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March 9, 2021
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June 4, 2021
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June 9, 2021
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September 7, 2021 (final observation date)
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September 10, 2021 (maturity date)
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*The securities are not subject to automatic early redemption
until March 4, 2020
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
Investment Summary
Contingent Income Auto-Callable Securities
Principal at Risk Securities
Contingent Income Auto-Callable Securities due September 10,
2021 All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target
Corporation and the Common Stock of Costco Wholesale Corporation (the “securities”) do not provide for the regular
payment of interest. Instead, the securities will pay a contingent quarterly coupon at an annual rate of at least 10.15% but
only if the determination closing price of each underlying stock is at or above 50% of its respective initial
share price, which we refer to as the respective coupon threshold level, on the related observation date. The actual contingent
quarterly coupon will be determined on the pricing date. If the determination closing price of any underlying stock is less
than its coupon threshold level on any observation date, we will pay no coupon for the related quarterly period. It is possible
that the determination closing price of one or more underlying stocks will remain below their respective coupon threshold levels
for extended periods of time or even throughout the entire 2-year term of the securities so that you will receive few or no contingent
quarterly coupons during the entire term of the securities. We refer to these coupons as contingent, because there is no guarantee
that you will receive a coupon payment on any coupon payment date. Even if all of the underlying stocks were to be at or above
their respective coupon threshold levels on some quarterly observation dates, one or more underlying stocks may fluctuate below
the respective coupon threshold level(s) on others. In addition, if the securities have not been automatically called prior to
maturity and the final share price of any underlying stock is less than its respective downside threshold level, investors
will be exposed to the decline in the worst performing underlying stock on a 1-to-1 basis, and will receive a payment at maturity
that is less than 60% of the stated principal amount of the securities and could be zero. Accordingly, investors in the securities
must be willing to accept the risk of losing their entire initial investment and also the risk of not receiving any contingent
quarterly payments throughout the entire 2-year term of the securities.
Maturity:
|
2 years
|
Contingent quarterly coupon:
|
A contingent quarterly coupon at an annual rate of at
least 10.15% (corresponding to at least approximately $25.375 per quarter per security) will be paid on the securities on each
coupon payment date but only if the determination closing price of each underlying stock is at or above its respective
coupon threshold level on the related observation date. The actual contingent quarterly coupon rate will be determined on the pricing
date.
If on any observation date, the determination closing price
of any underlying stock is less than its respective coupon threshold level, we will pay no coupon for the applicable quarterly
period.
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Automatic early redemption quarterly after six months:
|
Starting on March 4, 2020, if the determination closing price of each underlying stock is greater than or equal to their respective initial share price on any quarterly redemption determination date, the securities will be automatically redeemed for an early redemption payment equal to the stated principal amount plus the contingent quarterly coupon with respect to the related observation date.
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Payment at maturity:
|
If the securities have not previously been redeemed and the final
share price of each underlying stock is greater than or equal to its respective downside threshold level, the payment
at maturity will be the stated principal amount, and, if the final share price of each underlying stock is also greater
than or equal to its respective coupon threshold level, the related contingent quarterly coupon.
If the final share price of any underlying stock is less
than its downside threshold level, investors will receive a payment at maturity based on the decline in the worst performing underlying
stock over the term of the securities. If the final share price of each underlying stock is greater than or equal to its respective
coupon threshold level, investors will receive the contingent quarterly coupon with respect to the final
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
|
observation date. Under these circumstances, the payment at maturity will be less than 60% of the stated principal amount of the securities and could be zero. Accordingly, investors in the securities must be willing to accept the risk of losing their entire initial investment.
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
The original issue price of each security is
$1,000. This price includes costs associated with issuing, selling, structuring and hedging the securities, which are borne by
you, and, consequently, the estimated value of the securities on the pricing date will be less than $1,000. We estimate that the
value of each security on the pricing date will be approximately $979.50, or within $10.00 of that estimate. Our estimate of the
value of the securities as determined on the pricing date will be set forth in the final pricing supplement.
What goes into the estimated value on the pricing date?
In valuing the securities on the pricing date,
we take into account that the securities comprise both a debt component and a performance-based component linked to the underlying
stocks. The estimated value of the securities is determined using our own pricing and valuation models, market inputs and assumptions
relating to the underlying stocks, instruments based on the underlying stocks, volatility and other factors including current and
expected interest rates, as well as an interest rate related to our secondary market credit spread, which is the implied interest
rate at which our conventional fixed rate debt trades in the secondary market.
What determines the economic terms of the securities?
In determining the economic terms of the securities,
including the contingent quarterly coupon rate, the coupon threshold levels and the downside threshold levels, we use an internal
funding rate, which is likely to be lower than our secondary market credit spreads and therefore advantageous to us. If the issuing,
selling, structuring and hedging costs borne by you were lower or if the internal funding rate were higher, one or more terms of
the securities would be more favorable to you.
What is the relationship between the estimated value on the
pricing date and the secondary market price of the securities?
The price at which MS & Co. purchases the
securities in the secondary market, absent changes in market conditions, including those related to the underlying stocks, may
vary from, and be lower than, the estimated value on the pricing date, because the secondary market price takes into account our
secondary market credit spread as well as the bid-offer spread that MS & Co. would charge in a secondary market transaction
of this type and other factors. However, because the costs associated with issuing, selling, structuring and hedging the securities
are not fully deducted upon issuance, for a period of up to 6 months following the issue date, to the extent that MS & Co.
may buy or sell the securities in the secondary market, absent changes in market conditions, including those related to the underlying
stocks, and to our secondary market credit spreads, it would do so based on values higher than the estimated value. We expect that
those higher values will also be reflected in your brokerage account statements.
MS & Co. may, but is not obligated to,
make a market in the securities, and, if it once chooses to make a market, may cease doing so at any time.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
Key Investment Rationale
The securities do not provide for the regular payment of interest.
Instead, the securities will pay a contingent quarterly coupon but only if the determination closing price of each underlying
stock is at or above its respective coupon threshold level on the related observation date. The securities have been
designed for investors who are willing to forgo market floating interest rates and risk the loss of principal and accept the risk
of receiving few or no coupon payments for the entire 2-year term of the securities in exchange for an opportunity to earn interest
at a potentially above-market rate if all of the underlying stocks close at or above their respective coupon threshold levels on
each quarterly observation date, unless the securities are redeemed early. The following scenarios are for illustration purposes
only to demonstrate how the coupon and the payment at maturity (if the securities have not previously been redeemed) are calculated,
and do not attempt to demonstrate every situation that may occur. Accordingly, the securities may or may not be redeemed, the contingent
coupon may be payable in none of, or some but not all of, the quarterly periods during the 2-year term of the securities, and the
payment at maturity may be less than 60% of the stated principal amount of the securities and may be zero.
Scenario 1: The securities are redeemed prior to maturity
|
This scenario assumes that, prior to early redemption, all of
the underlying stocks close at or above their respective coupon threshold levels on some quarterly observation dates, but one or
more underlying stocks close below the respective coupon threshold level(s) on the others. Investors receive the contingent quarterly
coupon for the quarterly periods for which the determination closing prices of all of the underlying stocks are at or above their
respective coupon threshold levels on the related observation date, but not for the quarterly periods for which the determination
closing prices of one or more underlying stocks are below the respective coupon and downside threshold level(s) on the related
observation date.
When all of the underlying stocks close at or above their respective
initial share prices on a quarterly redemption determination date (beginning after six months), the securities will be automatically
redeemed for the stated principal amount plus the contingent quarterly coupon with respect to the related observation date.
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Scenario 2: The securities are not redeemed prior to maturity, and investors receive principal back at maturity
|
This scenario assumes that all of the underlying stocks close
at or above their respective coupon threshold levels on some quarterly observation dates, but one or more underlying stocks close
below the respective coupon threshold level(s) on the others, and at least one of the underlying stocks closes below its initial
share price on every quarterly redemption determination date. Consequently, the securities are not redeemed early, and investors
receive the contingent quarterly coupon for the quarterly periods for which the determination closing prices of all of the underlying
stocks are at or above their coupon threshold levels on the related observation date, but not for the quarterly periods for which
the determination closing prices of one or more underlying stocks are below the respective coupon threshold level(s) on the related
observation date.
On the final observation date, all of the underlying stocks close
at or above their respective downside threshold levels. At maturity, investors will receive the stated principal amount plus
the contingent quarterly coupon with respect to the final observation date.
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
Scenario 3: The securities are not redeemed prior to maturity, and investors suffer a substantial loss of principal at maturity
|
This scenario assumes that all of the underlying stocks close
at or above their respective coupon threshold levels on some quarterly observation dates, but one or more underlying stocks close
below the respective coupon threshold level(s) on the others, and at least one of the underlying stocks closes below its initial
share prices on every quarterly redemption determination date. Consequently, the securities are not redeemed early, and investors
receive the contingent quarterly coupon for the quarterly periods for which the determination closing prices of all of the underlying
stocks are greater than or equal to their respective coupon threshold levels on the related observation date, but not for the quarterly
periods for which the determination closing prices of one or more underlying stocks are below the respective coupon threshold level(s)
on the related observation date.
On the final observation date, one or more underlying stocks
close below the respective downside threshold level(s). At maturity, investors will receive an amount equal to the stated principal
amount multiplied by the share performance factor of the worst performing underlying stock. If the final share price of each underlying
stock is greater than or equal to its respective coupon threshold level, investors will receive the contingent quarterly coupon
with respect to the final observation date. Under these circumstances, the payment at maturity will be less than 60% of the stated
principal amount and could be zero.
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
How the Securities Work
The following diagrams illustrate the potential outcomes for
the securities depending on (1) the determination closing prices on each quarterly observation date, (2) the determination closing
prices on each quarterly redemption determination date and (3) the final share prices. Please see “Hypothetical Examples”
below for an illustration of hypothetical payouts on the securities.
Diagram #1: Contingent Quarterly Coupons
(Beginning on the First Coupon Payment Date until Early Redemption or Maturity)
Diagram #2: Automatic Early Redemption (Starting
After Six Months)
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
Diagram #3: Payment at Maturity if No Automatic
Early Redemption Occurs
For more information about the payout upon
an early redemption or at maturity in different hypothetical scenarios, see “Hypothetical Examples” below.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
Hypothetical Examples
The following hypothetical examples illustrate how to determine
whether a contingent quarterly coupon is paid with respect to an observation date and how to calculate the payment at maturity,
if any, assuming the securities are not redeemed prior to maturity. The following examples are for illustrative purposes only.
Whether you receive a contingent quarterly coupon will be determined by reference to the determination closing price of each underlying
stock on each quarterly observation date, and the amount you will receive at maturity, if any, will be determined by reference
to the final share price of each underlying stock on the final observation date. The actual initial share price, coupon threshold
level and downside threshold level for each underlying stock are set forth on the cover of this document. All payments on the securities,
if any, are subject to our credit risk. The below examples are based on the following terms:
Hypothetical Contingent Quarterly Coupon:
|
10.15% per annum (corresponding to approximately $25.375 per
quarter per security)1
With respect to each coupon payment date, a contingent quarterly
coupon is paid but only if the determination closing price of each underlying stock is at or above its respective coupon threshold
level on the related observation date.
|
Payment at Maturity (if the securities are not redeemed prior to maturity):
|
If the final share price of each underlying stock is greater
than or equal to its respective downside threshold level: the stated principal amount, and the contingent quarterly coupon
with respect to the final observation date
If the final share price of any underlying stock is less
than its respective downside threshold level: (i) the stated principal amount multiplied by (ii) the share performance
factor of the worst performing underlying stock. If the final share price of each underlying stock is greater than or equal to
its respective coupon threshold level, investors will receive the contingent quarterly coupon with respect to the final observation
date.
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Stated Principal Amount:
|
$1,000
|
Hypothetical Initial Share Price:
|
With respect to the WMT Stock: $100.00
With respect to the TGT Stock: $80.00
With respect to the COST Stock: $250.00
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Hypothetical Coupon Threshold Level:
|
With respect to the WMT Stock: $50.00, which is 50% of its hypothetical
initial share price
With respect to the TGT Stock: $40.00, which is 50% of its hypothetical
initial share price
With respect to the COST Stock: $125.00, which is 50% of its
hypothetical initial share price
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Hypothetical Downside Threshold Level:
|
With respect to the WMT Stock: $60.00, which is 60% of its hypothetical
initial share price
With respect to the TGT Stock: $48.00, which is 60% of its hypothetical
initial share price
With respect to the COST Stock: $150.00, which is 60% of its
hypothetical initial share price
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1 The actual contingent quarterly
coupon will be an amount determined by the calculation agent based on the actual contingent quarterly coupon rate and the number
of days in the applicable payment period, calculated on a 30/360 day-count basis. The hypothetical contingent quarterly coupon
of $25.375 is used in these examples for ease of analysis.
How to determine whether a contingent quarterly
coupon is payable with respect to an observation date:
|
Determination Closing Price
|
|
|
WMT Stock
|
TGT Stock
|
COST Stock
|
Hypothetical Contingent Quarterly Coupon
|
Hypothetical Observation Date 1
|
$75.00 (at or above its coupon threshold level)
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$65.00 (at or above its coupon threshold level)
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$185.00 (at or above its coupon threshold level)
|
$25.375
|
Hypothetical Observation Date 2
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$40.00 (below its coupon threshold level)
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$50.00 (at or above its coupon threshold level)
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$200.00 (at or above its coupon threshold level)
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$0
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Hypothetical Observation Date 3
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$80.00 (at or above its coupon threshold level)
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$35.00 (below its coupon threshold level)
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$100.00 (below its coupon threshold level)
|
$0
|
Hypothetical
|
$25.00 (below
|
$38.00 (below its
|
$95.00 (below its
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$0
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
Observation Date 4
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its coupon threshold level)
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coupon threshold level)
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coupon threshold level)
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On hypothetical observation date 1, each of the underlying stocks
closes at or above its respective coupon threshold level. Therefore, a hypothetical contingent quarterly coupon of $25.375 is paid
on the relevant coupon payment date.
On each of hypothetical observation dates 2 and 3, at least one
underlying stock closes at or above its coupon threshold level, but one or more of the other underlying stocks close below their
coupon downside threshold level(s). Therefore, no contingent quarterly coupon is paid on the relevant coupon payment date.
On hypothetical observation date 4, each of the underlying stocks
closes below its respective coupon threshold level, and accordingly no contingent quarterly coupon is paid on the relevant coupon
payment date.
You will not receive a contingent quarterly coupon on any
coupon payment date if the determination closing price of any underlying stock is below its respective coupon threshold level on
the related observation date.
How to calculate the payment at maturity (if
the securities have not been automatically redeemed):
Starting after six months, if the final share price of each underlying
stock is greater than or equal to its initial share price on any quarterly redemption determination date, the securities will be
automatically redeemed for an early redemption payment equal to the stated principal amount for each security plus the contingent
quarterly coupon with respect to the related observation date. In the following examples, one or more underlying stocks close below
the respective initial share price(s) on each redemption determination date, and, consequently, the securities are not automatically
redeemed prior to, and remain outstanding until, maturity.
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Final Share Price
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WMT Stock
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TGT Stock
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COST Stock
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Payment at Maturity
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Example 1:
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$30.00 (below its downside threshold level)
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$38.00 (below its downside threshold level)
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$300.00 (at or above its downside threshold level)
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$1,000 x share performance factor of the worst performing underlying stock = $1,000 x ($30.00 / $100.00) = $300.00
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Example 2:
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$125.00 (at or above its downside threshold level)
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$50.00 (at or above its downside threshold level)
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$100.00 (below its downside threshold level)
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$1,000 x share performance factor of the worst performing underlying stock = $1,000 x ($100.00 / $250.00) = $400.00
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Example 3:
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$40.00 (below its downside threshold level)
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$16.00 (below its downside threshold level)
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$62.50 (below its downside threshold level)
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$1,000 x ($16.00 / $80.00) = $200.00
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Example 4:
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$40.00 (below its downside threshold level)
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$24.00 (below its downside threshold level)
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$50.00 (below its downside threshold level)
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$1,000 x ($50.00 / $250.00) = $200.00
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Example 5:
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$55.00 (below its downside threshold level but at or above its coupon threshold level)
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$46.00 (below its downside threshold level but at or above its coupon threshold level)
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$135.00 (below its downside threshold level but at or above its coupon threshold level)
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$1,000 x ($135.00 / $250.00) = $540.00 + the contingent quarterly coupon with respect to the final observation date
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Example 6:
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$150.00 (at or above its downside threshold level and its coupon threshold level)
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$100.00 (at or above its downside threshold level and its coupon
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$300.00 (at or above its downside threshold level and its coupon threshold level)
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The stated principal amount + the contingent
quarterly coupon with respect to the final observation date.
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Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
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threshold level)
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For more information, please see above under “How to determine whether a contingent quarterly coupon is payable with respect to an observation date
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In examples 1 and 2, the final share price(s) of one or two of
the underlying stocks are at or above the respective downside threshold level(s), but the final share price(s) of one or both of
the other underlying stocks are below the respective downside threshold level(s). Therefore, investors are exposed to the downside
performance of the worst performing underlying stock at maturity and receive at maturity an amount equal to the stated principal
amount times the share performance factor of the worst performing underlying stock. Moreover, investors do not receive any
contingent quarterly coupon for the final quarterly period.
Similarly, in examples 3 and 4, the final share prices of all
of the underlying stocks are below their respective downside threshold levels, and investors receive at maturity an amount equal
to the stated principal amount times the share performance factor of the worst performing underlying stock. In example 3,
the WMT Stock has declined 60% from its initial share price to its final share price, the TGT Stock has declined 80% from its initial
share price to its final share price and the COST Stock has declined 75% from its initial share price to its final share price.
Therefore, the payment at maturity equals the stated principal amount times the share performance factor of the TGT Stock,
which represents the worst performing underlying stock in this example. In example 4, the WMT Stock has declined 60% from its initial
share price to its final share price, the TGT Stock has declined 70% from its initial share price to its final share price and
the COST Stock has declined 80% from its initial share price to its final share price. Therefore, the payment at maturity equals
the stated principal amount times the share performance factor of the COST Stock, which represents the worst performing
underlying stock in this example. Moreover, investors do not receive the contingent quarterly coupon for the final quarterly period.
In example 5, the final share price of each underlying stock
is below its respective downside threshold level. Therefore, investors are exposed to the downside performance of the worst performing
underlying stock at maturity and receive at maturity an amount equal to the stated principal amount times the share performance
factor of the worst performing underlying stock. However, because the final share price of each underlying stock is greater than
or equal to its respective coupon threshold level, investors receive the contingent quarterly coupon for the final observation
date.
In example 6, the final share price of each underlying stock
is at or above its respective downside threshold level and coupon threshold level. Therefore, investors receive at maturity the
stated principal amount of the securities plus the contingent quarterly coupon with respect to the final observation date.
However, investors do not participate in any appreciation of any of the underlying stocks.
If the securities are not redeemed prior to maturity and the
final share price of ANY underlying stock is below its respective downside threshold level, you will be exposed to the downside
performance of the worst performing underlying stock at maturity, and your payment at maturity will be less than 60% of the stated
principal amount per security and could be zero.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
Risk Factors
The
following is a list of certain key risk factors for investors in the securities. For further discussion of these and other risks,
you should read the section entitled “Risk Factors” in the accompanying product supplement and prospectus. You should
also consult with your investment, legal, tax, accounting and other advisers in connection with your investment in
the securities.
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The securities do not guarantee the return of any principal. The
terms of the securities differ from those of ordinary debt securities in that they do not guarantee the return of any of the principal
amount at maturity. If the securities have not been automatically redeemed prior to maturity and if the final share price of any
underlying stock is less than its downside threshold level of 60% of its initial share price, you will be exposed to the decline
in the closing price of the worst performing underlying stock, as compared to its initial share price, on a 1-to-1 basis, and you
will receive for each security that you hold at maturity an amount equal to the stated principal amount times the share
performance factor of the worst performing underlying stock. In this case, the payment at maturity will be less than 60% of the
stated principal amount and could be zero. You could lose up to your entire investment in the securities.
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The securities do not provide for the regular payment of interest
and may pay no interest over the entire term of the securities. The terms of the securities differ from those of ordinary
debt securities in that they do not provide for the regular payment of interest. Instead, the securities will pay a contingent
quarterly coupon but only if the determination closing price of each underlying stock is at or above 50% of
its respective initial share price, which we refer to as the respective coupon threshold level, on the related observation date.
If, on the other hand, the determination closing price of any underlying stock is lower than its coupon threshold level
on the relevant observation date for any interest period, we will pay no coupon on the applicable coupon payment date. It is possible
that the determination closing price(s) of one or more underlying stocks could remain below the respective coupon threshold level(s)
for extended periods of time or even throughout the entire 2-year term of the securities so that you will receive few or no contingent
quarterly coupons. If you do not earn sufficient contingent coupons over the term of the securities, the overall return on the
securities may be less than the amount that would be paid on a conventional debt security of ours of comparable maturity.
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You are exposed to the price risk of all of the underlying stocks,
with respect to both the contingent quarterly coupons, if any, and the payment at maturity, if any. Your
return on the securities is not linked to a basket consisting of the underlying stocks. Rather, it will be contingent upon the
independent performance of each underlying stock. Unlike an instrument with a return linked to a basket of underlying assets, in
which risk is mitigated and diversified among all the components of the basket, you will be exposed to the risks related to each
of the underlying stocks. Poor performance by any underlying stock over the term
of the securities may negatively affect your return and will not be offset or mitigated by any positive performance by the other
underlying stocks. To receive any contingent quarterly coupons, all
of the underlying stocks must close at or above their respective coupon threshold levels on the
applicable observation date. In addition, if any underlying stock has declined
to below its respective downside threshold level as of the final observation date, you will be fully exposed to
the decline in the worst performing underlying stock over the term of the securities on a 1-to-1 basis, even if the other underlying
stocks have appreciated or have not declined as much. Under this scenario, the value of any such payment will be less than 60%
of the stated principal amount and could be zero. Accordingly, your investment is subject to the price risk of all of the underlying
stocks.
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The contingent coupon, if any, is based only on the determination closing prices of the underlying stocks on the related
quarterly observation date at the end of the related interest period.
Whether the contingent coupon will be paid on any coupon payment date will be determined at the end of the relevant interest period
based on the determination closing price of each underlying stock on the relevant quarterly observation date. As a result, you
will not know whether you will receive the contingent coupon on any coupon payment date until near the end of the relevant interest
period. Moreover, because the contingent coupon is based solely on the price of each underlying stock on quarterly observation
dates, if the determination closing price of any underlying stock on any observation date is below
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Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
the respective coupon threshold
level, you will receive no coupon for the related interest period, even if the price(s) of one or more of the underlying stocks
were higher on other days during that interest period.
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§
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Investors will not participate in any appreciation in the price of any underlying stock. Investors will not participate
in any appreciation in the price of any underlying stock from its initial share price, and the return on the securities will be
limited to the contingent quarterly coupon, if any, that is paid with respect to each observation date on which all determination
closing prices are greater than or equal to their respective coupon threshold levels, if any.
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The market price will be influenced by many unpredictable factors.
Several factors, many of which are beyond our control, will influence the value of the securities
in the secondary market and the price at which MS & Co. may be willing to purchase or sell the securities in the secondary
market. We expect that generally the level of interest rates available in the market and the prices of the underlying
stocks on any day, including in relation to the respective
coupon threshold levels and downside threshold levels, will affect the value of the securities more than any other factors. Other
factors that may influence the value of the securities include:
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o
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the trading price and volatility (frequency and magnitude of changes in value) of the underlying stocks,
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o
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whether the determination closing price of any underlying stock has been below its respective coupon threshold level on any
observation date,
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o
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dividend rates on the underlying stocks,
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o
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geopolitical conditions and economic, financial, political, regulatory or judicial events that affect the underlying stocks
and which may affect the prices of the underlying stocks,
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o
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the time remaining until the securities mature,
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o
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interest and yield rates in the market,
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o
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the availability of comparable instruments,
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o
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the occurrence of certain events affecting the underlying stock that may or may not require an adjustment to the adjustment
factor, and
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o
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any actual or anticipated changes in our credit ratings or credit spreads.
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Some
or all of these factors will influence the price that you will receive if you sell your securities prior to maturity. For example,
you may have to sell your securities at a substantial discount from the stated principal amount of $1,000 per security if the price
of any underlying stock at the time of sale is near or below its coupon threshold level, and especially if the price of any underlying
stock at the time of sale is near or below its downside threshold level, or if market interest rates rise.
The
prices of the underlying stocks may be, and have recently been, volatile, and we can give you no assurance that the volatility
will lessen. The price of one or more of the underlying stocks may decrease and close below the respective coupon threshold
level(s) on each observation date so that you will receive no return on your investment, and
the price of one or more underlying stocks may decrease and close below the respective downside threshold level on the final observation
date so that you receive a payment at maturity that is less than 60% of the stated principal amount. There can be no assurance
that the determination closing prices of all of the underlying stocks will be at or above their respective coupon threshold levels
on any observation date so that you will receive a coupon payment on the securities for the applicable interest period, or, with
respect to the final observation date, that the closing prices of all of the underlying stocks will be at or above the respective
downside threshold levels so that you do not suffer a significant loss on your initial investment in the securities. See
“Walmart Inc. Overview,” “Target Corporation Overview” and “Costco Wholesale Corporation” below.
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§
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The securities are subject to our credit risk, and any actual or anticipated changes to our credit ratings or credit spreads
may adversely affect the market value of the securities. You are dependent on our ability to pay all amounts due on the securities
on each coupon payment date, upon automatic redemption and at maturity and therefore
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Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
you are subject to our credit risk.
The securities are not guaranteed by any other entity. If we default on our obligations under the securities, your investment would
be at risk and you could lose some or all of your investment. As a result, the market value of the securities prior to maturity
will be affected by changes in the market’s view of our creditworthiness. Any actual or anticipated decline in our credit
ratings or increase in the credit spreads charged by the market for taking our credit risk is likely to adversely affect the market
value of the securities.
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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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Reinvestment risk. The term
of your investment in the securities may be shortened due to the automatic early redemption feature of the securities. If the securities
are redeemed prior to maturity, you will receive no more contingent quarterly coupons and may be forced to invest in a lower interest
rate environment and may not be able to reinvest at comparable terms or returns. However, under no circumstances will the securities
be redeemed in the first six months of the term of the securities.
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Investing in the securities is not equivalent to investing in the
common stock of Walmart Inc., the common stock of Target Corporation or the common stock of Costco Wholesale Corporation. Investors
in the securities will not participate in any appreciation in the underlying stocks, and will not have voting rights or rights
to receive dividends or other distributions or any other rights with respect to the underlying stocks. As a result, any return
on the securities will not reflect the return you would realize if you actually owned shares of the underlying stocks and received
the dividends paid or distributions made on them.
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No affiliation with Walmart Inc., Target Corporation or Costco Wholesale Corporation. Walmart Inc., Target Corporation
and Costco Wholesale Corporation are not affiliates of ours, are not involved with this offering in any way, and have no obligation
to consider your interests in taking any corporate actions that might affect the value of the securities. We have not made any
due diligence inquiry with respect to Walmart Inc., Target Corporation or Costco Wholesale Corporation in connection with this
offering.
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We may engage in business with or involving Walmart Inc., Target Corporation or Costco Wholesale Corporation without regard
to your interests. We or our affiliates may presently or from time to time engage in business with Walmart Inc., Target Corporation
or Costco Wholesale Corporation without regard to your interests and thus may acquire non-public information about Walmart Inc.,
Target Corporation or Costco Wholesale Corporation. Neither we nor any of our affiliates undertakes to disclose any such information
to you. In addition, we or our affiliates from time to time have published and in the future may publish research reports with
respect to Walmart Inc., Target Corporation or Costco Wholesale Corporation, which may or may not recommend that investors buy
or hold the underlying stock(s).
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The antidilution adjustments the calculation agent is required to make do not cover every corporate event that could affect
the underlying stocks. MS & Co., as calculation agent, will adjust the adjustment factors for certain corporate events
affecting the underlying stocks, such as stock splits, stock dividends and extraordinary dividends, and certain other corporate
actions involving the issuers of the underlying stocks, such as mergers. However, the calculation agent will not make an adjustment
for every corporate event that can affect the underlying stocks. For example, the calculation agent is not required to make any
adjustments if the issuers of the underlying stocks or anyone else makes a partial tender or partial exchange offer for the underlying
stocks, nor will adjustments be made following the final observation date. In addition, no adjustments will be made for regular
cash dividends, which are expected to
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Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
reduce the price of the underlying
stocks by the amount of such dividends. If an event occurs that does not require the calculation agent to adjust an adjustment
factor, such as a regular cash dividend, the market price of the securities and your return on the securities may be materially
and adversely affected. For example, if the record date for a regular cash dividend were to occur on or shortly before an observation
date, this may decrease the determination closing price of an underlying stock to be less than the respective coupon threshold
level (resulting in no contingent quarterly coupon being paid with respect to such date) or the final share price to be less than
the respective downside threshold level (resulting in a loss of a significant portion of all of your investment in the securities),
materially and adversely affecting your return.
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The securities will not be listed on any securities exchange and secondary trading may be limited,
and accordingly, you should be willing to hold your securities for the entire 2-year term of the securities. The securities
will not be listed on any securities exchange. Therefore, there may be little or no secondary market for the securities. MS &
Co. may, but is not obligated to, make a market in the securities and, if it once chooses to make a market, may cease doing so
at any time. When it does make a market, it will generally do so for transactions of routine secondary market size at prices based
on its estimate of the current value of the securities, taking into account its bid/offer spread, our credit spreads, market volatility,
the notional size of the proposed sale, the cost of unwinding any related hedging positions, the time remaining to maturity and
the likelihood that it will be able to resell the securities. Even if there is a secondary market, it may not provide enough liquidity
to allow you to trade or sell the securities easily. Since other broker-dealers may not participate significantly in the secondary
market for the securities, the price at which you may be able to trade your securities is likely to depend on the price, if any,
at which MS & Co. is willing to transact. If, at any time, MS & Co. were to cease making a market in the securities, it
is likely that there would be no secondary market for the securities. Accordingly, you should be willing to hold your securities
to maturity.
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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 securities in the original issue price reduce the economic terms of the securities,
cause the estimated value of the securities to be less than the original issue price and will adversely affect secondary market
prices. Assuming no change in market conditions or any other relevant factors, the prices, if any, at which dealers, including
MS & Co., may be willing to purchase the securities in secondary market transactions will likely be significantly lower than
the original issue price, because secondary market prices will exclude the issuing, selling, structuring and hedging-related costs
that are included in the original issue price and borne by you and because the secondary market prices will reflect our secondary
market credit spreads and the bid-offer spread that any dealer would charge in a secondary market transaction of this type as well
as other factors.
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The inclusion of the costs of issuing,
selling, structuring and hedging the securities in the original issue price and the lower rate we are willing to pay as issuer
make the economic terms of the securities less favorable to you than they otherwise would be.
However, because the costs associated
with issuing, selling, structuring and hedging the securities are not fully deducted upon issuance, for a period of up to 6 months
following the issue date, to the extent that MS & Co. may buy or sell the securities in the secondary market, absent changes
in market conditions, including those related to the underlying stocks, and to our secondary market credit spreads, it would do
so based on values higher than the estimated value, and we expect that those higher values will also be reflected in your brokerage
account statements.
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The estimated value of the securities is determined by reference to our pricing and valuation models, which may differ from
those of other dealers and is not a maximum or minimum secondary market price. These pricing and valuation models are proprietary
and rely in part on subjective views of certain market inputs and certain assumptions about future events, which may prove to be
incorrect. As a result, because there is no market-standard way to value these types of securities, our models may yield a higher
estimated value of the securities than those generated by others, including other dealers in the market, if they attempted to value
the securities. In addition, the estimated value on the pricing date does not represent a minimum or maximum price at which dealers,
including MS & Co., would be willing to purchase your securities in the secondary market (if any exists) at any time. The value
of your
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Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
securities at any time after the
date of this document will vary based on many factors that cannot be predicted with accuracy, including our creditworthiness and
changes in market conditions. See also “The market price will be influenced by many unpredictable factors” above.
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Hedging and trading activity by our affiliates could potentially affect the value of the securities. One or more of
our affiliates and/or third-party dealers have carried out, and will continue to carry out, hedging activities related to the securities
(and to other instruments linked to the underlying stocks), including trading in the underlying stocks. Some of our affiliates
also trade the underlying stocks and other financial instruments related to the underlying stocks on a regular basis as part of
their general broker-dealer and other businesses. As a result, these entities may be unwinding or adjusting hedge positions during
the term of the securities, and the hedging strategy may involve greater and more frequent dynamic adjustments to the hedge as
the final observation date approaches. Any of these hedging or trading activities on or prior to September 4, 2019 could have increased
the initial share price of an underlying stock, and, therefore, could have increased (i) the value at or above which such underlying
stock must close on the redemption determination dates so that the securities are redeemed prior to maturity for the early redemption
payment (depending also on the performance of the other underlying stocks), (ii) the coupon threshold level for such underlying
stock, which is the value at or above which such underlying stock must close on the observation dates so that you receive a contingent
quarterly coupon on the securities (depending also on the performance of the other underlying stocks), and (iii) the downside threshold
level for such underlying stock, which is the value at or above which such underlying stock must close on the final observation
date, so that you are not exposed to the negative performance of the worst performing underlying stock at maturity (depending also
on the performance of the other underlying stocks). Additionally, such hedging or trading activities during the term of the securities
could potentially affect the value of any underlying stock on the redemption determination dates and the observation dates, and,
accordingly, whether we redeem the securities prior to maturity, whether we pay a contingent quarterly coupon on the securities
and the amount of cash you will receive at maturity, if any (depending also on the performance of the other underlying stocks).
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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 securities. As calculation agent, MS & Co. has determined the initial share prices, the coupon threshold levels
and the downside threshold levels and will determine the final share prices, the payment at maturity, if any, whether you receive
a contingent quarterly coupon on each coupon payment date and/or at maturity, whether the securities will be redeemed on any early
redemption date, whether a market disruption event has occurred and whether to make any adjustments to the adjustment factors.
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 certain
adjustments to the adjustment factors. These potentially subjective determinations may affect the payout to you upon an automatic
early redemption or at maturity, if any. For further information regarding these types of determinations, see “Description
of Auto-Callable Securities—Auto-Callable Securities Linked to Underlying Shares” and “—Calculation Agent
and Calculations” and related definitions in the accompanying product supplement. In addition, MS & Co. has determined
the estimated value of the securities on the pricing date.
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The U.S. federal income tax consequences of an investment in the securities are uncertain. There is no direct legal
authority as to the proper treatment of the securities for U.S. federal income tax purposes, and, therefore, significant aspects
of the tax treatment of the securities are uncertain.
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Please read the discussion under
“Additional Information—Tax considerations” in this document concerning the U.S. federal income tax consequences
of an investment in the securities. We intend to treat a security for U.S. federal income tax purposes as a single financial contract
that provides for a coupon that will be treated as gross income to you at the time received or accrued, in accordance with your
regular method of tax accounting. Under this treatment, the ordinary income treatment of the coupon payments, in conjunction with
the capital loss treatment of any loss recognized upon the sale, exchange or settlement of the securities, could result in adverse
tax consequences to holders of the securities because the deductibility of capital losses is subject to limitations. We do not
plan to request a ruling from the Internal Revenue Service (the “IRS”) regarding the tax treatment of the securities,
and the IRS or a court may not agree with the tax treatment described herein. If the IRS were successful in asserting an alternative
treatment for the
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
securities, the timing and character
of income or loss on the securities might differ significantly from the tax treatment described herein. For example, under one
possible treatment, the IRS could seek to recharacterize the securities as debt instruments. In that event, U.S. Holders (as defined
below) would be required to accrue into income original issue discount on the securities every year at a “comparable yield”
determined at the time of issuance (as adjusted based on the difference, if any, between the actual and the projected amount of
any contingent payments on the securities) and recognize all income and gain in respect of the securities as ordinary income. The
risk that financial instruments providing for buffers, triggers or similar downside protection features, such as the securities,
would be recharacterized as debt is greater than the risk of recharacterization for comparable financial instruments that do not
have such features.
Non-U.S. Holders (as defined
below) should note that we currently intend to withhold on any coupon paid to Non-U.S. Holders generally at a rate of 30%, or at
a reduced rate specified by an applicable income tax treaty under an “other income” or similar provision, and will
not be required to pay any additional amounts with respect to amounts withheld.
In 2007, the U.S. Treasury Department
and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts”
and similar instruments. While it is not clear whether the securities would be viewed as similar to the prepaid forward contracts
described in the notice, it is possible that any Treasury regulations or other guidance promulgated after consideration of these
issues could materially and adversely affect the tax consequences of an investment in the securities, possibly with retroactive
effect. The notice focuses on a number of issues, the most relevant of which for holders of the securities are the character and
timing of income or loss and the degree, if any, to which income realized by non-U.S. investors should be subject to withholding
tax. Both U.S. and Non-U.S. Holders should consult their tax advisers regarding the U.S. federal income tax consequences of an
investment in the securities, including possible alternative treatments, the issues presented by this notice and any tax consequences
arising under the laws of any state, local or non-U.S. taxing jurisdiction.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
Walmart Inc. Overview
Walmart Inc. operates discount stores and supercenters offering
merchandise such as apparel, housewares, small appliances, electronics and hardware. The WMT Stock is registered under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). Information provided to or filed with
the Securities and Exchange Commission by Walmart Inc. pursuant to the Exchange Act can be located by reference to the Securities
and Exchange Commission file number 001-06991 through the Securities and Exchange Commission’s website at .www.sec.gov. In
addition, information regarding Walmart Inc. may be obtained from other sources including, but not limited to, press releases,
newspaper articles and other publicly disseminated documents. Neither the issuer nor the agent makes any representation
that such publicly available documents or any other publicly available information regarding the issuer of the WMT Stock is accurate
or complete.
Information as of market close on September 4, 2019:
Bloomberg Ticker Symbol:
|
WMT
|
Exchange:
|
Nasdaq
|
Current Stock Price:
|
$115.91
|
52 Weeks Ago:
|
$95.36
|
52 Week High (on 9/4/2019):
|
$115.91
|
52 Week Low (on 12/24/2018):
|
$85.82
|
Current Dividend Yield:
|
1.83%
|
The following table sets forth the published
high and low closing prices of, as well as dividends on, the WMT Stock for each quarter from January 1, 2016 through September
4, 2019. The closing price of the WMT Stock on September 4, 2019 was $115.91. The associated graph shows the closing prices of
the WMT Stock for each day from January 1, 2014 through September 4, 2019. We obtained the information in the table and graph below
from Bloomberg Financial Markets, without independent verification. The historical performance of the WMT Stock should not be taken
as an indication of its future performance, and no assurance can be given as to the price of the WMT Stock at any time, including
on the redemption determination dates or the observation dates.
Common Stock of Walmart Inc. (CUSIP 931142103)
|
High ($)
|
Low ($)
|
Dividends ($)
|
2016
|
|
|
|
First Quarter
|
68.80
|
60.84
|
0.50
|
Second Quarter
|
73.02
|
63.15
|
0.50
|
Third Quarter
|
74.30
|
70.30
|
0.50
|
Fourth Quarter
|
72.01
|
67.39
|
0.50
|
2017
|
|
|
|
First Quarter
|
72.39
|
65.66
|
0.51
|
Second Quarter
|
80.26
|
71.43
|
0.51
|
Third Quarter
|
81.61
|
73.23
|
0.51
|
Fourth Quarter
|
99.62
|
78.45
|
0.51
|
2018
|
|
|
|
First Quarter
|
109.55
|
85.42
|
0.52
|
Second Quarter
|
88.46
|
82.40
|
0.52
|
Third Quarter
|
98.64
|
84.00
|
0.52
|
Fourth Quarter
|
105.56
|
85.82
|
0.52
|
2019
|
|
|
|
First Quarter
|
102.20
|
92.86
|
0.53
|
Second Quarter
|
111.24
|
96.94
|
0.53
|
Third Quarter (through September 4, 2019)
|
115.91
|
105.12
|
0.53
|
We make no representation as to the amount of dividends, if any,
that Walmart Inc. may pay in the future. In any event, as an investor in the Contingent Income Auto-Callable Securities, you will
not be entitled to receive dividends, if any, that may be payable on the common stock of Walmart Inc.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
Common Stock of Walmart Inc. – Daily Closing Prices
January 1, 2014 to September 4, 2019
|
|
* The red line indicates the downside threshold level of $69.546,
which is 60% of the initial share price, and the black line in the graph indicates the coupon threshold level of $57.955, which
is 50% of the initial share price.
This document relates only to the securities
offered hereby and does not relate to the WMT Stock or other securities of Walmart Inc. We have derived all disclosures contained
in this document regarding Walmart Inc. stock from the publicly available documents described above. In connection with the offering
of the securities, neither we nor the agent has participated in the preparation of such documents or made any due diligence inquiry
with respect to Walmart Inc. Neither we nor the agent makes any representation that such publicly available documents or any other
publicly available information regarding Walmart Inc. is accurate or complete. Furthermore, we cannot give any assurance that all
events occurring prior to the date hereof (including events that would affect the accuracy or completeness of the publicly available
documents described above) that would affect the trading price of the WMT Stock (and therefore the price of the WMT Stock at the
time we price the securities) have been publicly disclosed. Subsequent disclosure of any such events or the disclosure of or failure
to disclose material future events concerning Walmart Inc. could affect the value received with respect to the securities and therefore
the value of the securities.
Neither the issuer nor any of its affiliates
makes any representation to you as to the performance of the WMT Stock.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
Target Corporation Overview
Target Corporation sells a wide assortment
of general merchandise and food. The TGT Stock is registered under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). Information provided to or filed with the Securities and Exchange Commission by Target
Corporation pursuant to the Exchange Act can be located by reference to the Securities and Exchange Commission file number 001-6049
through the Securities and Exchange Commission’s website at.www.sec.gov. In addition, information regarding Target
Corporation may be obtained from other sources including, but not limited to, press releases, newspaper articles and other publicly
disseminated documents. Neither the issuer nor the agent makes any representation that such publicly available documents
or any other publicly available information regarding the issuer of the TGT Stock is accurate or complete.
Information as of market close on September 4, 2019:
Bloomberg Ticker Symbol:
|
TGT
|
Exchange:
|
NYSE
|
Current Stock Price:
|
$107.36
|
52 Weeks Ago:
|
$88.95
|
52 Week High (on 8/29/2019):
|
$107.93
|
52 Week Low (on 12/21/2018):
|
$61.13
|
Current Dividend Yield:
|
2.46%
|
The following table sets forth the published
high and low closing prices of, as well as dividends on, the common stock of Target Corporation for each quarter from January 1,
2016 through September 4, 2019. The closing price of the TGT Stock on September 4, 2019 was $107.36. The associated graph shows
the closing prices of the common stock of Target Corporation for each day from January 1, 2014 through September 4, 2019. We obtained
the information in the table and graph below from Bloomberg Financial Markets, without independent verification. The historical
performance of the TGT Stock should not be taken as an indication of its future performance, and no assurance can be given as to
the price of the TGT Stock at any time, including on the redemption determination dates or the observation dates.
Common Stock of Target Corporation (CUSIP 87612E106)
|
High ($)
|
Low ($)
|
Dividends ($)
|
2016
|
|
|
|
First Quarter
|
83.60
|
67.59
|
0.56
|
Second Quarter
|
83.98
|
66.74
|
0.56
|
Third Quarter
|
76.30
|
67.22
|
0.60
|
Fourth Quarter
|
78.61
|
66.53
|
0.60
|
2017
|
|
|
|
First Quarter
|
73.81
|
53.12
|
0.60
|
Second Quarter
|
58.41
|
50.52
|
0.60
|
Third Quarter
|
59.96
|
50.18
|
0.62
|
Fourth Quarter
|
65.82
|
54.16
|
0.62
|
2018
|
|
|
|
First Quarter
|
78.58
|
65.85
|
0.62
|
Second Quarter
|
79.07
|
68.98
|
0.62
|
Third Quarter
|
89.26
|
75.77
|
0.64
|
Fourth Quarter
|
88.47
|
61.13
|
0.64
|
2019
|
|
|
|
First Quarter
|
80.32
|
65.53
|
0.64
|
Second Quarter
|
88.30
|
70.78
|
0.64
|
Third Quarter (through September 4, 2019)
|
107.93
|
80.79
|
0.66
|
We make no representation as to the amount
of dividends, if any, that Target Corporation may pay in the future. In any event, as an investor in the Contingent Income Auto-Callable
Securities, you will not be entitled to receive dividends, if any, that may be payable on the common stock of Target Corporation.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
Common Stock of Target Corporation – Daily Closing Prices
January 1, 2014 to September 4, 2019
|
|
* The red line indicates the downside threshold level of $64.416,
which is 60% of the initial share price, and the black line in the graph indicates the coupon threshold level of $53.68, which
is 50% of the initial share price.
This document relates only to the securities
offered hereby and does not relate to the TGT Stock or other securities of Target Corporation. We have derived all disclosures
contained in this document regarding Target Corporation stock from the publicly available documents described above. In connection
with the offering of the securities, neither we nor the agent has participated in the preparation of such documents or made any
due diligence inquiry with respect to Target Corporation. Neither we nor the agent makes any representation that such publicly
available documents or any other publicly available information regarding Target Corporation is accurate or complete. Furthermore,
we cannot give any assurance that all events occurring prior to the date hereof (including events that would affect the accuracy
or completeness of the publicly available documents described above) that would affect the trading price of the TGT Stock (and
therefore the price of the TGT Stock at the time we price the securities) have been publicly disclosed. Subsequent disclosure of
any such events or the disclosure of or failure to disclose material future events concerning Target Corporation could affect the
value received with respect to the securities and therefore the value of the securities.
Neither the issuer nor any of its affiliates makes any representation
to you as to the performance of the TGT Stock.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
Costco Wholesale Corporation Overview
Costco Wholesale Corporation operates a chain of membership warehouses
that offer limited selection of nationally branded and private-label products. The COST Stock is registered under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). Information provided to or filed with the Securities and Exchange
Commission by Costco Wholesale Corporation pursuant to the Exchange Act can be located by reference to the Securities and Exchange
Commission file number 000-20355 through the Securities and Exchange Commission’s website at .www.sec.gov. In addition, information
regarding Costco Wholesale Corporation may be obtained from other sources including, but not limited to, press releases, newspaper
articles and other publicly disseminated documents. Neither the issuer nor the agent makes any representation that such publicly
available documents or any other publicly available information regarding the issuer of the COST Stock is accurate or complete.
Information as of market close on September 4, 2019:
Bloomberg Ticker Symbol:
|
COST
|
Exchange:
|
Nasdaq
|
Current Stock Price:
|
$296.12
|
52 Weeks Ago:
|
$234.68
|
52 Week High (on 8/29/2019):
|
$296.57
|
52 Week Low (on 12/24/2018):
|
$189.99
|
Current Dividend Yield:
|
0.88%
|
The following table sets forth the published
high and low closing prices of, as well as dividends on, the COST Stock for each quarter from January 1, 2016 through September
4, 2019. The closing price of the COST Stock on September 4, 2019 was $296.12. The associated graph shows the closing prices of
the COST Stock for each day from January 1, 2014 through September 4, 2019. We obtained the information in the table and graph
below from Bloomberg Financial Markets, without independent verification. The historical performance of the COST Stock should not
be taken as an indication of its future performance, and no assurance can be given as to the price of the COST Stock at any time,
including on the redemption determination dates or the observation dates.
Common Stock of Costco Wholesale Corporation (CUSIP 22160K105)
|
High ($)
|
Low ($)
|
Dividends ($)
|
2016
|
|
|
|
First Quarter
|
159.93
|
143.28
|
0.40
|
Second Quarter
|
158.25
|
141.29
|
0.45
|
Third Quarter
|
169.04
|
147.49
|
0.45
|
Fourth Quarter
|
163.86
|
142.24
|
0.45
|
2017
|
|
|
|
First Quarter
|
177.98
|
159.73
|
0.45
|
Second Quarter
|
182.45
|
157.13
|
0.50
|
Third Quarter
|
164.42
|
150.44
|
0.50
|
Fourth Quarter
|
192.73
|
154.61
|
0.50
|
2018
|
|
|
|
First Quarter
|
198.91
|
178.61
|
0.50
|
Second Quarter
|
211.75
|
182.61
|
0.57
|
Third Quarter
|
244.21
|
207.12
|
0.57
|
Fourth Quarter
|
240.37
|
189.99
|
0.57
|
2019
|
|
|
|
First Quarter
|
242.14
|
200.42
|
0.57
|
Second Quarter
|
267.35
|
239.58
|
0.65
|
Third Quarter (through September 4, 2019)
|
296.57
|
263.55
|
0.65
|
We make no representation as to the amount
of dividends, if any, that Costco Wholesale Corporation may pay in the future. In any event, as an investor in the Contingent Income
Auto-Callable Securities, you will not be entitled to receive dividends, if any, that may be payable on the common stock of Costco
Wholesale Corporation.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
Common Stock of Costco Wholesale Corporation – Daily Closing Prices
January 1, 2014 to September 4, 2019
|
|
* The red line indicates the downside threshold level of $177.672,
which is 60% of the initial share price, and the black line in the graph indicates the coupon threshold level of $148.06, which
is 50% of the initial share price.
This document relates only to the securities
offered hereby and does not relate to the COST Stock or other securities of Costco Wholesale Corporation. We have derived all disclosures
contained in this document regarding Costco Wholesale Corporation stock from the publicly available documents described above.
In connection with the offering of the securities, neither we nor the agent has participated in the preparation of such documents
or made any due diligence inquiry with respect to Costco Wholesale Corporation. Neither we nor the agent makes any representation
that such publicly available documents or any other publicly available information regarding Costco Wholesale Corporation is accurate
or complete. Furthermore, we cannot give any assurance that all events occurring prior to the date hereof (including events that
would affect the accuracy or completeness of the publicly available documents described above) that would affect the trading price
of the COST Stock (and therefore the price of the COST Stock at the time we price the securities) have been publicly disclosed.
Subsequent disclosure of any such events or the disclosure of or failure to disclose material future events concerning Costco Wholesale
Corporation could affect the value received with respect to the securities and therefore the value of the securities.
Neither the issuer nor any of its affiliates
makes any representation to you as to the performance of the COST Stock.
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
Additional Terms of the Securities
Please read this information in conjunction with the summary
terms on the front cover of this document.
Additional Terms:
|
If the terms described herein are inconsistent with those described in the accompanying product supplement or prospectus, the terms described herein shall control.
|
Interest period:
|
The quarterly period from and including the original issue date (in the case of the first interest period) or the previously scheduled coupon payment date, as applicable, to but excluding the following scheduled coupon payment date, with no adjustment for any postponement thereof.
|
Record date:
|
The record date for each coupon payment date shall be the date one business day prior to such scheduled coupon payment date; provided, however, that any coupon payable at maturity (or upon early redemption) shall be payable to the person to whom the payment at maturity or early redemption payment, as the case may be, shall be payable.
|
Underlying stock:
|
The accompanying product supplement refers to the underlying stock as the “underlying shares.”
|
Underlying stock issuer:
|
With respect to the WMT Stock, Walmart Inc.
With respect to the TGT Stock, Target Corporation
With respect to the COST Stock, Costco Wholesale Corporation
The accompanying product supplement refers to the underlying
stock issuer as the “underlying company.”
|
Downside threshold level:
|
The accompanying product supplement refers to the downside threshold level as the “trigger level.”
|
Day count convention:
|
Interest will be computed on the basis of a 360-day year of twelve 30-day months.
|
Postponement of coupon payment dates (including the maturity date) and early redemption dates:
|
If any observation date or redemption determination date is postponed due to a non-trading day or certain market disruption events with respect to each underlying stock so that it falls less than two business days prior to the relevant scheduled coupon payment date (including the maturity date) or early redemption date, as applicable, the coupon payment date (or the maturity date) or the early redemption date will be postponed to the second business day following that observation date or redemption determination date as postponed, and no adjustment will be made to any coupon payment, early redemption payment or payment at maturity made on that postponed date.
|
Antidilution adjustments:
|
The following replaces in its entirety the portion of the
section entitled “Antidilution Adjustments” in the accompanying product supplement for auto-callable securities from
the start of paragraph 5 to the end of such section.
5. If, with respect to one or more of the underlying stocks,
(i) there occurs any reclassification or change of such underlying stock, including, without limitation, as a result of the issuance
of any tracking stock by the underlying stock issuer for such underling stock, (ii) such underlying stock issuer or any surviving
entity or subsequent surviving entity of such underlying stock issuer (the “successor corporation”) has been subject
to a merger, combination or consolidation and is not the surviving entity, (iii) any statutory exchange of securities of such underlying
stock issuer or any successor corporation with another corporation occurs (other than pursuant to clause (ii) above), (iv) such
underlying stock issuer is liquidated, (v) such underlying stock issuer issues to all of its shareholders equity securities of
an issuer other than such underlying stock issuer (other than in a transaction described in clause (ii), (iii) or (iv) above) (a
“spin-off event”) or (vi) a tender or exchange offer or going-private transaction is consummated for all the outstanding
shares of such underlying stock (any such event in clauses (i) through (vi), a “reorganization event”), the method
of determining whether an early redemption has occurred and the amount payable upon an early redemption date or at maturity for
each security will be as follows:
· Upon any redemption determination date following the effective date of a reorganization event and prior to the final observation
date: If the exchange property value (as defined below) is greater than or equal to its initial share price, and the determination
closing price (or exchange property value, if applicable) of each other underlying stock is also greater than or equal to its
initial share price, the securities will be automatically redeemed for an early redemption payment.
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
|
· Upon the final observation date, if the securities have not previously been automatically redeemed: You will receive for
each security that you hold a payment at maturity equal to:
Ø
If the exchange property value on the final observation date is greater than or equal to the respective downside threshold
level, and the final share price of each other underlying stock (or exchange property value, as applicable) is also greater than
or equal to its respective downside threshold level: the stated principal amount, and the contingent quarterly coupon with respect
to the final observation date.
Ø
If the exchange property value on the final observation date is less than the respective downside threshold level, or if
the final share price (or exchange property value, if applicable) of any other underlying stock is less than its respective downside
threshold level:
Ø
If the worst performing underlying stock has not undergone a reorganization event as described in paragraph 5 above: (i)
the stated principal amount multiplied by (ii) the share performance factor of the worst performing underlying stock. If the determination closing price is greater than or equal to the coupon threshold level and the determination closing price (or exchange property
value, as applicable) of each other underlying stock is also greater than or equal to its coupon threshold level, investors will
also receive the contingent quarterly coupon with respect to the final observation date.
Ø
If the worst performing underlying stock has undergone a reorganization event as described in paragraph 5 above: (i)
the stated principal amount multiplied by (ii) the share performance factor of the worst performing underlying stock. If the exchange
property value is greater than or equal to the coupon threshold level and the determination closing price (or exchange property
value, as applicable) of each other underlying stock is also greater than or equal to its coupon threshold level, investors will
also receive the contingent quarterly coupon with respect to the final observation date. For purposes of determining the share
performance factor of the worst performing underlying stock, the final share price of such worst performing underlying stock will
be deemed to equal the per-share cash value, determined as of the final observation date, of the securities, cash or any other
assets distributed to holders of the worst performing underlying stock in or as a result of any such reorganization event, including
(A) in the case of the issuance of tracking stock, the reclassified share of such worst performing underlying stock, (B) in the
case of a spin-off event, the share of such worst performing underlying stock with respect to which the spun-off security was issued,
and (C) in the case of any other reorganization event where such worst performing underlying stock continues to be held by the
holders receiving such distribution, such worst performing underlying stock (collectively, the “exchange property”).
Following the effective date of a reorganization event, the contingent
quarterly coupon will be payable for each observation date on which the exchange property value is greater than or equal to the
coupon threshold level and the determination closing price (or exchange property value, as applicable) of each other underlying
stock is also greater than or equal to its coupon threshold level.
If exchange property includes a cash component,
investors will not receive any interest accrued on such cash component. In the event exchange property consists of securities,
those securities will, in turn, be subject to the antidilution adjustments set forth in paragraphs 1 through 5.
For purposes of determining whether or not
the exchange property value is less than the initial share price, less than the coupon threshold level or less than the downside
threshold level, or for determining the worst performing underlying stock, “exchange property value” means (x) for
any cash received in any reorganization event, the value, as determined by the calculation agent, as of the date of receipt, of
such cash received for one share of such underlying stock, as adjusted by the adjustment factor at the time of such reorganization
event, (y) for any property other than cash or securities received in any such reorganization event, the market value, as determined
by the calculation agent in its sole discretion, as of the date of receipt, of such exchange property received for one share of
such underlying stock, as adjusted by the adjustment factor at the time of such reorganization event and (z) for any security received
in any such reorganization event, an amount equal to the determination closing price, as of the
|
Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
|
day on which the exchange property value is
determined, per share of such security multiplied by the quantity of such security received for each share of such underlying stock,
as adjusted by the adjustment factor at the time of such reorganization event.
For purposes of paragraph 5 above, in the case
of a consummated tender or exchange offer or going-private transaction involving consideration of particular types, exchange property
shall be deemed to include the amount of cash or other property delivered by the offeror in the tender or exchange offer (in an
amount determined on the basis of the rate of exchange in such tender or exchange offer or going-private transaction). In the event
of a tender or exchange offer or a going-private transaction with respect to exchange property in which an offeree may elect to
receive cash or other property, exchange property shall be deemed to include the kind and amount of cash and other property received
by offerees who elect to receive cash.
Following the occurrence of any reorganization
event referred to in paragraph 5 above, all references in this offering document and in the related product supplement with respect
to the securities to such “underlying stock” shall be deemed to refer to the exchange property and references to a
“share” or “shares” of such underlying stock shall be deemed to refer to the applicable unit or units of
such exchange property, unless the context otherwise requires.
No adjustment to the adjustment factor will
be required unless such adjustment would require a change of at least 0.1% in the adjustment factor then in effect. The adjustment
factor resulting from any of the adjustments specified above will be rounded to the nearest one hundred-thousandth, with five one-millionths
rounded upward. Adjustments to the adjustment factor will be made up to the close of business on the final observation date.
No adjustments to the adjustment factor or
method of calculating the adjustment factor will be required other than those specified above. The adjustments specified above
do not cover all events that could affect the determination closing price or the final share price of such underlying stock, including,
without limitation, a partial tender or exchange offer for such underlying stock.
The calculation agent shall be solely responsible
for the determination and calculation of any adjustments to the adjustment factor or method of calculating the adjustment factor
and of any related determinations and calculations with respect to any distributions of stock, other securities or other property
or assets (including cash) in connection with any corporate event described in paragraphs 1 through 5 above, and its determinations
and calculations with respect thereto shall be conclusive in the absence of manifest error.
The calculation agent will provide information as to any adjustments
to the adjustment factor or to the method of calculating the amount payable at maturity of the securities made pursuant to paragraph
5 above upon written request by any investor in the securities.
|
Trustee:
|
The Bank of New York Mellon
|
Calculation agent:
|
MS & Co.
|
Issuer notices to registered security holders, the trustee and the depositary:
|
In the event that the maturity date is postponed due to postponement
of the final observation date, the issuer shall give notice of such postponement and, once it has been determined, of the date
to which the maturity date has been rescheduled (i) to each registered holder of the securities by mailing notice of such postponement
by first class mail, postage prepaid, to such registered holder’s last address as it shall appear upon the registry books,
(ii) to the trustee by facsimile, confirmed by mailing such notice to the trustee by first class mail, postage prepaid, at its
New York office and (iii) to The Depository Trust Company (the “depositary”) by telephone or facsimile confirmed by
mailing such notice to the depositary by first class mail, postage prepaid. Any notice that is mailed to a registered holder of
the securities in the manner herein provided shall be conclusively presumed to have been duly given to such registered holder,
whether or not such registered holder receives the notice. The issuer shall give such notice as promptly as possible, and in no
case later than (i) with respect to notice of postponement of the maturity date, the business day immediately preceding the scheduled
maturity date and (ii) with respect to notice of the date to which the maturity date has been rescheduled, the business day immediately
following the final observation date as postponed.
In the event that the securities are subject to early redemption,
the issuer shall, (i) on the business day following the applicable redemption determination date, give notice of the early redemption
and the early redemption payment, including specifying the payment date of the
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Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
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amount due upon the early redemption, (x) to each registered
holder of the securities by mailing notice of such early redemption by first class mail, postage prepaid, to such registered holder’s
last address as it shall appear upon the registry books, (y) to the trustee by facsimile confirmed by mailing such notice to the
trustee by first class mail, postage prepaid, at its New York office and (z) to the depositary by telephone or facsimile confirmed
by mailing such notice to the depositary by first class mail, postage prepaid, and (ii) on or prior to the early redemption date,
deliver the aggregate cash amount due with respect to the securities to the trustee for delivery to the depositary, as holder of
the securities. Any notice that is mailed to a registered holder of the securities in the manner herein provided shall be conclusively
presumed to have been duly given to such registered holder, whether or not such registered holder receives the notice. This notice
shall be given by the issuer or, at the issuer’s request, by the trustee in the name and at the expense of the issuer, with
any such request to be accompanied by a copy of the notice to be given.
The issuer shall, or shall cause the calculation agent to, (i)
provide written notice to the trustee, on which notice the trustee may conclusively rely, and to the depositary of the amount of
cash to be delivered as contingent quarterly coupon, if any, with respect to each security on or prior to 10:30 a.m. (New York
City time) on the business day preceding each coupon payment date, and (ii) deliver the aggregate cash amount due, if any, with
respect to the contingent quarterly coupon to the trustee for delivery to the depositary, as holder of the securities, on the applicable
coupon payment date.
The issuer shall, or shall cause the calculation agent to, (i)
provide written notice to the trustee, on which notice the trustee may conclusively rely, and to the depositary of the amount of
cash to be delivered with respect to each stated principal amount of the securities, on or prior to 10:30 a.m. (New York City time)
on the business day preceding the maturity date, and (ii) deliver the aggregate cash amount due with respect to the securities
to the trustee for delivery to the depositary, as holder of the securities, on the maturity date.
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Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
Additional Information About
the Securities
Additional Information:
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Minimum ticketing size:
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$1,000 / 1 security
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Tax considerations:
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Prospective investors should note that the discussion under
the section called “United States Federal Taxation” in the accompanying product supplement does not apply to the securities
issued under this document and is superseded by the following discussion.
The following is a general discussion of the material U.S. federal
income tax consequences and certain estate tax consequences of the ownership and disposition of the securities. This discussion
applies only to investors in the securities who:
· purchase the securities in the original offering; and
· hold the securities as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the
“Code”).
This discussion does not describe all of the tax consequences
that may be relevant to a holder in light of the holder’s particular circumstances or to holders subject to special rules,
such as:
· certain financial institutions;
· insurance companies;
· certain dealers and traders in securities or commodities;
· investors holding the securities as part of a “straddle,” wash sale, conversion transaction, integrated transaction
or constructive sale transaction;
· U.S. Holders (as defined below) whose functional currency is not the U.S. dollar;
· partnerships or other entities classified as partnerships for U.S. federal income tax purposes;
· regulated investment companies;
· real estate investment trusts; or
· tax-exempt entities, including “individual retirement accounts” or “Roth IRAs” as defined in Section 408
or 408A of the Code, respectively.
If an entity that is classified as a partnership for U.S. federal
income tax purposes holds the securities, the U.S. federal income tax treatment of a partner will generally depend on the status
of the partner and the activities of the partnership. If you are a partnership holding the securities or a partner in such a partnership,
you should consult your tax adviser as to the particular U.S. federal tax consequences of holding and disposing of the securities
to you.
As the law applicable to the U.S. federal income taxation of
instruments such as the securities is technical and complex, the discussion below necessarily represents only a general summary.
The effect of any applicable state, local or non-U.S. tax laws is not discussed, nor are any alternative minimum tax consequences
or consequences resulting from the Medicare tax on investment income. Moreover, the discussion below does not address the consequences
to taxpayers subject to special tax accounting rules under Section 451(b) of the Code.
This discussion is based on the Code, administrative pronouncements,
judicial decisions and final, temporary and proposed Treasury regulations, all as of the date hereof, changes to any of which subsequent
to the date hereof may affect the tax consequences described herein. Persons considering the purchase of the securities should
consult their tax advisers with regard to the application of the U.S. federal income tax laws to their particular situations as
well as any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
General
Due to the absence of statutory, judicial or administrative authorities
that directly address the
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Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
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treatment of the securities or instruments that are similar to
the securities for U.S. federal income tax purposes, no assurance can be given that the IRS or a court will agree with the tax
treatment described herein. We intend to treat a security for U.S. federal income tax purposes as a single financial contract that
provides for a coupon that will be treated as gross income to you at the time received or accrued in accordance with your regular
method of tax accounting. In the opinion of our counsel, Davis Polk & Wardwell LLP, this treatment of the securities is reasonable
under current law; however, our counsel has advised us that it is unable to conclude affirmatively that this treatment is more
likely than not to be upheld, and that alternative treatments are possible. Moreover, our counsel’s opinion is based on market
conditions as of the date of this preliminary pricing supplement and is subject to confirmation on the pricing date.
You should consult your tax adviser regarding all aspects
of the U.S. federal tax consequences of an investment in the securities (including possible alternative treatments of the securities).
Unless otherwise stated, the following discussion is based on the treatment of each security as described in the previous paragraph.
Tax Consequences to U.S. Holders
This section applies to you only if you are a U.S. Holder. As
used herein, the term “U.S. Holder” means a beneficial owner of a security that is, for U.S. federal income tax purposes:
· a citizen or individual resident of the United States;
· a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state
thereof or the District of Columbia; or
· an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.
Tax Treatment of the Securities
Assuming the treatment of the securities as set forth above is
respected, the following U.S. federal income tax consequences should result.
Tax Basis. A U.S. Holder’s tax
basis in the securities should equal the amount paid by the U.S. Holder to acquire the securities.
Tax Treatment of Coupon Payments.
Any coupon payment on the securities should be taxable as ordinary income to a U.S. Holder at the time received or accrued, in
accordance with the U.S. Holder’s regular method of accounting for U.S. federal income tax purposes.
Sale, Exchange or Settlement of the Securities.
Upon a sale, exchange or settlement of the securities, a U.S. Holder should recognize gain or loss equal to the difference
between the amount realized on the sale, exchange or settlement and the U.S. Holder’s tax basis in the securities sold, exchanged
or settled. For this purpose, the amount realized does not include any coupon paid at settlement and may not include sale proceeds
attributable to an accrued coupon, which may be treated as a coupon payment. Any such gain or loss recognized should be long-term
capital gain or loss if the U.S. Holder has held the securities for more than one year at the time of the sale, exchange or settlement,
and should be short-term capital gain or loss otherwise. The ordinary income treatment of the coupon payments, in conjunction with
the capital loss treatment of any loss recognized upon the sale, exchange or settlement of the securities, could result in adverse
tax consequences to holders of the securities because the deductibility of capital losses is subject to limitations.
Possible Alternative Tax Treatments of an Investment in
the Securities
Due to the absence of authorities that directly address the proper
tax treatment of the securities, no assurance can be given that the IRS will accept, or that a court will uphold, the treatment
described above. In particular, the IRS could seek to analyze the U.S. federal income tax consequences of owning the securities
under Treasury regulations governing contingent payment debt instruments (the “Contingent Debt Regulations”). If the
IRS were successful in asserting that the Contingent Debt Regulations applied to the securities, the
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Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
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timing and character of income thereon would be significantly
affected. Among other things, a U.S. Holder would be required to accrue into income original issue discount on the securities every
year at a “comparable yield” determined at the time of their issuance, adjusted upward or downward to reflect the difference,
if any, between the actual and the projected amount of any contingent payments on the securities. Furthermore, any gain realized
by a U.S. Holder at maturity or upon a sale, exchange or other disposition of the securities would be treated as ordinary income,
and any loss realized would be treated as ordinary loss to the extent of the U.S. Holder’s prior accruals of original issue
discount and as capital loss thereafter. The risk that financial instruments providing for buffers, triggers or similar downside
protection features, such as the securities, would be recharacterized as debt is greater than the risk of recharacterization for
comparable financial instruments that do not have such features.
Other alternative federal income tax treatments of the securities
are possible, which, if applied, could significantly affect the timing and character of the income or loss with respect to the
securities. 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 on whether to require holders
of “prepaid forward contracts” and similar 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; 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; and appropriate transition rules and effective dates.
While it is not clear whether instruments such as the securities would be viewed as similar to the prepaid forward contracts described
in the notice, any Treasury regulations or other guidance promulgated after consideration of these issues could materially and
adversely affect the tax consequences of an investment in the securities, possibly with retroactive effect. U.S. Holders should
consult their tax advisers regarding the U.S. federal income tax consequences of an investment in the securities, including possible
alternative treatments and the issues presented by this notice.
Backup Withholding and Information Reporting
Backup withholding may apply in respect of payments on the securities
and the payment of proceeds from a sale, exchange or other disposition of the securities, unless a U.S. Holder provides proof of
an applicable exemption or a correct taxpayer identification number and otherwise complies with applicable requirements of the
backup withholding rules. The amounts withheld under the backup withholding rules are not an additional tax and may be refunded,
or credited against the U.S. Holder’s U.S. federal income tax liability, provided that the required information is timely
furnished to the IRS. In addition, information returns will be filed with the IRS in connection with payments on the securities
and the payment of proceeds from a sale, exchange or other disposition of the securities, unless the U.S. Holder provides proof
of an applicable exemption from the information reporting rules.
Tax Consequences to Non-U.S. Holders
This section applies to you only if you are a Non-U.S. Holder.
As used herein, the term “Non-U.S. Holder” means a beneficial owner of a security that is for U.S. federal income tax
purposes:
· an individual who is classified as a nonresident alien;
· a foreign corporation; or
· a foreign estate or trust.
The term “Non-U.S. Holder” does not include any of
the following holders:
· a holder who is an individual present in the United States for 183 days or more in the taxable year of disposition and who is not
otherwise a resident of the United States for U.S. federal income tax purposes;
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Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
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· certain former citizens or residents of the United States; or
· a holder for whom income or gain in respect of the securities is effectively connected with the conduct of a trade or business
in the United States.
Such holders should consult their tax advisers regarding the
U.S. federal income tax consequences of an investment in the securities.
Although significant aspects of the tax treatment of each security
are uncertain, we intend to withhold on any coupon paid to a Non-U.S. Holder generally at a rate of 30% or at a reduced rate specified
by an applicable income tax treaty under an “other income” or similar provision. We will not be required to pay any
additional amounts with respect to amounts withheld. In order to claim an exemption from, or a reduction in, the 30% withholding
tax, a Non-U.S. Holder of the securities must comply with certification requirements to establish that it is not a U.S. person
and is eligible for such an exemption or reduction under an applicable tax treaty. If you are a Non-U.S. Holder, you should consult
your tax adviser regarding the tax treatment of the securities, including the possibility of obtaining a refund of any withholding
tax and the certification requirement described above.
Section 871(m) Withholding Tax on Dividend Equivalents
Section 871(m) of the Code and Treasury regulations promulgated
thereunder (“Section 871(m)”) generally impose a 30% (or a lower applicable treaty rate) withholding tax on dividend
equivalents paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments linked to U.S. equities or indices
that include U.S. equities (each, an “Underlying Security”). Subject to certain exceptions, Section 871(m) generally
applies to securities that substantially replicate the economic performance of one or more Underlying Securities, as determined
based on tests set forth in the applicable Treasury regulations (a “Specified Security”). However, pursuant to an IRS
notice, Section 871(m) will not apply to securities issued before January 1, 2021 that do not have a delta of one with respect
to any Underlying Security. Based on the terms of the securities and current market conditions, we expect that the securities will
not have a delta of one with respect to any Underlying Security on the pricing date. However, we will provide an updated determination
in the pricing supplement. Assuming that the securities do not have a delta of one with respect to any Underlying Security, our
counsel is of the opinion that the securities should not be Specified Securities and, therefore, should not be subject to Section
871(m).
Our determination is not binding on the IRS, and the IRS may
disagree with this determination. Section 871(m) is complex and its application may depend on your particular circumstances, including
whether you enter into other transactions with respect to an Underlying Security. If Section 871(m) withholding is required, we
will not be required to pay any additional amounts with respect to the amounts so withheld. You should consult your tax adviser
regarding the potential application of Section 871(m) to the securities.
U.S. Federal Estate Tax
Individual Non-U.S. Holders and entities the property of which
is potentially includible in such an individual’s gross estate for U.S. federal estate tax purposes (for example, a trust
funded by such an individual and with respect to which the individual has retained certain interests or powers) should note that,
absent an applicable treaty exemption, the securities may be treated as U.S.-situs property subject to U.S. federal estate tax.
Prospective investors that are non-U.S. individuals, or are entities of the type described above, should consult their tax advisers
regarding the U.S. federal estate tax consequences of an investment in the securities.
Backup Withholding and Information Reporting
Information returns will be filed with the IRS in connection
with any coupon payment and may be filed with the IRS in connection with the payment at maturity on the securities and the payment
of proceeds from a sale, exchange or other disposition. A Non-U.S. Holder may be subject to backup withholding in respect of amounts
paid to the Non-U.S. Holder, unless such Non-U.S. Holder complies with certification procedures to establish that it is not a U.S.
person for U.S. federal income tax purposes or otherwise establishes an exemption. The amount of any backup withholding from a
payment to a Non-U.S. Holder will be allowed as a credit
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Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
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against the Non-U.S. Holder’s U.S. federal income tax liability
and may entitle the Non-U.S. Holder to a refund, provided that the required information is timely furnished to the IRS.
FATCA
Legislation commonly referred to as “FATCA” generally
imposes a withholding tax of 30% on payments to certain non-U.S. entities (including financial intermediaries) with respect to
certain financial instruments, unless various U.S. information reporting and due diligence requirements have been satisfied. An
intergovernmental agreement between the United States and the non-U.S. entity’s jurisdiction may modify these requirements.
FATCA generally applies to certain financial instruments that are treated as paying U.S.-source interest or other U.S.-source “fixed
or determinable annual or periodical” income (“FDAP income”). Withholding (if applicable) applies to payments
of U.S.-source FDAP income and to payments of gross proceeds of the disposition (including upon retirement) of certain financial
instruments treated as providing for U.S.-source interest or dividends. Under recently proposed regulations (the preamble to which
specifies that taxpayers are permitted to rely on them pending finalization), no withholding will apply on payments of gross proceeds
(other than amounts treated as FDAP income). While the treatment of the securities is unclear, you should assume that any coupon
payment with respect to the securities will be subject to the FATCA rules. If withholding applies to the securities, we will not
be required to pay any additional amounts with respect to amounts withheld. Both U.S. and Non-U.S. Holders should consult their
tax advisers regarding the potential application of FATCA to the securities.
The discussion in the preceding paragraphs, insofar as it
purports to describe provisions of U.S. federal income tax laws or legal conclusions with respect thereto, constitutes the full
opinion of Davis Polk & Wardwell LLP regarding the material U.S. federal tax consequences of an investment in the securities.
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Use of proceeds and hedging:
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The proceeds from the sale of the securities will be used by
us for general corporate purposes. We will receive, in aggregate, $1,000 per security issued, because, when we enter into hedging
transactions in order to meet our obligations under the securities, our hedging counterparty will reimburse the cost of the agent’s
commissions. The costs of the securities borne by you and described beginning on page 3 above comprise the agent’s commissions
and the cost of issuing, structuring and hedging the securities.
On or prior to September 4, 2019, we hedged our anticipated exposure
in connection with the securities by entering into hedging transactions with our affiliates and/or third party dealers. We expect
our hedging counterparties to have taken positions in the underlying stocks and in futures and/or options contracts on the underlying
stocks. Such purchase activity could have increased the initial share price of an underlying stock, and, therefore, could have
increased (i) the value at or above which such underlying stock must close on the redemption determination dates so that the securities
are redeemed prior to maturity for the early redemption payment (depending also on the performance of the other underlying stocks),
(ii) the coupon threshold level for such underlying stock, which is the value at or above which such underlying stock must close
on the observation dates so that you receive a contingent quarterly coupon on the securities (depending also on the performance
of the other underlying stocks) for such underlying stock, and (iii) the downside threshold level for such underlying stock, which
is the value at or above which such underlying stock must close on the final observation date, so that you are not exposed to the
negative performance of the underlying stock at maturity (depending also on the performance of the other underlying stocks). These
entities may be unwinding or adjusting hedge positions during the term of the securities, and the hedging strategy may involve
greater and more frequent dynamic adjustments to the hedge as the final observation date approaches. Additionally, our hedging
activities, as well as our other trading activities, during the term of the securities could potentially affect the value of any
underlying stock on the redemption determination dates and other observation dates, and, accordingly, whether we redeem the securities
prior to maturity, whether we pay a contingent quarterly coupon on the securities and the amount of cash you will receive at maturity,
if any (depending also on the performance of the other underlying stocks). 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”),
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Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
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should consider the fiduciary standards of ERISA in the context
of the Plan’s particular circumstances before authorizing an investment in the securities. Accordingly, among other factors,
the fiduciary should consider whether the investment would satisfy the prudence and diversification requirements of ERISA and would
be consistent with the documents and instruments governing the Plan.
In addition, we and certain of our affiliates, including MS &
Co., may each be considered a “party in interest” within the meaning of ERISA, or a “disqualified person”
within the meaning of the Internal Revenue Code of 1986, as amended (the “Code”), with respect to many Plans, as well
as many individual retirement accounts and Keogh plans (such accounts and plans, together with other plans, accounts and arrangements
subject to Section 4975 of the Code, also “Plans”). ERISA Section 406 and Code Section 4975 generally prohibit transactions
between Plans and parties in interest or disqualified persons. Prohibited transactions within the meaning of ERISA or the Code
would likely arise, for example, if the securities are acquired by or with the assets of a Plan with respect to which MS &
Co. or any of its affiliates is a service provider or other party in interest, unless the securities are acquired pursuant to an
exemption from the “prohibited transaction” rules. A violation of these “prohibited transaction” rules
could result in an excise tax or other liabilities under ERISA and/or Section 4975 of the Code for those persons, unless exemptive
relief is available under an applicable statutory or administrative exemption.
The U.S. Department of Labor has issued five prohibited transaction
class exemptions (“PTCEs”) that may provide exemptive relief for direct or indirect prohibited transactions resulting
from the purchase or holding of the securities. Those class exemptions are PTCE 96-23 (for certain transactions determined by in-house
asset managers), PTCE 95-60 (for certain transactions involving insurance company general accounts), PTCE 91-38 (for certain transactions
involving bank collective investment funds), PTCE 90-1 (for certain transactions involving insurance company separate accounts)
and PTCE 84-14 (for certain transactions determined by independent qualified professional asset managers). In addition, ERISA Section
408(b)(17) and Code Section 4975(d)(20) provide an exemption for the purchase and sale of securities and the related lending transactions,
provided that neither the issuer of the securities nor any of its affiliates has or exercises any discretionary authority or control
or renders any investment advice with respect to the assets of the Plan involved in the transaction and provided further that the
Plan pays no more, and receives no less, than “adequate consideration” in connection with the transaction (the so-called
“service provider” exemption). There can be no assurance that any of these class or statutory exemptions will be available
with respect to transactions involving the securities.
Because we may be considered a party in interest with respect
to many Plans, the securities may not be purchased, held or disposed of by any Plan, any entity whose underlying assets include
“plan assets” by reason of any Plan’s investment in the entity (a “Plan Asset Entity”) or any person
investing “plan assets” of any Plan, unless such purchase, holding or disposition is eligible for exemptive relief,
including relief available under PTCEs 96-23, 95-60, 91-38, 90-1, 84-14 or the service provider exemption or such purchase, holding
or disposition is otherwise not prohibited. Any purchaser, including any fiduciary purchasing on behalf of a Plan, transferee or
holder of the securities will be deemed to have represented, in its corporate and its fiduciary capacity, by its purchase and holding
of the securities that either (a) it is not a Plan or a Plan Asset Entity and is not purchasing such securities on behalf of or
with “plan assets” of any Plan or with any assets of a governmental, non-U.S. or church plan that is subject to any
federal, state, local or non-U.S. law that is substantially similar to the provisions of Section 406 of ERISA or Section 4975 of
the Code (“Similar Law”) or (b) its purchase, holding and disposition of these securities will not constitute or result
in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or violate any Similar Law.
Due to the complexity of these rules and the penalties that may
be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries or other
persons considering purchasing the securities on behalf of or with “plan assets” of any Plan consult with their counsel
regarding the availability of exemptive relief.
The securities are contractual financial instruments. The financial
exposure provided by the securities is not a substitute or proxy for, and is not intended as a substitute or proxy for, individualized
investment management or advice for the benefit of any purchaser or holder of the securities. The securities have not been designed
and will not be administered in a
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Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
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manner intended to reflect the individualized needs and objectives
of any purchaser or holder of the securities.
Each purchaser or holder of any securities acknowledges and agrees
that:
(i) the purchaser or holder or its fiduciary has made and shall make all investment decisions
for the purchaser or holder and the purchaser or holder has not relied and shall not rely in any way upon us or our affiliates
to act as a fiduciary or adviser of the purchaser or holder with respect to (A) the design and terms of the securities, (B) the
purchaser or holder’s investment in the securities, or (C) the exercise of or failure to exercise any rights we have under
or with respect to the securities;
(ii) we and our affiliates have acted and will act solely for our own account in connection with
(A) all transactions relating to the securities and (B) all hedging transactions in connection with our obligations under the
securities;
(iii) any and all assets and positions relating to hedging transactions by us or our affiliates
are assets and positions of those entities and are not assets and positions held for the benefit of the purchaser or holder;
(iv) our interests are adverse to the interests of the purchaser or holder; and
(v) neither we nor any of our affiliates is a fiduciary or adviser of the purchaser or holder
in connection with any such assets, positions or transactions, and any information that we or any of our affiliates may provide
is not intended to be impartial investment advice.
Each purchaser and holder of the securities has exclusive responsibility
for ensuring that its purchase, holding and disposition of the securities do not violate the prohibited transaction rules of ERISA
or the Code or any Similar Law. The sale of any securities to any Plan or plan subject to Similar Law is in no respect a representation
by us or any of our affiliates or representatives that such an investment meets all relevant legal requirements with respect to
investments by plans generally or any particular plan, or that such an investment is appropriate for plans generally or any particular
plan. In this regard, neither this discussion nor anything provided in this document is or is intended to be investment advice
directed at any potential Plan purchaser or at Plan purchasers generally and such purchasers of these securities should consult
and rely on their own counsel and advisers as to whether an investment in these securities is suitable.
However, individual retirement accounts, individual retirement
annuities and Keogh plans, as well as employee benefit plans that permit participants to direct the investment of their accounts,
will not be permitted to purchase or hold the securities if the account, plan or annuity is for the benefit of an employee of Morgan
Stanley or Morgan Stanley Wealth Management or a family member and the employee receives any compensation (such as, for example,
an addition to bonus) based on the purchase of the securities by the account, plan or annuity.
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Additional considerations:
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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 securities, either directly or indirectly.
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Supplemental information regarding plan of distribution; conflicts of interest:
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Selected dealers, which may include our affiliates, and their
financial advisors will collectively receive from the agent a fixed sales commission of $ for each security they sell.
MS & Co. is an affiliate of MSFL and a wholly owned subsidiary
of Morgan Stanley, and it and other affiliates of ours expect to make a profit by selling, structuring and, when applicable, hedging
the securities. When MS & Co. prices this offering of securities, it will determine the economic terms of the securities, including
the contingent quarterly coupon rate, such that for each security the estimated value on the pricing date will be no lower than
the minimum level described in “Investment Summary” beginning on page 3.
MS & Co. will conduct this offering in compliance with the
requirements of FINRA Rule 5121 of the Financial Industry Regulatory Authority, Inc., which is commonly referred to as FINRA, regarding
a FINRA member firm’s distribution of the securities of an affiliate and related conflicts of interest. MS & Co. or any
of our other affiliates may not make sales in this offering to any discretionary account. See “Plan of Distribution (Conflicts
of Interest)” and “Use of Proceeds and Hedging” in the accompanying product supplement for auto-callable securities.
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Where you can find more information:
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MSFL and Morgan Stanley have filed a registration statement (including
a prospectus, as
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Morgan Stanley Finance LLC
Contingent Income Auto-Callable Securities due September 10, 2021
All Payments on the Securities Based on the Worst Performing of the Common Stock of Walmart Inc., the Common Stock of Target Corporation and the Common Stock of Costco Wholesale Corporation
Principal at Risk Securities
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supplemented by the product supplement for auto-callable securities)
with the Securities and Exchange Commission, or SEC, for the offering to which this communication relates. You should read the
prospectus in that registration statement, the product supplement for auto-callable securities and any other documents relating
to this offering that MSFL and Morgan Stanley have filed with the SEC for more complete information about MSFL, Morgan Stanley
and this offering. You may get these documents without cost by visiting EDGAR on the SEC web site at.www.sec.gov.
Alternatively, MSFL, Morgan Stanley, any underwriter or any dealer participating in the offering will arrange to send you the prospectus
and the product supplement for auto-callable securities if you so request by calling toll-free 1-(800)-584-6837.
You may access these documents on the SEC web site at.www.sec.gov
as follows:
Product
Supplement for Auto-Callable Securities dated November 16, 2017
Prospectus
dated November 16, 2017
Terms used but not defined in this document are defined in the
product supplement for auto-callable securities or in the prospectus.
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