CALCULATION
OF REGISTRATION FEE
Title
of Each Class of Securities Offered
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Maximum
Aggregate Offering Price
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Amount
of Registration Fee
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Dual Directional Contingent Buffer Equity Notes
due 2020
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$1,615,000
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$209.63
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Pricing
Supplement
To prospectus dated November 16, 2017,
product supplement for knock-out notes dated November 16, 2017 and
index supplement dated November 16, 2017
|
Pricing Supplement
No. 2,572
Registration Statement Nos.
333-221595; 333-221595-01
Dated September 27, 2019; Rule 424(b)(2)
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|
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Morgan Stanley Finance LLC
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$1,615,000
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Capped Dual-Directional Contingent Buffer Equity Notes Linked to the S&P 500® Index due October 15, 2020
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Fully and Unconditionally Guaranteed by Morgan Stanley
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Principal at Risk Securities
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General
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·
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The securities are designed for investors who seek an unleveraged return (subject to the Maximum Upside Payment at Maturity
of $1,070.00 per security) equal to any appreciation, or an unleveraged return equal to the absolute value of any depreciation
(of up to 20.15%), of the S&P 500® Index at maturity, and who anticipate that the Final Average Index Value
will not be less than the Initial Index Value by more than 20.15%. Investors should be willing to forgo interest and dividend payments,
and, if a Knock-Out Event occurs, meaning that the Final Average Index Value is less than the Initial Index Value by more than
20.15%, be willing to lose a significant portion or all of their principal.
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·
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Senior unsecured obligations of Morgan Stanley Finance LLC (“MSFL”), fully and unconditionally guaranteed by Morgan
Stanley, maturing October 15, 2020†.
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·
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Minimum purchase of $10,000. Minimum denominations of $1,000 and integral multiples thereof.
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·
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The securities priced on September 27, 2019 and are expected to settle on October 2, 2019.
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·
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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.
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Final Terms
Issuer:
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Morgan Stanley Finance LLC
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Guarantor:
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Morgan Stanley
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Underlying Index:
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S&P 500® Index
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Knock-Out Event:
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A Knock-Out Event occurs if the Final Average Index Value has decreased, as compared to the Initial Index Value, by more than the Knock-Out Buffer Amount (that is, if the Final Average Index Value is less than the Knock-Out Level).
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Knock-Out Buffer Amount:
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20.15%
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Knock-Out Level:
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2,364.989, which is approximately 79.85% of the Initial Index Value
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Payment at Maturity:
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If
a Knock-Out Event HAS NOT occurred, you will receive a cash payment at maturity per security equal to:
· if
the Final Average Index Value is greater than the Initial Index Value: $1,000 plus a return equal to $1,000 times
the Underlying Index Return, subject to the Maximum Upside Payment at Maturity; or
· if
the Final Average Index Value is less than or equal to the Initial Index Value but is greater than or equal to the
Knock Out Level: $1,000 + ($1,000 x Absolute Index Return).
For additional clarification, please see “What is the Return
on the Securities at Maturity Assuming a Range of Performance for the Underlying Index?” beginning on page 3.
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If a Knock-Out Event HAS occurred, you will receive a
cash payment at maturity that will reflect the percentage depreciation in the Final Average Index Value from the Initial Index
Value on a 1-to-1 basis. Under these circumstances, your payment at maturity per $1,000 principal amount security will be calculated
as follows:
$1,000 + ($1,000 x Underlying Index Return).
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Under these circumstances, the Payment at Maturity will be less than the principal amount of $1,000, and will represent a loss of more than 20.15%, and possibly all, of your investment.
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Maximum Upside Payment at Maturity:
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$1,070.00 per security (107% of the principal amount)
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Index Closing Value:
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On any day, the index closing value for the Underlying Index
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Underlying Index Return:
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Final
Average Index Value – Initial Index Value
Initial Index Value
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Absolute Index Return:
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The absolute value of the Underlying Index Return. For example, a –5% Underlying Index Return will result in a +5% Absolute Index Return.
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Initial Index Value:
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2,961.79, which is the Index Closing Value on the Pricing Date
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Final Average Index Value:
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The arithmetic average of the Index Closing Values on each of the five Valuation Dates
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Valuation Dates:
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October 5, 2020, October 6, 2020, October 7, 2020, October 8, 2020 and October 9, 2020†
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Maturity Date:
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October 15, 2020†
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Pricing Date:
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September 27, 2019
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Issue Date:
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October 2, 2019 (3 business days after the Pricing Date)
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Listing:
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The securities will not be listed on any securities exchange.
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Estimated value on the Pricing Date:
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$983.70 per security. See “Additional Terms Specific To The Securities” on page 2.
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CUSIP / ISIN:
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61769HWF8 / US61769HWF80
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†Subject to postponement
for non-index business days or in the event of a market disruption event and as described under “Description of Notes—Postponement
of Valuation Date(s) or Review Date(s)” in the accompanying product supplement for knock-out notes.
Investing in the securities involves a number of risks. See
“Risk Factors” beginning on page S-20 of the accompanying product supplement and “Selected Risk Considerations”
beginning on page 8 of this pricing supplement.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of the securities or passed upon the accuracy or the adequacy of this pricing
supplement or the accompanying product supplement for knock-out notes, index supplement and prospectus. Any representation to the
contrary is a criminal offense.
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Price to Public (1)
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Fees and Commissions(1)(2)
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Proceeds to Us(3)
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Per security
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$1,000
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$10.00
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$990.00
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Total
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$1,615,000
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$16,150
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$1,598,850
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(1)
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J.P. Morgan Securities LLC and JPMorgan Chase Bank, N.A. will act as placement agents for the securities. The placement agents
will forgo fees for sales to certain fiduciary accounts. The total fees represent the amount that the placement agents receive
from sales to accounts other than such fiduciary accounts. The placement agents will receive a fee from the Issuer or one of its
affiliates that will not exceed $10.00 per $1,000 principal amount of securities.
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(2)
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Please see “Supplemental Plan of Distribution; Conflicts of Interest” in this pricing supplement for information
about fees and commissions.
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(3)
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See “Use of Proceeds and Hedging” on page 11.
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The agent for this offering, Morgan
Stanley & Co. LLC (“MS & Co.”), is an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley. See
“Supplemental Plan of Distribution; Conflicts of Interest” below.
The
securities are not deposits OR SAVINGS ACCOUNTS and are not insured by the Federal Deposit Insurance Corporation or any other governmental
agency OR INSTRUMENTALITY, nor are they obligations of, or guaranteed by, a bank.
References
to “we,” “us” and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively,
as the context requires.
Morgan Stanley
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September 27, 2019
Additional Terms Specific to the
Securities
You should read this pricing supplement together with
the prospectus dated November 16, 2017, as supplemented by the product supplement for knock-out notes dated November 16, 2017 and
the index supplement dated November 16, 2017. This pricing supplement, together with the documents listed below, contains the
terms of the securities and supplements the preliminary terms dated September 24, 2019 and supersedes all other prior or contemporaneous
oral statements as well as any other written materials including preliminary or indicative pricing terms, correspondence, trade
ideas, structures for implementation, sample structures, fact sheets, brochures or other educational materials of ours. You
should carefully consider, among other things, the matters set forth in “Risk Factors” in the accompanying product
supplement for knock-out notes, as the securities involve risks not associated with conventional debt securities. We urge you to
consult your investment, legal, tax, accounting and other advisers in connection with your investment in the securities.
You may access these documents on the SEC website
at .ww.w.sec.gov as follows
(or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
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·
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Index supplement dated November 16, 2017:
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https://www.sec.gov/Archives/edgar/data/895421/000095010317011283/dp82797_424b2-indexsupp.htm
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·
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Prospectus dated November 16, 2017:
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https://www.sec.gov/Archives/edgar/data/895421/000095010317011237/dp82798_424b2-base.htm
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 is less than $1,000. We estimate that the value of each
security on the Pricing Date is $983.70.
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
Index. The estimated value of the securities is determined using our own pricing and valuation models, market inputs and assumptions
relating to the Underlying Index, instruments based on the Underlying Index, volatility and other factors including current and
expected interest rates, as well as an interest rate related to our secondary market credit spread, which is the implied interest
rate at which our conventional fixed rate debt trades in the secondary market.
What determines the economic terms of the securities?
In determining the economic terms of the securities,
including the Knock-Out Level and the Maximum Upside Payment at Maturity, we use an internal funding rate, which is likely to be
lower than our secondary market credit spreads and therefore advantageous to us. If the issuing, selling, structuring and hedging
costs borne by you were lower or if the internal funding rate were higher, one or more of the economic terms of the 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 Index, may vary from, and
be lower than, the estimated value on the Pricing Date, because the secondary market price takes into account our secondary market
credit spread as well as the bid-offer spread that MS & Co. would charge in a secondary market transaction of this type and
other factors. However, because the costs associated with issuing, selling, structuring and hedging the 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 Index, and
to our secondary market credit spreads, it would do so based on values higher than the estimated value. We expect that those higher
values will also be reflected in your brokerage account statements.
MS & Co. may, but is not obligated to, make a
market in the securities, and, if it once chooses to make a market, may cease doing so at any time.
What is the Return on the Securities
at Maturity Assuming a Range of Performance for the Underlying Index?
The following table and graph illustrate the
hypothetical return at maturity on the securities. The “Return on Securities” as used in this pricing supplement is
the number, expressed as a percentage, that results from comparing the payment at maturity per $1,000 principal amount security
to $1,000. The hypothetical returns set forth below reflect the Maximum Upside Payment at Maturity of $1,070.00 per security and
assume an Initial Index Value of 2,500 and a Knock-Out Level of 1,996.25 (which is 79.85% of the hypothetical Initial Index Value).
The actual Initial Index Value and Knock-Out Level are set forth on the cover page of this pricing supplement. The hypothetical
returns set forth below are for illustrative purposes only and may not reflect the actual returns applicable to a purchaser of
the securities.
Final Average Index Value
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Underlying Index Return
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Return on Securities
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4,000.00
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60.00%
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7.00%
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3,750.00
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50.00%
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7.00%
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3,500.00
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40.00%
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7.00%
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3,250.00
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30.00%
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7.00%
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3,000.00
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20.00%
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7.00%
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2,875.00
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15.00%
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7.00%
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2,750.00
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10.00%
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7.00%
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2,675.00
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7.00%
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7.00%
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2,625.00
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5.00%
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5.00%
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2,562.50
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2.50%
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2.50%
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2,500.00
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0.00%
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0.00%
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2,375.00
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-5.00%
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5.00%
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2,250.00
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-10.00%
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10.00%
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2,125.00
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-15.00%
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15.00%
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2,000.00
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-20.00%
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20.00%
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1,996.25
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-20.15%
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20.15%
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1,975.00
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-21.00%
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-21.00%
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1,875.00
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-25.00%
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-25.00%
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1,750.00
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-30.00%
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-30.00%
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1,500.00
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-40.00%
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-40.00%
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1,000.00
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-60.00%
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-60.00%
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500.00
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-80.00%
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-80.00%
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0
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-100.00%
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-100.00%
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Securities Payoff Diagram
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How it works
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§
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Upside Scenario if the Underlying Index Appreciates.
If the Final Average Index Value is greater than the Initial Index Value, the investor would receive the $1,000 principal
amount plus 100% of the appreciation of the Underlying Index over the term of the securities, subject to the Maximum Upside
Payment at Maturity.
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§
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Absolute Return Scenario. If the Final Average Index
Value is less than or equal to the Initial Index Value and is greater than or equal to the Knock-Out Level, the investor
would receive a 1% positive return on the securities for each 1% negative return on the Underlying Index.
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§
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If the Underlying Index depreciates 10%, the investor would receive a 10% return, or $1,100 per security.
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§
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The maximum return you may receive in this scenario is a positive 20.15% return at maturity.
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§
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Downside Scenario. If the Final Average Index Value is
less than the Knock-Out Level, the investor would receive an amount less than the $1,000 principal amount, based on a 1%
loss of principal for each 1% decline in the Underlying Index. Under these circumstances, the Payment at Maturity will be less
than 79.85% of the principal amount per security. There is no minimum payment at maturity on the securities.
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§
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If the Underlying Index depreciates 70%, the investor would lose 70% of the investor’s principal and receive only $300
per security at maturity, or 30% of the principal amount.
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Hypothetical Examples
of Amounts Payable at Maturity
The following examples illustrate how the return
on the securities set forth in the table on the previous page is calculated.
Example 1: A Knock-Out Event HAS NOT occurred,
and the Index Closing Value increases from the Initial Index Value of 2,500 to a Final Average Index Value of 3,250. Because
the Underlying Index Return of 30% would result in a payment at maturity that is greater than the Maximum Upside Payment at Maturity,
the investor receives only the Maximum Upside Payment at Maturity of $1,070.00 per security.
Example 2: A Knock-Out Event HAS NOT occurred,
and the Index Closing Value increases from the Initial Index Value of 2,500 to a Final Average Index Value of 2,562.50. Because
the Underlying Index Return of 2.50% is positive, the investor receives a payment at maturity per $1,000 principal amount security,
calculated as follows:
$1,000 + ($1,000 x 2.50%) = $1,025.00
Example 3: A Knock-Out Event HAS NOT occurred,
and the Index Closing Value decreases from the Initial Index Value of 2,500 to a Final Average Index Value of 2,250. Because
a Knock-Out Event has not occurred and the Final Average Index Value is less than the Initial Index Value by 10%, the investor
receives the benefit of the absolute return feature and therefore receives a payment at maturity per $1,000 principal amount security,
calculated as follows:
$1,000 + ($1,000 x 10%) = $1,100.00
Example 4: A Knock-Out Event HAS occurred, and
the Index Closing Value decreases from the Initial Index Value of 2,500 to a Final Average Index Value of 1,000. Because a
Knock-Out Event has occurred, the investor loses the benefit of the absolute return feature, and receives an amount that is significantly
less than the $1,000 principal amount, based on a 1% loss of principal for each 1% decline in the Underlying Index, calculated
as follows:
$1,000 + ($1,000 x -60%) = $400.00
Selected
Purchase Considerations
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·
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CAPPED APPRECIATION POTENTIAL; NO GUARANTEED RETURN OF ANY PRINCIPAL — The securities provide the opportunity
to participate in the appreciation of the Underlying Index at maturity, subject to the Maximum Upside Payment at Maturity. If
a Knock-Out Event HAS NOT occurred and the Final Average Index Value is greater than the Initial Index Value, you
will receive at maturity $1,000 plus a return equal to $1,000 times the Underlying Index Return, subject to the Maximum
Upside Payment at Maturity. If a Knock-Out Event HAS NOT occurred and the Final Average Index Value is less than
or equal to the Initial Index Value but is greater than or equal to the Knock Out Level, you will receive at maturity
$1,000 plus $1,000 times the Absolute Index Return. However, if a Knock-Out Event HAS occurred, you
will lose a significant portion or all of your investment, based on a 1% loss for every 1% decline in the Final Average Index Value,
as compared to the Initial Index Value. Because the securities are our unsecured obligations, payment of any amount at maturity
is subject to our ability to pay our obligations as they become due.
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SECURITIES LINKED TO THE S&P 500® INDEX— The S&P 500® Index, which is calculated,
maintained and published by S&P Dow Jones Indices LLC (“S&P”), consists of stocks of 500 component companies
selected to provide a performance benchmark for the U.S. equity markets. The calculation of the S&P 500® Index
is based on the relative value of the float adjusted aggregate market capitalization of the 500 component companies as of a particular
time as compared to the aggregate average market capitalization of 500 similar companies during the base period of the years 1941
through 1943. For additional information about the S&P 500® Index, see the information set forth under “S&P
500® Index” in the accompanying index supplement.
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TAX TREATMENT — You should review carefully the section entitled “United States Federal Taxation”
in the accompanying product supplement for knock-out notes. Although there is uncertainty regarding the U.S. federal income tax
consequences of an investment in the securities due to the lack of governing authority, in the opinion of our counsel, Davis Polk
& Wardwell LLP, under current law, and based on current market conditions, a security should be treated as a single financial
contract that is an “open transaction” for U.S. federal income tax purposes. Assuming this treatment of the securities
is respected, your gain or loss on the securities should be treated as long-term capital gain or loss if you have held the securities
for more than one year, and short-term capital gain or loss otherwise, even if you are an initial purchaser of securities at a
price that is below the principal amount of the securities.
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The Internal Revenue Service (the
“IRS”) or a court, however, may not respect this characterization or treatment of the securities, in which case the
timing and character of any income or loss on the securities could be significantly and adversely affected. For example, under
one possible treatment, the IRS could seek to recharacterize the securities as debt instruments. In that event, you 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 and recognize all income and gain in respect of the securities as ordinary income. Additionally, as discussed
under “United States Federal Taxation—FATCA” in the accompanying product supplement for knock-out notes, the
withholding rules commonly referred to as “FATCA” would apply to the securities if they were recharacterized as debt
instruments. However, recently proposed regulations (the preamble to which specifies that taxpayers are permitted to rely on them
pending finalization) eliminate the withholding requirement on payments of gross proceeds of a taxable disposition (other than
amounts treated as “FDAP income,” as defined in the accompanying product supplement for knock-out notes). 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. We do not plan to request a ruling from the IRS regarding the tax treatment of the securities, and the IRS or a
court may not agree with the tax treatment described above.
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 these instruments to accrue income over the term of
their investment. It also asks for comments on a number of related topics, including the character of income or loss with respect
to these instruments; whether short-term instruments should be subject to any such accrual regime; the relevance of factors such
as exchange-traded status of the instruments and the nature of the underlying property to which the instruments are linked; the
degree, if any, to which any income (including any mandated accruals) realized by non-U.S. holders should be subject to withholding
tax; and whether these investments are or should be subject to the “constructive ownership” rule, which very generally
can operate to recharacterize certain long-term capital gain as ordinary income and impose an interest charge. While the notice
requests comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated after
consideration of these issues could materially and adversely affect the tax consequences of an investment in the securities, possibly
with retroactive effect.
As discussed in the accompanying
product supplement for knock-out notes, Section 871(m) of the Internal Revenue Code of 1986, as amended, and Treasury regulations
promulgated thereunder (“Section 871(m)”) generally impose a 30% (or a lower applicable treaty rate) withholding tax
on dividend equivalents paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments linked to U.S. equities
or indices that include U.S. equities (each, an “Underlying Security”). Subject to certain exceptions, Section 871(m)
generally applies to securities that substantially replicate the economic performance of one or more Underlying Securities, as
determined based on tests set forth in the applicable Treasury regulations (a “Specified Security”). However, pursuant
to an IRS notice, Section 871(m) will not apply to securities issued before January 1, 2021 that do not have a delta of one with
respect to any Underlying Security. Based on our determination 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 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 treatment of the securities, including possible alternative characterizations, the issues presented by the 2007 notice,
the potential application of Section 871(m) and any tax consequences arising under the laws of any state, local or non-U.S. taxing
jurisdiction.
The discussion in the preceding paragraphs
under “Tax Treatment” and the section entitled “United States Federal Taxation” in the accompanying product
supplement for knock-out notes, insofar as they purport to describe provisions of U.S. federal income tax laws or legal conclusions
with respect thereto, constitute the full opinion of Davis Polk & Wardwell LLP regarding the material U.S. federal tax consequences
of an investment in the securities.
Selected Risk
Considerations
An investment in the securities involves significant
risks. Investing in the securities is not equivalent to investing directly in the Underlying Index or any of the component stocks
of the Underlying Index. These risks are explained in more detail in the “Risk Factors” section of the accompanying
product supplement for knock-out notes dated November 16, 2017.
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·
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YOUR INVESTMENT IN THE SECURITIES MAY RESULT IN A LOSS — The terms of the securities
differ from those of ordinary debt securities in that we do not guarantee to pay you any of the principal amount of the securities
at maturity and do not pay you interest on the securities. If a Knock-Out Event has occurred, you will be fully exposed to the
depreciation in the Final Average Index Value as compared to the Initial Index Value on a 1-to-1 basis. If a Knock-Out Event
has occurred, the Payment at Maturity on each security will be significantly less than the principal amount of the securities,
and, consequently, the entire principal amount of your investment is at risk.
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·
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THE SECURITIES DO NOT PAY INTEREST – Unlike ordinary debt securities, the securities
do not pay interest and do not guarantee any return of principal at maturity.
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·
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YOUR APPRECIATION POTENTIAL IS LIMITED – The appreciation potential of the securities
will be limited by the Maximum Upside Payment at Maturity. If the Final Average Index Value is greater than the Initial Index Value,
the Payment at Maturity will never exceed the Maximum Upside Payment at Maturity, even if the Final Average Index Value is substantially
greater than the Initial Index Value. The maximum positive return you can receive if the Underlying Index depreciates is also limited
by the Knock-Out Level.
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·
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NO DIVIDEND PAYMENTS OR VOTING RIGHTS – As a holder of the securities, you will
not have voting rights or rights to receive cash dividends or other distributions or other rights that holders of securities composing
the Underlying Index would have.
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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 at maturity, and therefore you are subject to our credit risk. If we default on our obligations under the securities,
your investment would be at risk and you could lose some or all of your investment. As a result, the market value of the securities
prior to maturity will be affected by changes in the market’s view of our creditworthiness. Any actual or anticipated decline
in our credit ratings or increase in the credit spreads charged by the market for taking our credit risk is likely to adversely
affect the market value of the securities.
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·
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AS A FINANCE SUBSIDIARY, MSFL HAS NO INDEPENDENT OPERATIONS AND WILL HAVE NO INDEPENDENT ASSETS – As a finance
subsidiary, MSFL has no independent operations beyond the issuance and administration of its securities and will have no independent
assets available for distributions to holders of MSFL securities if they make claims in respect of such securities in a bankruptcy,
resolution or similar proceeding. Accordingly, any recoveries by such holders will be limited to those available under the related
guarantee by Morgan Stanley and that guarantee will rank pari passu with all other unsecured, unsubordinated obligations
of Morgan Stanley. Holders will have recourse only to a single claim against Morgan Stanley and its assets under the guarantee.
Holders of securities issued by MSFL should accordingly assume that in any such proceedings they would not have any priority over
and should be treated pari passu with the claims of other unsecured, unsubordinated creditors of Morgan Stanley, including
holders of Morgan Stanley-issued securities.
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·
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THE 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 Index, and to our secondary market credit spreads, it would do so based on
values higher than the estimated value, and we expect that those higher values will also be reflected in your brokerage account
statements.
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THE ESTIMATED VALUE OF THE SECURITIES IS DETERMINED BY REFERENCE TO OUR PRICING AND VALUATION MODELS, WHICH MAY DIFFER FROM THOSE
OF OTHER DEALERS AND IS NOT A MAXIMUM OR MINIMUM SECONDARY MARKET PRICE– These pricing and valuation models are proprietary
and rely in part on subjective views of certain market inputs and certain assumptions about future events, which may prove to be
incorrect. As a result, because there is no market-standard way to value these types of securities, our models may yield a higher
estimated value of the securities than those generated by others, including other dealers in the market, if they attempted to value
the securities. In addition, the estimated value on the Pricing Date does not represent a minimum or maximum price at which dealers,
including MS & Co., would be willing to purchase your securities in the secondary market (if any exists) at any time. The value
of your securities at any time after the date of this pricing supplement will vary based on many factors that cannot be predicted
with accuracy, including our creditworthiness and changes in market conditions. See also “Many economic and market factors
will impact the value of the securities” above.
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LACK OF LIQUIDITY — The securities will not be listed on any securities exchange.
Therefore, there may be little or no secondary market for the securities. Morgan Stanley & Co. LLC (“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 not to make 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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POTENTIAL CONFLICTS — We and our affiliates play a variety of roles in connection
with the issuance of the securities, including acting as calculation agent and hedging our obligations under the securities. In
performing these duties, the economic interests of the calculation agent and other affiliates of ours are potentially adverse to
your interests as an investor in the securities. We will not have any obligation to consider your interests as a holder of the
securities in taking any corporate action that might affect the value of the Underlying Index and the securities. In addition,
MS & Co. has determined the estimated value of the securities on the Pricing Date.
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HEDGING AND TRADING ACTIVITY BY OUR AFFILIATES COULD POTENTIALLY ADVERSELY AFFECT THE VALUE
OF THE SECURITIES — One or more of our affiliates and/or third-party dealers have carried out, and will continue to carry
out, hedging activities related to the securities (and to other instruments linked to the Underlying Index or its component stocks),
including trading in the stocks that constitute the Underlying Index as well as in other instruments related to the Underlying
Index. As a result, these entities may be unwinding or adjusting hedge positions during the term of the securities, and the hedging
strategy may involve greater and more frequent dynamic adjustments to the hedge as the Valuation Dates approach. Some of our affiliates
also trade the stocks that constitute the Underlying Index and other financial instruments related to the Underlying Index on a
regular basis as part of their general broker-dealer and other businesses. Any of these hedging or trading activities on or prior
to the Pricing Date could have increased the Initial Index Value, and, therefore, could have increased the value at or above which
the Underlying Index must close on the Valuation Dates so that investors do not suffer a significant loss on their initial investment
in the securities.
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MANY ECONOMIC AND MARKET FACTORS WILL IMPACT THE VALUE OF THE SECURITIES — The
value of the securities will be affected by a number of economic and market factors that may either offset or magnify each other,
including:
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the value, especially in relation to the Knock-Out Level, and the actual or expected volatility, of the Underlying Index;
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the time to maturity of the securities;
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the dividend rates on the common stocks underlying the
Underlying Index;
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interest and yield rates in the market generally;
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geopolitical conditions and economic, financial, political, regulatory or judicial events that affect the stocks constituting
the Underlying Index or stock markets generally and which may affect the Index Closing Value of the Underlying Index on the Valuation
Dates; and
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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 principal amount if a Knock-Out Event is likely to occur in light of the then-current
level of the Underlying Index.
You cannot predict the future performance
of the Underlying Index based on its historical performance. We cannot guarantee that a Knock-Out Event will not occur. You can
review the historical values of the Underlying Index in “Historical Information” below.
Additional Terms of the
Securities
Terms used but not defined in this pricing supplement
are defined in the product supplement for knock-out notes, the index supplement or in the prospectus.
Underlying Index Publisher
S&P Dow Jones Indices LLC or any successor thereof
Issuer Notice to Registered Security
Holders, the Trustee and the Depositary:
In the event that the Maturity Date is postponed due
to postponement of the final Valuation Date, the issuer shall give notice of such postponement and, once it has been determined,
of the date to which the Maturity Date has been rescheduled (i) to each registered holder of the 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 actual final Valuation Date.
The issuer shall, or shall cause the calculation agent
to, (i) provide written notice to the trustee and to the depositary of the amount of cash, if any, 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, if any, to the trustee for delivery
to the depositary, as holder of the securities, on the Maturity Date.