October 2019
Preliminary Terms No. 2,661
Registration Statement Nos.
333-221595; 333-221595-01
Dated October 3, 2019
Filed pursuant to Rule 433
Morgan
Stanley Finance LLC
Structured Investments
Opportunities in International Equities
Equity-Linked Partial Principal at Risk Securities
due April 30, 2024
Based on the Performance of the EURO STOXX 50®
Index
Fully and Unconditionally
Guaranteed by Morgan Stanley
Equity-Linked Partial Principal at Risk Securities, which we
refer to as the securities, are unsecured obligations of Morgan Stanley Finance LLC (“MSFL”) and are fully and unconditionally
guaranteed by Morgan Stanley. The securities will pay no interest, provide for a minimum payment amount of only 95% of principal
at maturity and have the terms described in the accompanying product supplement, index supplement and prospectus, as supplemented
and modified by this document. At maturity, if the underlying index has appreciated in value, investors will receive the stated
principal amount of their investment plus at least 120% (to be determined on the pricing date) of the appreciation of the underlying
index from the initial index value to the final index value. However, if at maturity the underlying index has depreciated in value,
investors will lose 1% for every 1% decline of the final index value from the initial index value, subject to the minimum payment
amount. Investors may lose up to 5% of the stated principal amount of the securities. The securities are for investors who
are concerned about principal risk, but seek an equity index-based return, and who are willing to risk 5% of their principal and
to forgo current income in exchange for the repayment of at least 95% of the principal at maturity and the opportunity to earn
a return reflecting at least 120% (to be determined on the pricing date) of the appreciation of the underlying index from the initial
index value to the final index value. The securities are securities issued as part of MSFL’s Series A Global Medium-Term
Notes program.
All payments on the securities, including the payment of the
minimum payment amount at maturity, 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
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Issuer:
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Morgan Stanley Finance LLC
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Guarantor:
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Morgan Stanley
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Issue price:
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$1,000 per security (see “Commissions and issue price” below)
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Stated principal amount:
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$1,000 per security
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Aggregate principal amount:
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$
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Pricing date:
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October 25, 2019
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Original issue date:
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October 30, 2019 (3 business days after the pricing date)
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Maturity date:
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April 30, 2024
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Interest:
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None
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Underlying index:
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EURO
STOXX 50® Index
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Payment at maturity:
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If the final index value is greater than the initial index
value:
$1,000 + supplemental redemption amount
If the final index value is
less than or equal to the initial index value:
$1,000 x (final index value
/ initial index value), subject to the minimum payment amount
Under these circumstances, the payment at maturity will
be less than the stated principal amount of $1,000 per security by an amount that is proportionate to the percentage decline of
the underlying index. However, under no circumstances will the payment due at maturity be less than the minimum payment amount
of $950 per security.
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Supplemental redemption amount:
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(i) $1,000 times (ii) the index percent change times (iii) the participation rate
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Minimum payment amount:
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$950 per security (95% of the stated principal amount)
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Participation rate:
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At least 120%. The actual participation rate will be determined on the pricing date.
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Index percent change:
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(final index value – initial index value) / initial index value
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Initial index value:
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, which is the index closing value on the pricing date
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Final index value:
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The index closing value on the determination date
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Determination date:
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April 25, 2024, subject to postponement for non-index business days and certain market disruption events
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CUSIP / ISIN:
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61769HB87 / US61769HB876
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Listing:
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The securities will not be listed on any securities exchange.
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Agent:
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Morgan Stanley & Co. LLC (“MS & Co.”), an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley. See “Supplemental information regarding plan of distribution; conflicts of interest.”
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Estimated value on the pricing date:
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Approximately $955.00 per security, or within $22.50 of that estimate. See “Investment Summary” beginning on page 2.
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Commissions and issue price:
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Price to public
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Agent’s commissions(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)
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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.
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(2)
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See “Use of proceeds
and hedging” on page 14.
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The securities involve risks not associated with an investment
in ordinary debt securities. See “Risk Factors” beginning on page 6.
The Securities and Exchange Commission and state securities
regulators have not approved or disapproved these securities, or determined if this document or the accompanying product supplement,
index supplement and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The securities are not deposits or savings accounts and are
not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality, nor are they obligations
of, or guaranteed by, a bank.
You should read this document together with the related product
supplement, index supplement and prospectus, each of which can be accessed via the hyperlinks below. Please also see “Additional
Terms of the Securities” and “Additional Information About the Securities” at the end of this document.
As used in this document, “we,” “us”
and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Product Supplement for Equity-Linked Partial Principal at Risk Securities dated November 16, 2017
Index Supplement dated November 16, 2017 Prospectus dated November 16, 2017
Morgan Stanley Finance LLC
Equity-Linked
Partial Principal at Risk Securities due April 30, 2024
Based
on the Performance of the EURO STOXX 50® Index
Investment Summary
Equity-Linked Partial Principal at Risk
Securities
The Equity-Linked Partial Principal at Risk Securities due April
30, 2024 Based on the Performance of the EURO STOXX 50® Index (the “securities”) provide investors with
an opportunity to receive a return reflecting at least 120% (to be determined on the pricing date) of the positive performance
of the underlying index while maintaining 1:1 downside exposure to any depreciation of the underlying index, subject to the minimum
payment amount at maturity of $950 per security.
If the final index value is greater than the initial index
value, the securities will pay the stated principal amount of $1,000 plus a supplemental redemption amount. The supplemental redemption
amount provides at least 120% (to be determined on the pricing date) upside participation (e.g., if the underlying index appreciates
10% from the initial index value to the final index value, the investor receives 100% of principal plus 12% at maturity) in the
performance of the underlying index. If the final index value is equal to or less than the initial index value, the payment
at maturity per security will be equal to or less than the $1,000 principal amount of securities by an amount proportionate to
the decline in the underlying index as of the determination date, subject to the minimum payment amount of $950 per security. The
securities do not pay interest, and all payments on the securities, including the payment of the minimum payment amount at maturity,
are subject to our credit risk.
Maturity:
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4.5 years
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Minimum payment amount:
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$950 per security (95% of the stated principal amount). You could lose up to 5% of the stated principal amount of the securities.
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Participation rate:
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At least 120%. The actual participation rate will be determined on the pricing date.
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Interest:
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None
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Morgan Stanley Finance LLC
Equity-Linked Partial Principal at Risk Securities due April 30, 2024
Based on the Performance of the EURO STOXX 50® Index
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 $955.00, or within $22.50 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 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 minimum payment amount and the participation rate, 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.
Morgan Stanley Finance LLC
Equity-Linked Partial Principal at Risk Securities due April 30, 2024
Based on the Performance of the EURO STOXX 50® Index
Key Investment Rationale
The securities offer at least 120% participation in the positive
performance of the underlying index, while providing for a minimum repayment of 95% of the stated principal amount if the securities
are held to maturity, in exchange for forgoing current income and interest. The actual participation rate will be determined on
the pricing date. All payments on the securities, including the payment of the minimum payment amount at maturity, are subject
to our credit risk.
Minimum Payment Amount of 95% of Principal at Maturity
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The securities provide for the minimum payment amount of 95% of principal if held to maturity.
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Upside Scenario
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The underlying index appreciates, and the securities return par plus at least 120% upside participation in the appreciation of the underlying index. The actual participation rate will be determined on the pricing date.
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Downside Scenario
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The underlying index depreciates, and the securities redeem for less than the $1,000 stated principal amount by an amount proportionate to the decline in the value of the underlying index, subject to the minimum payment amount of $950 per security (95% of the stated principal amount).
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Morgan Stanley Finance LLC
Equity-Linked Partial Principal at Risk Securities due April 30, 2024
Based on the Performance of the EURO STOXX 50® Index
How the Securities Work
Payoff Diagram
The payoff diagram below illustrates the
payment at maturity on the securities, based on the following terms:
Stated principal amount:
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$1,000 per security
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Hypothetical participation rate:
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120%
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Minimum payment amount
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$950 per security (95% of the stated principal amount)
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Payoff Diagram
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How it works
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§
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Upside Scenario. If the final index value is greater than the initial index
value, investors would receive the $1,000 stated principal amount plus 120% participation in the appreciation of the underlying
index.
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o
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If the underlying index appreciates 10%, investors would receive a 12% return, or $1,120 per security.
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§
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Par or Downside Scenario. If the final index value is less than or equal to
the initial index value, investors would receive an amount less than or equal to the $1,000 stated principal amount, based on a
1% loss of principal for each 1% decline in the underlying index over the term of the securities, subject to the minimum payment
amount of $950 per security.
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|
o
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If the underlying index depreciates 1.50% from the initial index value to the final index value, investors would lose 1.50%
of their principal and receive only $985 per security at maturity, or 98.50% of the stated principal amount.
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|
o
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If the underlying index depreciates 50% from the initial index value to the final index value, investors would receive the
minimum payment amount of $950 per security at maturity, or 95% of the stated principal amount.
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Morgan Stanley Finance LLC
Equity-Linked Partial Principal at Risk Securities due April 30, 2024
Based on the Performance of the EURO STOXX 50® Index
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, index supplement and prospectus. We also urge you to consult with your investment, legal,
tax, accounting and other advisers in connection with your investment in the securities.
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§
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The securities do not pay interest and provide for a minimum payment amount of only 95% of principal. The terms of the
securities differ from those of ordinary debt securities in that the securities do not pay interest and provide for a minimum payment
amount of only 95% of principal at maturity. If the underlying index has depreciated over the term of the securities, the payout
at maturity will be an amount in cash that is less than the $1,000 stated principal amount of each security by an amount proportionate
to the decrease in the value of the underlying index, subject to the minimum payment amount of $950 per security (95% of the stated
principal amount). You could lose up to 5% of your investment in the securities.
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§
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The market price of the securities 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, including the value of the underlying
index at any time, the volatility (frequency and magnitude of changes in value) of the underlying index, dividend rate on the stocks
underlying the index, interest and yield rates in the market, time remaining until the
securities mature, geopolitical conditions and economic, financial, political, regulatory
or judicial events that affect the underlying index or equities markets generally and which may affect the final index value of
the underlying index and any actual or anticipated changes in our credit ratings or credit spreads. The value of the underlying
index may be, and has recently been, volatile, and we can give you no assurance that the volatility will lessen. You may receive
less, and possibly significantly less, than the stated principal amount per security if you try to sell your securities prior to
maturity.
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§
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There are risks associated with investments in securities linked to the value of foreign equity securities. The securities
are linked to the value of foreign equity securities. Investments in securities linked to the value of foreign equity securities
involve risks associated with the securities markets in those countries, including risks of volatility in those markets, governmental
intervention in those markets and cross-shareholdings in companies in certain countries. Also, there is generally less publicly
available information about foreign companies than about U.S. companies that are subject to the reporting requirements of the United
States Securities and Exchange Commission, and foreign companies are subject to accounting, auditing and financial reporting standards
and requirements different from those applicable to U.S. reporting companies. The prices of securities issued in foreign markets
may be affected by political, economic, financial and social factors in those countries, or global regions, including changes in
government, economic and fiscal policies and currency exchange laws. Local securities markets may trade a small number of securities
and may be unable to respond effectively to increases in trading volume, potentially making prompt liquidation of holdings difficult
or impossible at times. Moreover, the economies in such countries may differ favorably or unfavorably from the economy in the United
States in such respects as growth of gross national product, rate of inflation, capital reinvestment, resources, self-sufficiency
and balance of payment positions
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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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Morgan Stanley Finance LLC
Equity-Linked Partial Principal at Risk Securities due April 30, 2024
Based on the Performance of the EURO STOXX 50® Index
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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 amount payable on the securities is not linked to the value of the underlying index at any time other than the determination
date. The final index value will be based on the index closing value on the determination date, subject to postponement for
non-index business days and certain market disruption events. Even if the value of the underlying index appreciates prior to the
determination date but then drops by the determination date to be equal to or below the initial index value, the payment at maturity
will be less, and may be significantly less, than it would have been had the payment at maturity been linked to the value of the
underlying index prior to such drop. Although the actual value of the underlying index on the stated maturity date or at other
times during the term of the securities may be higher than the final index value, the payment at maturity will be based solely
on the index closing value on the determination date.
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§
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The rate we are willing to pay for securities of this type, maturity and issuance size is likely to be lower than the rate
implied by our secondary market credit spreads and advantageous to us. Both the lower rate and the inclusion of costs associated
with issuing, selling, structuring and hedging the 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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§
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You cannot predict the future performance of the underlying index based on its historical performance. The value of
the underlying index may be, and has recently been, volatile, and we can give you no assurance that the volatility will lessen.
You cannot predict the future performance of the EURO STOXX 50® Index based on its historical performance. See “EURO
STOXX 50® Index Overview” below.
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§
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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
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Morgan Stanley Finance LLC
Equity-Linked Partial Principal at Risk Securities due April 30, 2024
Based on the Performance of the EURO STOXX 50® Index
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 “The market price of the securities
will be influenced by many unpredictable factors” above.
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§
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Adjustments to the underlying index could adversely affect the value of the securities. The publisher of the underlying
index can add, delete or substitute the stocks underlying the underlying index, and can make other methodological changes required
by certain events relating to the underlying stocks, such as stock dividends, stock splits, spin-offs, rights offerings and extraordinary
dividends, that could change the value of the underlying index. Any of these actions could adversely affect the value of the securities.
The publisher of the underlying index may also discontinue or suspend calculation or publication of the underlying index at any
time. In these circumstances, MS & Co., as the calculation agent, will have the sole discretion to substitute a successor index
that is comparable to the discontinued index. MS & Co. could have an economic interest that is different than that of investors
in the securities insofar as, for example, MS & Co. is permitted to consider indices that are calculated and published by MS
& Co. or any of its affiliates. If MS & Co. determines that there is no appropriate successor index on the determination
date, the final index value will be an amount calculated based on the prices of the stocks underlying the discontinued index at
the time of such discontinuance, without rebalancing or substitution, computed by MS & Co, as calculation agent, in accordance
with the formula for calculating the index closing value last in effect prior to discontinuance of the index.
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§
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Investing in the securities is not equivalent to investing in the underlying index. Investing in the securities is not
equivalent to investing in the underlying index or its component stocks. Investors in the securities will not have voting rights
or rights to receive dividends or other distributions or any other rights with respect to stocks that constitute the underlying
index.
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§
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The securities will not be listed on any securities exchange and secondary trading may be limited. The securities will
not be listed on any securities exchange. Therefore, there may be little or no secondary market for the securities. MS & Co.
may, but is not obligated to, make a market in the securities, and, if it once chooses to
make a market, may cease doing so at any time. When it does make a market, it will generally do so for transactions of routine
secondary market size at prices based on its estimate of the current value of the securities, taking into account its bid/offer
spread, our credit spreads, market volatility, the notional size of the proposed sale, the cost of unwinding any related hedging
positions, the time remaining to maturity and the likelihood that it will be able to resell the securities. Even if there
is a secondary market, it may not provide enough liquidity to allow you to trade or sell the securities easily. Because we do not
expect that other broker-dealers will 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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§
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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. will determine the initial index value and the final index value, and
will calculate the amount of cash you will receive at maturity. Moreover, certain determinations made by MS & Co., in its capacity
as calculation agent, may require it to exercise discretion and make subjective judgments, such as with respect to the occurrence
or non-occurrence of market disruption events and the selection of a successor index or calculation of the index closing value
in the event of a discontinuance of the underlying index or a market disruption event,
may adversely affect the payout to you at maturity. For further information regarding these types of determinations, see “Description
of Equity-Linked Partial Principal at Risk Securities —Supplemental Redemption Amount,” “—Calculation Agent
and Calculations,” “—Alternate Exchange Calculation in the Case of an Event of Default” and “—Discontinuance
of Any Underlying Index; Alteration of Method of Calculation” in the accompanying product supplement. In addition, MS &
Co. has determined the estimated value of the securities on the pricing date.
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§
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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 expect to carry out hedging activities
|
Morgan Stanley Finance LLC
Equity-Linked Partial Principal at Risk Securities due April 30, 2024
Based on the Performance of the EURO STOXX 50® Index
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 determination date approaches. MS & Co. and some of our affiliates also trade the stocks
that constitute the underlying index and other financial instruments related to the underlying index on a regular basis as part
of their general broker-dealer and other businesses. Any of these hedging or trading activities on or prior to the pricing date
could potentially increase the initial index value, and, therefore, the value at or above which the underlying index must close
on the determination date so that investors do not suffer a loss on their initial investment in the securities. Additionally, such
hedging or trading activities during the term of the securities, including on the determination date, could adversely affect the
value of the underlying index on the determination date, and, accordingly, the amount of cash an investor will receive at maturity.
Morgan Stanley Finance LLC
Equity-Linked Partial Principal at Risk Securities due April 30, 2024
Based on the Performance of the EURO STOXX 50® Index
EURO STOXX 50®
Index Overview
The EURO STOXX 50® Index was created by STOXX
Limited, which is owned by Deutsche Börse AG and SIX Group AG. Publication of the EURO STOXX 50® Index began
on February 26, 1998, based on an initial index value of 1,000 at December 31, 1991. The EURO STOXX 50® Index is
composed of 50 component stocks of market sector leaders from within the STOXX 600 Supersector Indices, which includes stocks selected
from the Eurozone. The component stocks have a high degree of liquidity and represent the largest companies across all market sectors.
For additional information about the EURO STOXX 50® Index, see the information set forth under “EURO STOXX
50® Index” in the accompanying index supplement.
Information
as of market close on September 30, 2019:
Bloomberg Ticker Symbol:
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SX5E
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Current Index Value:
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3,569.45
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52 Weeks Ago:
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3,399.20
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52 Week High (on 9/20/2019):
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3,571.39
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52 Week Low (on 12/27/2018):
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2,937.36
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The following
graph sets forth the daily closing values of the underlying index for the period from January 1, 2008 through September 30, 2019.
The related table sets forth the published high and low closing values, as well as end-of-quarter closing values, of the underlying
index for each quarter in the same period. The closing value of the underlying index on September 30, 2019 was 3,569.45. We obtained
the information in the table and graph below from Bloomberg Financial Markets, without independent verification. The underlying
index has at times experienced periods of high volatility, and you should not take the historical values of the underlying index
as an indication of its future performance.
EURO STOXX
50® Index Historical Performance
Daily Closing
Values
January 1,
2008 to September 30, 2019
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|
Morgan Stanley Finance LLC
Equity-Linked Partial Principal at Risk Securities due April 30, 2024
Based on the Performance of the EURO STOXX 50® Index
EURO STOXX 50® Index
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High
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Low
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Period End
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2008
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|
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First Quarter
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4,339.23
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3,431.82
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3,628.06
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Second Quarter
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3,882.28
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3,340.27
|
3,352.81
|
Third Quarter
|
3,445.66
|
3,000.83
|
3,038.20
|
Fourth Quarter
|
3,113.82
|
2,165.91
|
2,447.62
|
2009
|
|
|
|
First Quarter
|
2,578.43
|
1,809.98
|
2,071.13
|
Second Quarter
|
2,537.35
|
2,097.57
|
2,401.69
|
Third Quarter
|
2,899.12
|
2,281.47
|
2,872.63
|
Fourth Quarter
|
2,992.08
|
2,712.30
|
2,964.96
|
2010
|
|
|
|
First Quarter
|
3,017.85
|
2,631.64
|
2,931.16
|
Second Quarter
|
3,012.65
|
2,488.50
|
2,573.32
|
Third Quarter
|
2,827.27
|
2,507.83
|
2,747.90
|
Fourth Quarter
|
2,890.64
|
2,650.99
|
2,792.82
|
2011
|
|
|
|
First Quarter
|
3,068.00
|
2,721.24
|
2,910.91
|
Second Quarter
|
3,011.25
|
2,715.88
|
2,848.53
|
Third Quarter
|
2,875.67
|
1,995.01
|
2,179.66
|
Fourth Quarter
|
2,476.92
|
2,090.25
|
2,316.55
|
2012
|
|
|
|
First Quarter
|
2,608.42
|
2,286.45
|
2,477.28
|
Second Quarter
|
2,501.18
|
2,068.66
|
2,264.72
|
Third Quarter
|
2,594.56
|
2,151.54
|
2,454.26
|
Fourth Quarter
|
2,659.95
|
2,427.32
|
2,635.93
|
2013
|
|
|
|
First Quarter
|
2,749.27
|
2,570.52
|
2,624.02
|
Second Quarter
|
2,835.87
|
2,511.83
|
2,602.59
|
Third Quarter
|
2,936.20
|
2,570.76
|
2,893.15
|
Fourth Quarter
|
3,111.37
|
2,902.12
|
3,109.00
|
2014
|
|
|
|
First Quarter
|
3,172.43
|
2,962.49
|
3,161.60
|
Second Quarter
|
3,314.80
|
3,091.52
|
3,228.24
|
Third Quarter
|
3,289.75
|
3,006.83
|
3,225.93
|
Fourth Quarter
|
3,277.38
|
2,874.65
|
3,146.43
|
2015
|
|
|
|
First Quarter
|
3,731.35
|
3,007.91
|
3,697.38
|
Second Quarter
|
3,828.78
|
3,424.30
|
3,424.30
|
Third Quarter
|
3,686.58
|
3,019.34
|
3,100.67
|
Fourth Quarter
|
3,506.45
|
3,069.05
|
3,267.52
|
2016
|
|
|
|
First Quarter
|
3,178.01
|
2,680.35
|
3,004.93
|
Second Quarter
|
3,151.69
|
2,697.44
|
2,864.74
|
Third Quarter
|
3,091.66
|
2,761.37
|
3,002.24
|
Fourth Quarter
|
3,290.52
|
2,954.53
|
3,290.52
|
2017
|
|
|
|
First Quarter
|
3,500.93
|
3,230.68
|
3,500.93
|
Second Quarter
|
3,658.79
|
3,409.78
|
3,441.88
|
Third Quarter
|
3,594.85
|
3,388.22
|
3,594.85
|
Fourth Quarter
|
3,697.40
|
3,503.96
|
3,503.96
|
2018
|
|
|
|
First Quarter
|
3,672.29
|
3,278.72
|
3,361.50
|
Second Quarter
|
3,592.18
|
3,340.35
|
3,395.60
|
Third Quarter
|
3,527.18
|
3,293.36
|
3,399.20
|
Fourth Quarter
|
3,414.16
|
2,937.36
|
3,001.42
|
2019
|
|
|
|
First Quarter
|
3,409.00
|
2,954.66
|
3,351.71
|
Second Quarter
|
3,514.62
|
3,280.43
|
3,473.69
|
Third Quarter
|
3,571.39
|
3,282.78
|
3,569.45
|
“EURO STOXX 50®” and “STOXX®”
are registered trademarks of STOXX Limited. For more information, see “EURO STOXX 50® Index” in the
accompanying index supplement.
Morgan Stanley Finance LLC
Equity-Linked Partial Principal at Risk Securities due April 30, 2024
Based on the Performance of the EURO STOXX 50® Index
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, index supplement
or prospectus, the terms described herein shall control.
|
Underlying
index publisher:
|
STOXX
Limited, or any successor thereof
|
Denominations:
|
$1,000
per security and integral multiples thereof
|
Call
right:
|
The
securities are not callable prior to the maturity date.
|
Postponement
of maturity date:
|
If
the determination date is postponed so that it falls less than two business days prior to the scheduled maturity date, the
maturity date of the securities will be postponed to the second business day following the determination date as postponed.
|
Trustee:
|
The
Bank of New York Mellon
|
Calculation
agent:
|
MS
& Co.
|
Issuer
notice to registered security holders, the trustee and the depositary:
|
In the
event that the maturity date is postponed due to postponement of the determination date, the issuer shall give notice
of such postponement and, once it has been determined, of the date to which the maturity date has been rescheduled (i)
to each registered holder of the securities by mailing notice of such postponement by first class mail, postage prepaid,
to such registered holder’s last address as it shall appear upon the registry books, (ii) to the trustee by facsimile,
confirmed by mailing such notice to the trustee by first class mail, postage prepaid, at its New York office and (iii)
to The Depository Trust Company (the “depositary”) by telephone or facsimile, confirmed by mailing such notice
to the depositary by first class mail, postage prepaid. Any notice that is mailed to a registered holder of the securities
in the manner herein provided shall be conclusively presumed to have been duly given to such registered holder, whether
or not such registered holder receives the notice. The issuer shall give such notice as promptly as possible, and in no
case later than (i) with respect to notice of postponement of the maturity date, the business day immediately preceding
the scheduled maturity date, and (ii) with respect to notice of the date to which the maturity date has been rescheduled,
the business day immediately following the actual determination date as postponed.
The
issuer shall, or shall cause the calculation agent to, (i) provide written notice to the trustee at its New York office, on which
notice the trustee may conclusively rely, and to the depositary of the payment at maturity on or prior to 10:30 a.m. (New York
City time) on the business day preceding the maturity date and (ii) deliver the aggregate cash amount due with respect to the
securities to the trustee for delivery to the depositary, as holder of the securities, on the maturity date.
|
Morgan Stanley Finance LLC
Equity-Linked Partial Principal at Risk Securities due April 30, 2024
Based on the Performance of the EURO STOXX 50® Index
Additional Information About the Securities
Additional
Information:
|
|
Minimum
ticketing size:
|
$1,000
/ 1 security
|
Tax
considerations:
|
In the opinion of our counsel, Davis Polk & Wardwell LLP,
the securities should be treated as “contingent payment debt instruments” for U.S. federal income tax purposes, as
described in the section of the accompanying product supplement called “United States Federal Taxation—Tax Consequences
to U.S. Holders.” Under this treatment, if you are a U.S. taxable investor, you generally will be subject to annual income
tax based on the “comparable yield” (as defined in the accompanying product supplement) of the securities, adjusted
upward or downward to reflect the difference, if any, between the actual and projected amount of the payments on the securities.
The comparable yield will be determined on the pricing date and may be significantly higher or lower than the comparable yield
if the securities were priced on the date hereof. The comparable yield and the projected payment schedule (or information about
how to obtain them) will be provided in the final pricing supplement. In addition, any gain recognized by U.S. taxable investors
on the sale or exchange, or at maturity, of the securities generally will be treated as ordinary income.
You should read the discussion under “United States Federal
Taxation” in the accompanying product supplement concerning the U.S. federal income tax consequences of an investment in
the securities.
|
|
The comparable yield and the projected payment schedule will
not be provided for any purpose other than the determination of U.S. Holders’ accruals of interest income and adjustments
thereto in respect of the securities for U.S. federal income tax purposes, and we make no representation regarding the actual amount
of the payments that will be made on the securities.
If you are a non-U.S. investor, please also read the section
of the accompanying product supplement called “United States Federal Taxation—Tax Consequences to Non-U.S. Holders.”
As discussed in the accompanying product supplement, Section
871(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and Treasury regulations promulgated thereunder
(“Section 871(m)”) generally impose a 30% (or a lower applicable treaty rate) withholding tax on dividend equivalents
paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments linked to U.S. equities or indices that include
U.S. equities (each, an “Underlying Security”). Subject to certain exceptions, Section 871(m) generally applies to
securities that substantially replicate the economic performance of one or more Underlying Securities, as determined based on tests
set forth in the applicable Treasury regulations (a “Specified Security”). However, pursuant to an Internal Revenue
Service (“IRS”) notice, Section 871(m) will not apply to securities issued before January 1, 2021 that do not have
a delta of one with respect to any Underlying Security. Based on the terms of the securities and current market conditions, we
expect that the securities will not have a delta of one with respect to any Underlying Security on the pricing date. However, we
will provide an updated determination in the final pricing supplement. Assuming that the securities do not have a delta of one
with respect to any Underlying Security, our counsel is of the opinion that the securities should not be Specified Securities and,
therefore, should not be subject to Section 871(m). Our determination is not binding on the IRS, and the IRS may disagree with
this determination. Section 871(m) is complex and its application may depend on your particular circumstances, including whether
you enter into other transactions with respect to an Underlying Security. If 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.
In addition, as discussed in the accompanying product supplement,
withholding rules commonly referred to as “FATCA” apply to certain financial instruments (including the securities)
with respect to payments of amounts treated as interest and to any payment of gross proceeds of a disposition (including retirement)
of such an instrument. However, recently proposed regulations (the preamble to which specifies that taxpayers are permitted to
rely on them pending finalization) eliminate the withholding requirement on payments of gross proceeds of a taxable disposition
(other than amounts treated as interest or other “FDAP income,” as defined in the accompanying product supplement).
|
|
You should consult your tax adviser regarding all
aspects of the U.S. federal income tax consequences of an investment in the securities, as well as any tax consequences
|
Morgan Stanley Finance LLC
Equity-Linked Partial Principal at Risk Securities due April 30, 2024
Based on the Performance of the EURO STOXX 50® Index
|
arising under the laws of any state, local or non-U.S. taxing jurisdiction. Moreover, neither this document nor the accompanying product supplement addresses the consequences to taxpayers subject to special tax accounting rules under Section 451(b) of the Code.
|
|
|
|
The discussion in the preceding paragraphs under “Tax considerations” and the discussion contained in the section entitled “United States Federal Taxation” in the accompanying product supplement, insofar as they purport to describe provisions of U.S. federal income tax laws or legal conclusions with respect thereto, constitute the full opinion of Davis Polk & Wardwell LLP regarding the material U.S. federal tax consequences of an investment in the securities.
|
Use
of proceeds and hedging:
|
The proceeds from the sale of the securities
will be used by us for general corporate purposes. We will receive, in aggregate, $1,000 per security issued, because, when we
enter into hedging transactions in order to meet our obligations under the securities, our hedging counterparty will reimburse
the cost of the agent’s commissions. The costs of the securities borne by you and described on page 2 above comprise the
agent’s commissions and the cost of issuing, structuring and hedging the securities.
On or prior to the pricing date, we
expect to hedge 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 take positions in the stocks constituting the underlying index,
in futures and/or options contracts on the underlying index or the component stocks of the underlying index listed on major securities
markets, or positions in any other available securities or instruments that they may wish to use in connection with such hedging.
Such purchase activity could increase the value of the underlying index on the pricing date, and, therefore, the value at or above
which the underlying index must close on the determination date so that investors do not suffer a loss on their initial investment
in the securities. In addition, through our affiliates, we are likely to modify our hedge position throughout the term of the
securities, including on the determination date, by purchasing and selling the stocks constituting the underlying index, futures
or options contracts on the underlying index or its component stocks listed on major securities markets or positions in any other
available securities or instruments that we may wish to use in connection with such hedging activities. As a result, these entities
may be unwinding or adjusting hedge positions during the term of the securities, and the hedging strategy may involve greater
and more frequent dynamic adjustments to the hedge as the determination date approaches. We cannot give any assurance that our
hedging activities will not affect the value of the underlying index, and, therefore, adversely affect the value of the securities
or the payment you will receive at maturity. For further information on our use of proceeds and hedging, see “Use of Proceeds
and Hedging” in the accompanying product supplement.
|
Benefit plan investor considerations:
|
Each fiduciary of a pension, profit-sharing or other employee
benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (a “Plan”),
should consider the fiduciary standards of ERISA in the context of the Plan’s particular circumstances before authorizing
an investment in the securities. Accordingly, among other factors, the fiduciary should consider whether the investment would satisfy
the prudence and diversification requirements of ERISA and would be consistent with the documents and instruments governing the
Plan.
In addition, we and certain of our affiliates, including MS &
Co., may each be considered a “party in interest” within the meaning of ERISA, or a “disqualified person”
within the meaning of the Internal Revenue Code of 1986, as amended (the “Code”), with respect to many Plans, as well
as many individual retirement accounts and Keogh plans (such accounts and plans, together with other plans, accounts and arrangements
subject to Section 4975 of the Code, also “Plans”). ERISA Section 406 and Code Section 4975 generally prohibit transactions
between Plans and parties in interest or disqualified persons. Prohibited transactions within the meaning of ERISA or the Code
would likely arise, for example, if the securities are acquired by or with the assets of a Plan with respect to which MS &
Co. or any of its affiliates is a service provider or other party in interest, unless the securities are acquired pursuant to an
exemption from the “prohibited transaction” rules. A violation of these “prohibited transaction” rules
could result in an excise tax or other liabilities under ERISA and/or Section 4975 of the Code for those persons, unless exemptive
relief is available under an applicable statutory or administrative exemption.
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
|
Morgan Stanley Finance LLC
Equity-Linked Partial Principal at Risk Securities due April 30, 2024
Based on the Performance of the EURO STOXX 50® Index
|
involving insurance company separate accounts) and PTCE 84-14
(for certain transactions determined by independent qualified professional asset managers). In addition, ERISA Section 408(b)(17)
and Section 4975(d)(20) of the Code provide an exemption for the purchase and sale of securities and the related lending transactions,
provided that neither the issuer of the securities nor any of its affiliates has or exercises any discretionary authority or control
or renders any investment advice with respect to the assets of the Plan involved in the transaction and provided further that the
Plan pays no more, and receives no less, than “adequate consideration” in connection with the transaction (the so-called
“service provider” exemption). There can be no assurance that any of these class or statutory exemptions will be available
with respect to transactions involving the securities.
Because we may be considered a party in interest with respect
to many Plans, the securities may not be purchased, held or disposed of by any Plan, any entity whose underlying assets include
“plan assets” by reason of any Plan’s investment in the entity (a “Plan Asset Entity”) or any person
investing “plan assets” of any Plan, unless such purchase, holding or disposition is eligible for exemptive relief,
including relief available under PTCEs 96-23, 95-60, 91-38, 90-1, 84-14 or the service provider exemption or such purchase, holding
or disposition is otherwise not prohibited. Any purchaser, including any fiduciary purchasing on behalf of a Plan, transferee or
holder of the securities will be deemed to have represented, in its corporate and its fiduciary capacity, by its purchase and holding
of the securities that either (a) it is not a Plan or a Plan Asset Entity and is not purchasing such securities on behalf of or
with “plan assets” of any Plan or with any assets of a governmental, non-U.S. or church plan that is subject to any
federal, state, local or non-U.S. law that is substantially similar to the provisions of Section 406 of ERISA or Section 4975 of
the Code (“Similar Law”) or (b) its purchase, holding and disposition of these securities will not constitute or result
in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or violate any Similar Law.
Due to the complexity of these rules and the penalties that may
be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries or other
persons considering purchasing the securities on behalf of or with “plan assets” of any Plan consult with their counsel
regarding the availability of exemptive relief.
The securities are contractual financial instruments. The financial
exposure provided by the securities is not a substitute or proxy for, and is not intended as a substitute or proxy for, individualized
investment management or advice for the benefit of any purchaser or holder of the securities. The securities have not been designed
and will not be administered in a manner intended to reflect the individualized needs and objectives of any purchaser or holder
of the securities.
Each purchaser or holder of any securities acknowledges and agrees
that:
(i) the
purchaser or holder or its fiduciary has made and shall make all investment decisions for the purchaser or holder and the purchaser
or holder has not relied and shall not rely in any way upon us or our affiliates to act as a fiduciary or adviser of the purchaser
or holder with respect to (A) the design and terms of the securities, (B) the purchaser or holder’s investment in the securities,
or (C) the exercise of or failure to exercise any rights we have under or with respect to the securities;
(ii) we
and our affiliates have acted and will act solely for our own account in connection with (A) all transactions relating to the securities
and (B) all hedging transactions in connection with our obligations under the securities;
(iii) any
and all assets and positions relating to hedging transactions by us or our affiliates are assets and positions of those entities
and are not assets and positions held for the benefit of the purchaser or holder;
(iv) our
interests are adverse to the interests of the purchaser or holder; and
(v) neither
we nor any of our affiliates is a fiduciary or adviser of the purchaser or holder in connection with any such assets, positions
or transactions, and any information that we or any of our affiliates may provide is not intended to be impartial investment advice.
Each purchaser and holder of the securities has exclusive
responsibility for ensuring that its purchase, holding and disposition of the securities do not violate the prohibited transaction
rules of ERISA or the Code or any Similar Law. The sale of any securities to any Plan or plan subject to Similar Law is in no
respect a representation by us or any of our affiliates or representatives that such an investment meets all relevant legal requirements
with respect to investments by
|
Morgan Stanley Finance LLC
Equity-Linked Partial Principal at Risk Securities due April 30, 2024
Based on the Performance of the EURO STOXX 50® Index
|
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 the securities should consult and rely on their own counsel and advisers as to whether an investment in the
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, 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.
|
Additional
considerations:
|
Client accounts over which Morgan Stanley, Morgan Stanley Wealth Management or any of their respective subsidiaries have investment discretion are not permitted to purchase the securities, either directly or indirectly.
|
Supplemental
information regarding plan of distribution; conflicts of interest:
|
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 participation 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” on page 2.
MS & Co. will conduct this offering in compliance
with the requirements of FINRA Rule 5121 of the Financial Industry Regulatory Authority, Inc., which is commonly referred to as
FINRA, regarding a FINRA member firm’s distribution of the securities of an affiliate and related conflicts of interest.
MS & Co. or any of our other affiliates may not make sales in this offering to any discretionary account. See “Plan
of Distribution (Conflicts of Interest)” and “Use of Proceeds and Hedging” in the accompanying product supplement.
|
Where
you can find more information:
|
Morgan Stanley and MSFL have filed a registration statement (including
a prospectus, as supplemented by the product supplement for Equity-Linked Securities and the index supplement) with the Securities
and Exchange Commission, or SEC, for the offering to which this communication relates. You should read the prospectus in that registration
statement, the product supplement for Equity-Linked Partial Principal at Risk Securities, the index supplement and any other documents
relating to this offering that Morgan Stanley and MSFL have filed with the SEC for more complete information Morgan Stanley, MSFL
and this offering. You may get these documents without cost by visiting EDGAR on the SEC web site at.www.sec.gov.
Alternatively, Morgan Stanley, MSFL, any underwriter or any dealer participating in the offering will arrange to send you the prospectus,
the product supplement for Equity-Linked Partial Principal at Risk Securities and the index supplement if you so request by calling
toll-free 800-584-6837.
You may access these documents on the SEC web site at www.sec.gov
as follows:
Product Supplement for Equity-Linked Partial Principal at Risk Securities dated November 16, 2017
Index Supplement dated November 16, 2017
Prospectus dated November 16, 2017
Terms used but not defined in this document are defined
in the product supplement for Equity-Linked Partial Principal at Risk Securities, in the index supplement or in the prospectus.
|
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