Preliminary Terms No. 2,687
Registration Statement Nos. 333-221595;
333-221595-01
Opportunities in U.S. Equities
Trigger Jump Securities With Daily Trigger Monitoring
Based on the Value of the Worst Performing of the S&P 500® Index, the NASDAQ-100 Index® and
the Dow Jones Industrial AverageSM due October 19, 2020
The Trigger Jump 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, do not guarantee any return of principal at maturity and have the terms described
in the accompanying product supplement for Jump Securities, index supplement and prospectus, as supplemented and modified by this
document. The amount you receive at maturity will depend on whether a trigger event has occurred. A “trigger event”
will occur if the index closing value of any underlying index is less than 75% of its respective initial index value, which
we refer to as the respective downside threshold value, on any index business day during the term of the securities. If
a trigger event has not occurred, the payment at maturity on the securities will be determined as follows: (i) if the final index
value of each underlying index is greater than or equal to its respective initial index value, you will receive for
each security that you hold at maturity a minimum of $153 per security in addition to the stated principal amount, or if the worst
performing underlying index has appreciated by more than 15.30% over the term of the securities, you will receive for each security
that you hold at maturity the stated principal amount plus an amount based on the percentage increase of such worst performing
underlying index or (ii) if the final index value of any underlying index is less than its respective initial
index value, investors will receive the stated principal amount of their investment. However, if the index closing value of
any underlying index is less than its respective downside threshold value on any index business day during
the term of the securities, a trigger event will have occurred and, at maturity, investors will be exposed to the decline in the
worst performing underlying index on a 1-to-1 basis. Accordingly, you could lose your entire initial investment in the securities.
Because the payment at maturity on the securities is based on the worst performing of the underlying indices, a decline in
any index closing value below 75% of its respective initial index value on any index business day during the term
of the securities will result in a trigger event occurring, which may result in a significant loss on your investment, even if
the other underlying indices have appreciated or have not declined as much. The securities are for investors who seek an equity
index-based return and who are willing to risk their principal, risk exposure to the worst performing of three underlying indices
and forgo current income in exchange for the possibility of receiving a return equal to at least the upside payment of $153 per
security, which only applies if (i) the index closing value of each underlying index remains greater than or equal
to its respective downside threshold value on each index business day during the term of the securities and (ii) the final
index value of each underlying index is greater than or equal to its respective initial index value. The securities
are notes issued as part of MSFL’s Series A Global Medium-Term Notes Program.
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
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Stated principal amount:
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$1,000 per security
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Pricing date:
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October 11, 2019
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Original issue date:
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October 17, 2019 (3 business days after the pricing date)
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Maturity date:
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October 19, 2020
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Aggregate principal amount:
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$
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Interest:
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None
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Underlying indices:
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The S&P 500® Index (the “SPX Index”), the NASDAQ-100 Index® (the “NDX Index”) and the Dow Jones Industrial AverageSM ( the “INDU Index”)
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Trigger event:
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A trigger event occurs if, on any index business day from but excluding the pricing date to and including the valuation date, the index closing value of any underlying index is less than its respective downside threshold value. If a trigger event occurs on any index business day during the term of the securities, you will be exposed to the downside performance of the worst performing underlying index at maturity.
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Payment at maturity:
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· If
a trigger event HAS NOT occurred on any index business day during the term of the securities up to and including the valuation
date:
· If
the final index value of each underlying index is greater than or equal to its respective initial index value:
$1,000 + the greater of (i) $1,000
× the index percent change of the worst performing underlying index and (ii) the upside payment
· If
the final index value of any underlying index is less than its respective initial index value:
$1,000
· If
a trigger event HAS occurred on any index business day during the term of the securities up to and including the valuation date:
$1,000 × index performance
factor of the worst performing underlying index, subject to a maximum payment at maturity of the stated principal amount
If a trigger event occurs and the final index value
of any underlying index is less than its initial index value, the payment at maturity will be less than the stated principal amount
of the securities and could be zero.
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Upside payment:
|
$153 per security (15.30% of the stated principal amount)
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Index percent change:
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With respect to each underlying index, (final index value – initial index value) / initial index value
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Index performance factor:
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With respect to each underlying index, final index value / initial index value
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Worst performing underlying index:
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The underlying index with the least index performance factor
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Initial index value:
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With respect to the SPX Index, ,
which is the index closing value of such index on the pricing date
With respect to the NDX Index, ,
which is the index closing value of such index on the pricing date
With respect to the INDU Index, ,
which is the index closing value of such index on the pricing date
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Downside threshold value:
|
With respect to the SPX Index, ,
which is 75% of the initial index value for such index
With respect to the NDX Index, ,
which is 75% of the initial index value for such index
With respect to the INDU Index, ,
which is 75% of the initial index value for such index
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Final index value:
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With respect to each underlying index, the index closing value of such index on the valuation date
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Valuation date:
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October 14, 2020, subject to postponement for non-index business days and certain market disruption events
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CUSIP / ISIN:
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61769HZK4 / US61769HZK49
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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 $983.20 per security, or within $10.00 of that estimate. See “Investment Summary” on page 2.
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Commissions and issue price:
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Price to public
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Agent’s commissions(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, MS & Co., 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 for Jump Securities.
|
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(2)
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See “Use of proceeds and hedging” on page
21.
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The securities
involve risks not associated with an investment in ordinary debt securities. See “Risk Factors” beginning on page
8.
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.
References
to “we,” “us” and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively,
as the context requires.
Product
Supplement for Jump Securities dated November 16, 2017 Index
Supplement dated November 16, 2017 Prospectus
dated November 16, 2017
Morgan Stanley Finance LLC
Trigger Jump Securities With Daily Trigger Monitoring Based on the Value of the Worst Performing of the S&P 500® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM due October 19, 2020
Principal at Risk Securities
Investment Summary
Principal at Risk Securities
The Trigger Jump Securities With Daily Trigger Monitoring Based
on the Value of the Worst Performing of the S&P 500® Index, the NASDAQ-100 Index® and the Dow
Jones Industrial AverageSM due October 19, 2020 (the “securities”) can be used:
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§
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As an alternative to direct exposure to the underlying indices that provides a minimum fixed positive return of 15.30%, which
only applies if (i) the index closing value of each underlying index remains greater than or equal to its respective
downside threshold value on each index business day during the term of the securities and (ii) the final index value of
each underlying index is greater than or equal to its respective initial index value;
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|
§
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To enhance returns and potentially outperform the worst performing of the S&P 500® Index, the NASDAQ-100
Index® and the Dow Jones Industrial AverageSM in a moderately bullish or moderately bearish scenario,
but only if a trigger event does not occur; and
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|
§
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To obtain limited protection against the loss of principal in the event of a decline of the underlying indices as of the valuation
date, but only if the index closing value of each underlying index is greater than or equal to its respective downside
threshold value on each index business day during the term of the securities.
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If the index closing value of any underlying
index is less than its downside threshold value on any index business day during the term of the securities, a trigger event
will have occurred and, if the final index value of any underlying index is less than its respective initial index
value, the securities are exposed on a 1-to-1 basis to the percentage decline of the final index value of the worst performing
underlying index from its respective initial index value. Accordingly, investors may lose their entire initial investment
in the securities.
Maturity:
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Approximately 1 year
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Upside payment:
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$153 per security (15.30% of the stated principal amount), payable only if the index closing value of each underlying index is greater than or equal to its respective downside threshold value on each index business day during the term of the securities and the final index value of each underlying index is greater than or equal to its respective initial index value. In addition, if the worst performing underlying index has appreciated by more than 15.30% over the term of the securities, you will receive for each security that you hold at maturity the stated principal amount plus an amount based on the percentage increase of such worst performing underlying index.
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Downside threshold value:
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For each underlying index, 75% of the respective initial index value, monitored daily throughout the term of the securities
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Minimum payment at maturity:
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None. Investors may lose their entire initial investment in the securities.
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Interest:
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None
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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 $983.20, or within $10.00 of that estimate. Our estimate of the value of the securities
as determined on the pricing date will be set forth in the final pricing supplement.
What goes into the estimated value on the pricing date?
In valuing the securities on the pricing date,
we take into account that the securities comprise both a debt component and a performance-based component linked to the underlying
indices. The estimated value of the securities is determined using our own pricing and valuation models, market inputs and assumptions
relating to the underlying indices, instruments based on the underlying indices, 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.
Morgan Stanley Finance LLC
Trigger Jump Securities With Daily Trigger Monitoring Based on the Value of the Worst Performing of the S&P 500® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM due October 19, 2020
Principal at Risk Securities
What determines the economic terms of the securities?
In determining the economic terms of the securities,
including the upside payment and the downside threshold values, 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 indices, 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 indices,
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
Trigger Jump Securities With Daily Trigger Monitoring Based on the Value of the Worst Performing of the S&P 500® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM due October 19, 2020
Principal at Risk Securities
Key Investment Rationale
The securities do not pay interest but provide a minimum positive
return of 15.30% if a trigger event does not occur and the final index value of each of the S&P 500®
Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM is greater than or equal to
its respective initial index value. If a trigger event does not occur, the securities offer an uncapped 1-to-1 participation
in the apprecation of the worst performing underlying index if the appreciation of such index is greater than 15.30%. If a trigger
event does not occur and the final index value of any underlying index is less than its respective
initial index value, investors will receive the stated principal amount of their investment. However, if the index closing
value of any underlying index is less than its respective downside threshold value on any index business day
during the term of the securities, a trigger event will have occurred and investors will be exposed to the decline in the worst
performing underlying index over the term of the securities.
Trigger Event
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A trigger event occurs if, on any index business day from but excluding the pricing date to and including the valuation date, the index closing value of any underlying index is less than its respective downside threshold value. If a trigger event occurs on any index business day during the term of the securities, you will be exposed to the downside performance of the worst performing underlying index at maturity.
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Upside Scenario – A Trigger Event Does Not Occur
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If a trigger event has not occurred and if the final index value of each underlying index is greater than or equal to its respective initial index value, the payment at maturity for each security will be equal to $1,000 plus the greater of (i) $1,000 times the index percent change of the worst performing underlying index and (ii) the upside payment of $153.
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Par Scenario – A Trigger Event Does Not Occur
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If a trigger event has not occurred and if the final index value of any underlying index is less than its respective initial index value, the payment at maturity for each security will be equal to the stated principal amount of $1,000 per security.
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Downside Scenario – A Trigger Event Occurs and the Final Index Value of Any Underlying Index is Less Than its Respective Initial Index Value
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If a trigger event has occurred (meaning that the index closing
value of any underlying index is less than its respective downside threshold value on any index business day during
the term of the securities) and the final index value of any underlying index is less than its respective downside threshold
value, you will lose 1% for every 1% decline in the value of the worst performing underlying index from its initial index
value, without any buffer (e.g., a 60% depreciation in the worst performing underlying index from the respective initial index
value to the respective final index value will result in a payment at maturity of $400 per security).
Because the payment at maturity of the securities is based on
the worst performing of the underlying indices, a decline in any underlying index below its respective downside threshold value
on any index business day during the term of the securities will result in a trigger event occurring, which may result in a loss
of a significant portion or all of your investment, even if the other underlying indices have appreciated or have not declined
as much.
|
Morgan Stanley Finance LLC
Trigger Jump Securities With Daily Trigger Monitoring Based on the Value of the Worst Performing of the S&P 500® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM due October 19, 2020
Principal at Risk Securities
Hypothetical Examples
The following hypothetical examples illustrate how to calculate
the payment at maturity on the securities. The following examples are for illustrative purposes only. The payment at maturity on
the securities is subject to our credit risk. The below examples are based on the following terms. The actual initial index values
and downside threshold values will be determined on the pricing date.
Stated Principal Amount:
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$1,000 per security
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Hypothetical Initial Index Value:
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With respect to the SPX Index: 2,900
With respect to the NDX Index: 8,000
With respect to the INDU Index: 26,000
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Hypothetical Downside Threshold Value:
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With respect to the SPX Index: 2,175, which is 75% of
its hypothetical initial index value
With respect to the NDX Index: 6,000, which is 75% of its hypothetical
initial index value
With respect to the INDU Index: 19,500, which is 75%
of its hypothetical initial index value
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Upside Payment:
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$153 (15.30% of the stated principal amount)
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Interest:
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None
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|
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EXAMPLE 1: A trigger event HAS NOT occurred and the level
of the worst performing underlying index increases by 45% from its initial index value to its final index value.
Final index value
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SPX Index: 4,205
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NDX Index: 12,000
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|
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INDU Index: 41,600
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Index percent change
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SPX Index: (4,205 – 2,900) / 2,900 = 45%
NDX Index: (12,000 – 8,000) / 8,000 = 50%
INDU Index: (41,600 – 26,000) / 26,000 = 60%
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Index performance factor
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SPX Index: 4,205 / 2,900 = 145%
NDX Index: 12,000 / 8,000 = 150%
INDU Index: 41,600 / 26,000 = 160%
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Payment at maturity
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=
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$1,000 + ($1,000 x the index percent change of the worst performing underlying index)
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=
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$1,000 + $450
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=
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$1,450
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|
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In example 1, the index closing value of each underlying index
is at or above its respective initial index value on each index business day during the term of the securities. Therefore,
a trigger event has not occurred. Because the final index value of each underlying index is at or above its respective initial
index value, and the index percent change of the worst performing underlying index is greater than the minimum positive return
of 15.30%, investors receive at maturity the stated principal amount plus 1-to-1 participation in the performance
of the worst performing underlying index. Investors receive $1,450 per security at maturity.
EXAMPLE 2: A trigger event HAS NOT occurred and the level
of the worst performing underlying index increases by 10% from its initial index value to its final index value.
Final index value
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SPX Index: 3,480
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|
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NDX Index: 9,200
|
|
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INDU Index: 28,600
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Index percent change
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|
SPX Index: (3,480 – 2,900) / 2,900 = 20%
NDX Index: (9,200 – 8,000) / 8,000 = 15%
INDU Index: (28,600 – 26,000) / 26,000 = 10%
|
Morgan Stanley Finance LLC
Trigger Jump Securities With Daily Trigger Monitoring Based on the Value of the Worst Performing of the S&P 500® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM due October 19, 2020
Principal at Risk Securities
Index performance factor
|
|
SPX Index: 3,480 / 2,900 = 120%
NDX Index: 9,200 / 8,000 = 115%
INDU Index: 28,600 / 26,000 = 110%
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Payment at maturity
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=
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$1,000 + upside payment
|
|
=
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$1,000 + $153
|
|
=
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$1,153
|
|
|
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In example 2, the index closing value of each underlying index
is at or above its respective downside threshold value on each index business day during the term of the securities. Therefore,
a trigger event has not occurred. Because the final index value of each underlying index is at or above its respective initial
index value, investors receive at maturity the stated principal amount plus the upside payment of $153. Investors
receive $1,153 per security at maturity and do not participate in the appreciation of any underlying index.
EXAMPLE 3: A trigger event HAS NOT occurred and the
level of the worst performing underlying index decreases by 15% from its initial index value to its final index value.
Final index value
|
|
SPX Index: 2,610
|
|
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NDX Index: 3,600
|
|
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INDU Index: 22,100
|
Index performance factor
|
|
SPX Index: 2,610 / 2,900 = 90%
NDX Index: 8,000 / 8,000 = 100%
INDU Index: 22,100 / 26,000 = 85%
|
Payment at maturity
|
=
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$1,000
|
|
|
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In example 3, the index closing value of each underlying index
is at or above its respective downside threshold value on each index business day during the term of the securities. Therefore,
a trigger event has not occurred. Because the final index value of at least one underlying index is less than its respective initial
index value, investors do not receive the upside payment. Investors receive at maturity the stated principal amount of $1,000 per
security.
EXAMPLE 4: A trigger event HAS occurred and the level
of the worst performing underlying index decreases by 55% from its initial index value to its final index value.
Final index value
|
|
SPX Index: 3,480
|
|
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NDX Index: 3,600
|
|
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INDU Index: 22,100
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Index performance factor
|
|
SPX Index: 3,480 / 2,900 = 120%
NDX Index: 3,600 / 8,000 = 45%
INDU Index: 22,100 / 26,000 = 85%
|
Payment at maturity
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=
|
$1,000 × index performance factor of the worst performing underlying index
|
|
=
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$1,000 × 45%
|
|
=
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$450
|
|
|
|
In example 4, because the index closing value of at least one
underlying index was less than its respective downside threshold on one or more index business days during the term of the securities,
a trigger event has occurred. Therefore, investors lose the benefit of the upside payment and instead are exposed to the full negative
performance of the NDX Index, which is the worst performing underlying index in this example. Under these circumstances, investors
lose 1% of the stated principal amount for every 1% decline in the value of the worst performing underlying index from its initial
index value. In this example, investors receive a payment at maturity equal to $450 per security, resulting in a loss of 55%.
EXAMPLE 5: A trigger event HAS occurred and the level
of the worst performing underlying index increases by 20% from its initial index value to its final index value.
Morgan Stanley Finance LLC
Trigger Jump Securities With Daily Trigger Monitoring Based on the Value of the Worst Performing of the S&P 500® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM due October 19, 2020
Principal at Risk Securities
Final index value
|
|
SPX Index: 3,480
|
|
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NDX Index: 12,000
|
|
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INDU Index: 33,800
|
Index performance factor
|
|
SPX Index: 3,480 / 2,900 = 120%
NDX Index: 12,000 / 8,000 = 150%
INDU Index: 33,800 / 26,000 = 130%
|
Payment at maturity
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=
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$1,000
|
|
|
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In example 5, because the index closing value of at least one
underlying index was less than its respective downside threshold value on one or more index business days during the term of the
securities, a trigger event has occurred. Therefore, investors lose the benefit of the upside payment and instead receive a return
reflecting the performance of the worst performing underlying index, subject to a maximum payment at maturity of $1,000. Although
each underlying index has appreciated substantially, the payment at maturity on the securities is limited to the stated principal
amount, without any positive return, because a trigger event has occurred.
If a trigger event occurs on any index business day during
the term of the securities, investors will have full downside exposure to the worst performing underlying index at maturity. Under
these circumstances, if the final index value of any underlying index is less than its respective initial index value, investors
will lose some or all of their investment in the securities.
Morgan Stanley Finance LLC
Trigger Jump Securities With Daily Trigger Monitoring Based on the Value of the Worst Performing of the S&P 500® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM due October 19, 2020
Principal at Risk Securities
Risk Factors
The following is a non-exhaustive 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. You should also consult with
your investment, legal, tax, accounting and other advisers in connection with your investment in the securities.
|
§
|
The securities do not pay interest or guarantee the return of any principal. The terms of the securities differ from
those of ordinary debt securities in that the securities do not pay interest or guarantee the payment of any principal at maturity.
If the index closing value of any underlying index is less than its respective downside threshold value on any index
business day during the term of the securities, a trigger event will have occurred and investors will have full downside exposure
to the worst performing underlying index at maturity. Under these circumstances, you will lose the benefit of the upside payment
and, if the final index value of any underlying index is less than its respective initial index value, you will receive
at maturity an amount in cash that is less than the $1,000 stated principal amount of each security by an amount proportionate
to the full decline in the final index value of the worst performing underlying index from its initial index value over the term
of the securities, and you will lose some or all of your investment. There is no minimum payment at maturity on the securities,
and, accordingly, you could lose your entire investment.
|
|
§
|
You are exposed to the price risk of each underlying index. Your return on the securities is not linked to a basket
consisting of each underlying index. Rather, it will be based upon the independent performance of each underlying index. Unlike
an instrument with a return linked to a basket of underlying assets, in which risk is mitigated and diversified among all the components
of the basket, you will be exposed to the risks related to each underlying index. Poor performance by any underlying index over
the term of the securities will negatively affect your return and will not be offset or mitigated by any positive performance by
the other underlying indices. If the index closing value of any underlying index declines to below 75% of its respective initial
index value on any index business day during the term of the securities, a trigger event will have occurred and you will be fully
exposed to the negative performance of the worst performing underlying index at maturity, even if the other underlying indices
have appreciated or have not declined as much. Accordingly, your investment is subject to the price risk of each underlying
index. Additionally, if a trigger event occurs, the underlying index that caused the trigger event to occur may be different than
the underlying index that is ultimately the worst performing underlying index based on which the payment at maturity will be determined.
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|
§
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Because the securities are linked to the performance of the worst performing underlying index, you are exposed to greater
risk of sustaining a loss on your investment than if the securities were linked to just one underlying index. The risk that
you will suffer a loss on your investment is greater if you invest in the securities as opposed to substantially similar securities
that are linked to the performance of just one underlying index. With three underlying indices, it is more likely that the index
closing value of any underlying index will decline to below its respective downside threshold value on any index business day than
if the securities were linked to only one underlying index. Therefore, it is more likely that you will suffer a loss on your investment.
|
|
§
|
If a trigger event occurs, the amount payable on the securities is not linked to the values of the underlying indices at
any time other than the valuation date. The final index values will be the index closing values on the valuation date, subject
to postponement for non-index business days and certain market disruption events. If a trigger event occurs, even if the value
of the worst performing underlying index appreciates prior to the valuation date but then drops by the valuation date, the payment
at maturity may be significantly less than it would have been had the payment at maturity been linked to the value of the worst
performing underlying index prior to such drop. Although the actual value of the worst performing underlying index on
the stated maturity date or at other times during the term of the securities may be higher than its respective final index value,
if a trigger event occurs, the payment at maturity will be based solely on the index closing value of the worst performing underlying
index on the valuation date.
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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. Morgan Stanley
& Co. LLC, which we refer to as 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
|
Morgan Stanley Finance LLC
Trigger Jump Securities With Daily Trigger Monitoring Based on the Value of the Worst Performing of the S&P 500® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM due October 19, 2020
Principal at Risk Securities
volatility,
the notional size of the proposed sale, the cost of unwinding any related hedging positions, the time remaining to maturity and
the likelihood that it will be able to resell the securities. Even if there is a secondary market, it may not provide enough liquidity
to allow you to trade or sell the securities easily. Since other broker-dealers may not participate significantly in the secondary
market for the securities, the price at which you may be able to trade your securities is likely to depend on the price, if any,
at which MS & Co. is willing to transact. If, at any time, MS & Co. were to cease making a market in the securities, it
is likely that there would be no secondary market for the securities. Accordingly, you should be willing to hold your securities
to maturity.
|
§
|
The market price of the securities may 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:
|
|
§
|
whether a trigger event has occurred,
|
|
§
|
the values of the underlying indices at any time (including
in relation to their initial index values),
|
|
§
|
the volatility (frequency and magnitude of changes
in value) of the underlying indices,
|
|
§
|
dividend rates on the securities underlying the underlying
indices,
|
|
§
|
interest and yield rates in the market,
|
|
§
|
geopolitical conditions and economic, financial, political,
regulatory or judicial events that affect the component stocks of the underlying indices or securities markets generally and which
may affect the value of the underlying indices,
|
|
§
|
the time remaining until the maturity of the securities,
|
|
§
|
the composition of the underlying indices and changes
in the constituent stocks of the underlying indices, and
|
|
§
|
any actual or anticipated changes in our credit ratings
or credit spreads.
|
Some or all of these factors will
influence the price you will receive if you sell your securities prior to maturity. In particular, you may have to sell your securities
at a substantial discount from the stated principal amount if at the time of sale the value of any underlying index is near, at
or below its respective downside threshold value.
You cannot predict the future performance
of the underlying indices based on their historical performance. If the index closing value of any underlying index is less than
75% of its respective initial index value on any index business day during the term of the securities, a trigger event will have
occurred and you will be exposed at maturity on a 1-to-1 basis to the full decline in the final index value of the worst performing
underlying index from its respective initial index value. There can be no assurance that the index closing value of each underlying
index will be greater than 75% of its respective initial index value on each index business day during the term of the securities
so that you will receive at maturity an amount that is greater than the $1,000 stated principal amount for each security you hold,
or that you will not lose some or all of your investment.
|
§
|
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.
|
|
§
|
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
|
Morgan Stanley Finance LLC
Trigger Jump Securities With Daily Trigger Monitoring Based on the Value of the Worst Performing of the S&P 500® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM due October 19, 2020
Principal at Risk Securities
and should be treated pari
passu with the claims of other unsecured, unsubordinated creditors of Morgan Stanley, including holders of Morgan Stanley-issued
securities.
|
§
|
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., are 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.
|
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 indices, 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.
|
§
|
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 notes in the secondary market (if any exists) at any time. The value
of your securities at any time after the date of this document will vary based on many factors that cannot be predicted with accuracy,
including our creditworthiness and changes in market conditions. See also “The market price of the securities may be influenced
by many unpredictable factors” above.
|
|
§
|
Investing in the securities is not equivalent to investing in the underlying indices. Investing in the securities is
not equivalent to investing in any underlying index or the component stocks of any underlying index. Investors in the securities
will not participate in any positive performance of any underlying index, and 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 indices.
|
|
§
|
Adjustments to the underlying indices could adversely affect the value of the securities. The publisher of each underlying
index may add, delete or substitute the stocks underlying such index or make other methodological changes that could change the
value of such underlying index. Any of these actions could adversely affect the value of the securities. The publisher of such
underlying index may also discontinue or suspend calculation or publication of such 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 underlying 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, the payout on the securities at maturity
will be an amount based on the closing prices on the valuation date of the stocks underlying the relevant index at the time of
such discontinuance, without rebalancing or substitution, computed by the calculation agent in accordance with the formula for
calculating such underlying index last in effect prior to such discontinuance (depending also on the performance of the other underlying
indices).
|
|
§
|
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
|
Morgan Stanley Finance LLC
Trigger Jump Securities With Daily Trigger Monitoring Based on the Value of the Worst Performing of the S&P 500® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM due October 19, 2020
Principal at Risk Securities
values, the downside threshold
values, whether a trigger event has occurred, the final index values, the index performance factors, if applicable, and the payment
that you will receive at maturity, if any. Moreover, certain determinations made by MS & Co., in its capacity as calculation
agent, may require it to exercise discretion and make subjective judgments, such as with respect to the occurrence or non-occurrence
of market disruption events and the selection of a successor index or calculation of the index closing values in the event of a
market disruption event or discontinuance of an underlying index. These potentially subjective determinations may adversely
affect the payout to you at maturity, if any. For further information regarding these types of determinations, see “Description
of Securities—Postponement of Valuation Date(s),” “—Discontinuance of Any Underlying Index or Basket Index;
Alteration of Method of Calculation,” “—Alternate Exchange Calculation in case of an Event of Default”
and “—Calculation Agent and Calculations” in the accompanying product supplement. In addition, MS
& Co. has determined the estimated value of the securities on the pricing date.
|
§
|
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 related to the securities (and to other
instruments linked to the underlying indices or their component stocks), including trading in the stocks that constitute the
underlying indices as well as in other instruments related to the underlying indices. 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 date approaches. Some of our affiliates also trade the stocks that constitute
the underlying indices and other financial instruments related to the underlying indices
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 of an underlying index, and, therefore, could increase
the value at or above which such underlying index must close on each index business day during the term of the securities so that
you are not exposed to the negative performance of the worst performing underlying index (depending also on the performance of
the other underlying indices). Additionally, such hedging or trading activities during the term of the securities, including on
the valuation date, could adversely affect the value of any underlying index, and, accordingly, the amount of cash an investor
will receive at maturity, if any (depending also on the performance of the other underlying indices).
|
|
§
|
The U.S. federal income tax consequences of an investment in the securities are uncertain. Please read the discussion
under “Additional Information—Tax considerations” in this document and the discussion under “United States
Federal Taxation” in the accompanying product supplement for Jump Securities (together, the “Tax Disclosure Sections”)
concerning the U.S. federal income tax consequences of an investment in the securities. If the Internal Revenue Service (the “IRS”)
were successful in asserting an alternative treatment, the timing and character of income on the securities might differ significantly
from the tax treatment described in the Tax Disclosure Sections. For example, under one possible treatment, the IRS could seek
to recharacterize the securities as debt instruments. In that event, U.S. Holders 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 Jump Securities, 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 Jump Securities). 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
in the Tax Disclosure Sections.
|
In 2007, the U.S. Treasury Department
and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts”
and similar instruments. The notice focuses in particular on whether to require holders of these instruments to accrue income over
the term of their investment. It also asks for comments on a number of related topics, including the character of income or loss
with respect to these instruments; whether short-term instruments should be subject to any such accrual regime; the relevance of
factors such as the exchange-traded status of the instruments and the nature of the underlying property to which the instruments
are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors should be subject
to withholding tax; and whether these instruments are or should be subject to the
Morgan Stanley Finance LLC
Trigger Jump Securities With Daily Trigger Monitoring Based on the Value of the Worst Performing of the S&P 500® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM due October 19, 2020
Principal at Risk Securities
“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. Both U.S. and Non-U.S. Holders should consult their tax advisers regarding
the U.S. federal income tax consequences of an investment in the securities, including possible alternative treatments, the issues
presented by this notice and any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
Morgan Stanley Finance LLC
Trigger Jump Securities With Daily Trigger Monitoring Based on the Value of the Worst Performing of the S&P 500® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM due October 19, 2020
Principal at Risk Securities
S&P 500®
Index Overview
The S&P 500® Index, which is calculated, maintained
and published by S&P Dow Jones Indices LLC (“S&P”), consists of stocks of 500 component companies selected
to provide a performance benchmark for the U.S. equity markets. The calculation of the S&P 500® Index is based
on the relative value of the float adjusted aggregate market capitalization of the 500 component companies as of a particular time
as compared to the aggregate average market capitalization of 500 similar companies during the base period of the years 1941 through
1943. For additional information about the S&P 500® Index, see the information set forth under “S&P
500® Index” in the accompanying index supplement.
Information as of market close on October 8, 2019:
Bloomberg Ticker Symbol:
|
SPX
|
Current Index Value:
|
2,893.06
|
52 Weeks Ago:
|
2,884.43
|
52 Week High (on 7/26/2019):
|
3,025.86
|
52 Week Low (on 12/24/2018):
|
2,351.10
|
|
|
The following graph sets forth the daily closing values of the
SPX Index for the period from January 1, 2014 through October 8, 2019. The related table sets forth the published high and low
closing values, as well as end-of-quarter closing values, of the SPX Index for each quarter in the same period. The closing value
of the SPX Index on October 8, 2019 was 2,893.06. We obtained the information in the table and graph below from Bloomberg Financial
Markets, without independent verification. The SPX Index has at times experienced periods of high volatility, and you should not
take the historical values of the SPX Index as an indication of its future performance.
SPX Index Daily Closing Values
January 1, 2014 to October 8, 2019
|
|
Morgan Stanley Finance LLC
Trigger Jump Securities With Daily Trigger Monitoring Based on the Value of the Worst Performing of the S&P 500® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM due October 19, 2020
Principal at Risk Securities
S&P 500® Index
|
High
|
Low
|
Period End
|
2014
|
|
|
|
First Quarter
|
1,878.04
|
1,741.89
|
1,872.34
|
Second Quarter
|
1,962.87
|
1,815.69
|
1,960.23
|
Third Quarter
|
2,011.36
|
1,909.57
|
1,972.29
|
Fourth Quarter
|
2,090.57
|
1,862.49
|
2,058.90
|
2015
|
|
|
|
First Quarter
|
2,117.39
|
1,992.67
|
2,067.89
|
Second Quarter
|
2,130.82
|
2,057.64
|
2,063.11
|
Third Quarter
|
2,128.28
|
1,867.61
|
1,920.03
|
Fourth Quarter
|
2,109.79
|
1,923.82
|
2,043.94
|
2016
|
|
|
|
First Quarter
|
2,063.95
|
1,829.08
|
2,059.74
|
Second Quarter
|
2,119.12
|
2,000.54
|
2,098.86
|
Third Quarter
|
2,190.15
|
2,088.55
|
2,168.27
|
Fourth Quarter
|
2,271.72
|
2,085.18
|
2,238.83
|
2017
|
|
|
|
First Quarter
|
2,395.96
|
2,257.83
|
2,362.72
|
Second Quarter
|
2,453.46
|
2,328.95
|
2,423.41
|
Third Quarter
|
2,519.36
|
2,409.75
|
2,519.36
|
Fourth Quarter
|
2,690.16
|
2,529.12
|
2,673.61
|
2018
|
|
|
|
First Quarter
|
2,872.87
|
2,581.00
|
2,640.87
|
Second Quarter
|
2,786.85
|
2,581.88
|
2,718.37
|
Third Quarter
|
2,930.75
|
2,713.22
|
2,913.98
|
Fourth Quarter
|
2,925.51
|
2,351.10
|
2,506.85
|
2019
|
|
|
|
First Quarter
|
2,854.88
|
2,447.89
|
2,834.40
|
Second Quarter
|
2,954.18
|
2,744.45
|
2,941.76
|
Third Quarter
|
3,025.86
|
2,840.60
|
2,976.74
|
Fourth Quarter (through October 8, 2019)
|
2,952.01
|
2,887.61
|
2,893.06
|
|
|
|
|
“Standard & Poor’s®,” “S&P®,”
“S&P 500®,” “Standard & Poor’s 500” and “500” are trademarks of
Standard and Poor’s Financial Services LLC. For more information, see “S&P 500® Index” in
the accompanying index supplement.
Morgan Stanley Finance LLC
Trigger Jump Securities With Daily Trigger Monitoring Based on the Value of the Worst Performing of the S&P 500® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM due October 19, 2020
Principal at Risk Securities
NASDAQ-100 Index® Overview
The NASDAQ-100 Index®, which is calculated, maintained
and published by Nasdaq, Inc., is a modified capitalization-weighted index of 100 of the largest and most actively traded equity
securities of non-financial companies listed on The NASDAQ Stock Market LLC. The NASDAQ-100 Index® includes companies
across a variety of major industry groups. At any moment in time, the value of the NASDAQ-100 Index® equals the
aggregate value of the then-current NASDAQ-100 Index® share weights of each of the NASDAQ-100 Index®
component securities, which are based on the total shares outstanding of each such NASDAQ-100 Index® component security,
multiplied by each such security’s respective last sale price on NASDAQ (which may be the official closing price published
by NASDAQ), and divided by a scaling factor, which becomes the basis for the reported NASDAQ-100 Index® value. For
additional information about the NASDAQ-100 Index®, see the information set forth under “NASDAQ-100 Index®”
in the accompanying index supplement.
Information as of market close on October 8, 2019:
Bloomberg Ticker Symbol:
|
NDX
|
Current Index Value:
|
7,604.270
|
52 Weeks Ago:
|
7,352.823
|
52 Week High (on 7/26/2019):
|
8,016.953
|
52 Week Low (on 12/24/2018):
|
5,899.354
|
|
|
The following graph sets forth the daily closing values of the
NDX Index for the period from January 1, 2014 through October 8, 2019. The related table sets forth the published high and low
closing values, as well as end-of-quarter closing values, of the NDX Index for each quarter in the same period. The closing value
of the NDX Index on October 8, 2019 was 7,604.270. We obtained the information in the table below from Bloomberg Financial Markets,
without independent verification. The NDX Index has at times experienced periods of high volatility, and you should not take the
historical values of the NDX Index as an indication of its future performance.
NDX Index Daily Closing Values
January 1, 2014 to October 8, 2019
|
|
Morgan Stanley Finance LLC
Trigger Jump Securities With Daily Trigger Monitoring Based on the Value of the Worst Performing of the S&P 500® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM due October 19, 2020
Principal at Risk Securities
NASDAQ-100 Index®
|
High
|
Low
|
Period End
|
2014
|
|
|
|
First Quarter
|
3,727.185
|
3,440.502
|
3,595.736
|
Second Quarter
|
3,849.479
|
3,446.845
|
3,849.479
|
Third Quarter
|
4,103.083
|
3,857.938
|
4,049.445
|
Fourth Quarter
|
4,337.785
|
3,765.281
|
4,236.279
|
2015
|
|
|
|
First Quarter
|
4,483.049
|
4,089.648
|
4,333.688
|
Second Quarter
|
4,548.740
|
4,311.257
|
4,396.761
|
Third Quarter
|
4,679.675
|
4,016.324
|
4,181.060
|
Fourth Quarter
|
4,719.053
|
4,192.963
|
4,593.271
|
2016
|
|
|
|
First Quarter
|
4,497.857
|
3,947.804
|
4,483.655
|
Second Quarter
|
4,565.421
|
4,201.055
|
4,417.699
|
Third Quarter
|
4,891.363
|
4,410.747
|
4,875.697
|
Fourth Quarter
|
4,965.808
|
4,660.457
|
4,863.620
|
2017
|
|
|
|
First Quarter
|
5,439.742
|
4,911.333
|
5,436.232
|
Second Quarter
|
5,885.296
|
5,353.586
|
5,646.917
|
Third Quarter
|
6,004.380
|
5,596.956
|
5,979.298
|
Fourth Quarter
|
6,513.269
|
5,981.918
|
6,396.422
|
2018
|
|
|
|
First Quarter
|
7,131.121
|
6,306.100
|
6,581.126
|
Second Quarter
|
7,280.705
|
6,390.837
|
7,040.802
|
Third Quarter
|
7,660.180
|
7,014.554
|
7,627.650
|
Fourth Quarter
|
7,645.453
|
5,899.354
|
6,329.964
|
2019
|
|
|
|
First Quarter
|
7,493.270
|
6,147.128
|
7,378.771
|
Second Quarter
|
7,845.729
|
6,978.018
|
7,671.075
|
Third Quarter
|
8,016.953
|
7,415.691
|
7,749.449
|
Fourth Quarter (through October 8, 2019)
|
7,754.103
|
7,550.786
|
7,604.270
|
|
|
|
|
“Nasdaq®,”
“NASDAQ-100®” and “NASDAQ-100 Index®” are trademarks of Nasdaq, Inc. For
more information, see “NASDAQ-100 Index®” in the accompanying index supplement. For more information,
see “NASDAQ-100 Index®” in the accompanying index supplement.
Morgan Stanley Finance LLC
Trigger Jump Securities With Daily Trigger Monitoring Based on the Value of the Worst Performing of the S&P 500® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM due October 19, 2020
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Dow Jones Industrial AverageSM Overview
The Dow Jones Industrial AverageSM is a price-weighted
index composed of 30 common stocks that is published by S&P Dow Jones Indices LLC, the marketing name and a licensed trademark
of CME Group Inc., as representative of the broad market of U.S. industry. For additional information about the Dow Jones
Industrial AverageSM, see the information set forth under “Dow Jones Industrial AverageSM” in
the accompanying index supplement.
Information as of market close on October 8, 2019:
Bloomberg Ticker Symbol:
|
INDU
|
Current Index Value:
|
26,164.04
|
52 Weeks Ago:
|
26,486.78
|
52 Week High (on 7/15/2019):
|
27,359.16
|
52 Week Low (on 12/24/2018):
|
21,792.20
|
|
|
The following graph sets forth the daily closing values of the
INDU Index for the period from January 1, 2014 through October 8, 2019. The related table sets forth the published high and low
closing values, as well as end-of-quarter closing values, of the INDU Index for each quarter in the same period. The closing value
of the INDU Index on October 8, 2019 was 26,164.04. We obtained the information in the table below from Bloomberg Financial Markets,
without independent verification. The INDU Index has at times experienced periods of high volatility, and you should not take the
historical values of the INDU Index as an indication of its future performance.
INDU Index Daily Closing Values
January 1, 2014 to October 8, 2019
|
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Morgan Stanley Finance LLC
Trigger Jump Securities With Daily Trigger Monitoring Based on the Value of the Worst Performing of the S&P 500® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM due October 19, 2020
Principal at Risk Securities
Dow Jones Industrial AverageSM
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High
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Low
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Period End
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2014
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First Quarter
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16,530.94
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15,372.80
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16,457.66
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Second Quarter
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16,947.08
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16,026.75
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16,826.60
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Third Quarter
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17,279.74
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16,368.27
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17,042.90
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Fourth Quarter
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18,053.71
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16,117.24
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17,823.07
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2015
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First Quarter
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18,288.63
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17,164.95
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17,776.12
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Second Quarter
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18,312.39
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17,596.35
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17,619.51
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Third Quarter
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18,120.25
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15,666.44
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16,284.70
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Fourth Quarter
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17,918.15
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16,272.01
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17,425.03
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2016
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First Quarter
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17,716.66
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15,660.18
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17,685.09
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Second Quarter
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18,096.27
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17,140.24
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17,929.99
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Third Quarter
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18,636.05
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17,840.62
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18,308.15
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Fourth Quarter
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19,974.62
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17,888.28
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19,762.60
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2017
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First Quarter
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21,115.55
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19,732.40
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20,663.22
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Second Quarter
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21,528.99
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20,404.49
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21,349.63
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Third Quarter
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22,412.59
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21,320.04
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22,405.09
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Fourth Quarter
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24,837.51
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22,557.60
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24,719.22
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2018
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First Quarter
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26,616.71
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23,533.20
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24,103.11
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Second Quarter
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25,322.31
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23,644.19
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24,271.41
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Third Quarter
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26,743.50
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24,174.82
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26,458.31
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Fourth Quarter
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26,828.39
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21,792.20
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23,327.46
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2019
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First Quarter
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26,091.95
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22,686.22
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25,928.68
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Second Quarter
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26,753.17
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24,815.04
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26,599.96
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Third Quarter
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27,359.16
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25,479.42
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26,916.83
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Fourth Quarter (through October 8, 2019)
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26,573.72
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26,078.62
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26,164.04
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“Dow
Jones,” “Dow Jones Industrial Average,” “Dow Jones Indexes” and “DJIA” are service marks
of Dow Jones Trademark Holdings LLC. For more information, see “Dow Jones Industrial AverageSM” in the accompanying
index supplement.
Morgan Stanley Finance LLC
Trigger Jump Securities With Daily Trigger Monitoring Based on the Value of the Worst Performing of the S&P 500® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM due October 19, 2020
Principal at Risk Securities
Additional Terms of the Securities
Please read this information in conjunction with the summary
terms on the front cover of this document.
Additional Terms:
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If
the terms described herein are inconsistent with those described in the accompanying product supplement, index supplement
or prospectus, the terms described herein shall control.
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Trustee:
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The Bank of New York Mellon
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Calculation agent:
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Morgan Stanley & Co. LLC (“MS & Co.”)
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Underlying index publishers:
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With respect to each of the SPX Index and the INDU Index, S&P
Dow Jones Indices LLC, or any successor thereof.
With respect to the NDX Index, Nasdaq, Inc., or any successor
thereof.
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Issuer notice to registered security holders, the trustee and the depositary:
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In the event that the maturity date of the securities is postponed
due to postponement of the valuation date, the issuer shall give notice of such postponement and, once it has been determined,
of the date to which the maturity date has been rescheduled (i) to each registered holder of the 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 valuation date.
The Issuer shall, or shall cause the calculation agent to, (i)
provide written notice to the trustee, upon which the trustee may conclusively rely, 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 or prior to the maturity date.
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Morgan Stanley Finance LLC
Trigger Jump Securities With Daily Trigger Monitoring Based on the Value of the Worst Performing of the S&P 500® Index, the NASDAQ-100 Index® and the Dow Jones Industrial AverageSM due October 19, 2020
Principal at Risk Securities
Additional Information About the Securities
Additional Information:
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Minimum ticketing size:
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$1,000 / 1 security
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Tax considerations:
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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. However, because our counsel’s opinion is based in part on market conditions as of the date of this document, it is subject to confirmation on the pricing date.
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Assuming this treatment of the securities is respected and subject to the discussion in “United States Federal Taxation” in the accompanying product supplement for Jump Securities, the following U.S. federal income tax consequences should result based on current law:
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§ A U.S. Holder should not be required to recognize taxable income over the term of the securities prior to settlement, other than pursuant to a sale or exchange.
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§ Upon sale, exchange or settlement of the securities, a U.S. Holder should recognize gain or loss equal to the difference between the amount realized and the U.S. Holder’s tax basis in the securities. Such gain or loss should be long-term capital gain or loss if the investor has held the securities for more than one year, and short-term capital gain or loss otherwise.
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In 2007, the
U.S. Treasury Department and the Internal Revenue Service (the “IRS”) released a notice requesting comments on the
U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments. The notice focuses in particular
on whether to require holders of these instruments to accrue income over the term of their investment. It also asks for comments
on a number of related topics, including the character of income or loss with respect to these instruments; whether short-term
instruments should be subject to any such accrual regime; the relevance of factors such as the exchange-traded status of the instruments
and the nature of the underlying property to which the instruments are linked; the degree, if any, to which income (including any
mandated accruals) realized by non-U.S. investors should be subject to withholding tax; and whether these instruments are or should
be subject to the “constructive ownership” rule, which very generally can operate to recharacterize certain long-term
capital gain as ordinary income and impose an interest charge. While the notice requests comments on appropriate transition rules
and effective dates, any Treasury regulations or other guidance promulgated after consideration of these issues could materially
and adversely affect the tax consequences of an investment in the securities, possibly with retroactive effect.
As discussed
in the accompanying product supplement for Jump Securities, Section 871(m) of the Internal Revenue Code of 1986, as amended, and
Treasury regulations promulgated thereunder (“Section 871(m)”) generally impose a 30% (or a lower applicable treaty
rate) withholding tax on dividend equivalents paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments
linked to U.S. equities or indices that include U.S. equities (each, an “Underlying Security”). Subject to certain
exceptions, Section 871(m) generally applies to securities that substantially replicate the economic performance of one or more
Underlying Securities, as determined based on tests set forth in the applicable Treasury regulations (a “Specified Security”).
However, pursuant to an IRS notice, Section 871(m) will not apply to securities issued before January 1, 2021 that do not have
a delta of one with respect to any Underlying Security. Based on the terms of the 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.
Both U.S.
and non-U.S. investors considering an investment in the securities should read the discussion under “Risk Factors”
in this document and the discussion under “United States Federal Taxation” in the accompanying product supplement for
Jump Securities and consult their tax advisers regarding all aspects of the U.S. federal income tax consequences of an investment
in the securities, including possible alternative treatments, the issues presented by the aforementioned notice and any tax consequences
arising under the laws of any state, local or non-U.S. taxing jurisdiction.
The discussion
in the preceding paragraphs under “Tax considerations” and the discussion contained in the section entitled “United
States Federal Taxation” in the accompanying product supplement for Jump Securities, 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
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