CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities Offered
|
|
Maximum Aggregate Offering Price
|
|
Amount of Registration Fee
|
Contingent Income Auto-Callable Securities due 2021
|
|
$1,645,000
|
|
$213.52
|
|
|
|
|
|
October 2019
Pricing Supplement No. 2,575
Registration Statement Nos. 333-221595; 333-221595-01
Dated October 18, 2019
Filed pursuant to Rule 424(b)(2)
Morgan
Stanley Finance LLC
STRUCTURED INVESTMENTS
Opportunities in U.S. Equities
Contingent Income Auto-Callable Securities due
April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst
Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Fully
and Unconditionally Guaranteed by Morgan Stanley
Principal at Risk Securities
The securities are unsecured obligations of Morgan Stanley Finance
LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley. The securities have the terms described
in the accompanying product supplement, index supplement and prospectus, as supplemented or modified by this document. The
securities do not guarantee the repayment of principal and do not provide for the regular payment of interest. Instead,
the securities will pay a contingent monthly coupon but only if the index closing value of each of the Russell 2000®
Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index® is at or above its
coupon barrier level of 70% of its respective initial index value on the related observation date. If, however, the
index closing value of any underlying index is less than its coupon barrier level on any observation date, we will pay no
interest for the related monthly period. In addition, the securities will be automatically redeemed if the index closing
value of each underlying index is greater than or equal to its respective initial index value on any of the four quarterly
redemption determination dates (beginning approximately six months after the original issue date) for the early redemption payment
equal to the sum of the stated principal amount plus the related contingent monthly coupon. At maturity, if the securities
have not previously been redeemed and the index closing value of each underlying index has remained greater than or equal
to 70% of the respective initial index value, which we refer to as the downside threshold level, on each index business day
during the term of the securities, the payment at maturity will be the stated principal amount and the related contingent monthly
coupon. If, however, the index closing value of any underlying index is less than its respective downside threshold
level on any index business day during the term of the securities, a trigger event will have occurred and investors will
be fully exposed to the decline in the worst performing underlying index on a 1-to-1 basis and, if the final index value of any
underlying index is less than its initial index value, investors will receive a payment at maturity that is less than the stated
principal amount of the securities and could be zero. Accordingly, investors in the securities must be willing
to accept the risk of losing their entire initial investment and also the risk of not receiving any contingent monthly coupons
throughout the 1.5-year term of the securities. Because all payments on the securities are based on the worst performing
of the underlying indices, a decline beyond the respective coupon barrier level or respective downside threshold level, as applicable,
of any underlying index will result in few or no contingent coupon payments and a potentially significant loss of your investment,
even if one or both of the other underlying indices have appreciated or have not declined as much. The securities are
for investors who are willing to risk their principal and seek an opportunity to earn interest at a potentially above-market rate
in exchange for the risk of receiving no monthly coupons over the entire 1.5-year term. Investors will not participate
in any appreciation of any underlying index. The securities are notes issued as part of MSFL’s Series A Global
Medium-Term Notes program.
All payments are subject to our credit risk. If
we default on our obligations, you could lose some or all of your investment. These securities are not secured obligations and
you will not have any security interest in, or otherwise have any access to, any underlying reference asset or assets.
FINAL TERMS
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Issuer:
|
Morgan Stanley Finance LLC
|
Guarantor:
|
Morgan Stanley
|
Underlying indices:
|
Russell 2000® Index (the “RTY Index”), the Dow Jones Industrial AverageSM (the “INDU Index”) and the NASDAQ-100 Index® (the “NDX Index”)
|
Aggregate principal amount:
|
$1,645,000
|
Stated principal amount:
|
$1,000 per security
|
Issue price:
|
$1,000 per security
|
Pricing date:
|
October 18, 2019
|
Original issue date:
|
October 23, 2019 (3 business days after the pricing date)
|
Maturity date:
|
April 26, 2021
|
Early redemption:
|
The securities are not subject to automatic early redemption
until six months after the original issue date. Following this initial 6-month non-call period, if, on any of the four redemption
determination dates, beginning on April 20, 2020, the index closing value of each underlying index is greater than or equal
to its respective initial index value, the securities will be automatically redeemed for an early redemption payment on the
related early redemption date. No further payments will be made on the securities once they have been redeemed.
The securities will not be redeemed early on any early redemption
date if the index closing value of any underlying index is below the respective initial index value for such underlying index on
the related redemption determination date.
|
Early redemption payment:
|
The early redemption payment will be an amount equal to (i) the stated principal amount for each security you hold plus (ii) the contingent monthly coupon with respect to the related observation date.
|
Contingent monthly coupon:
|
A contingent coupon at an annual rate of 7.50% (corresponding
to approximately $6.25 per month per security) will be paid on the securities on each coupon payment date but only if
the closing value of each underlying index is at or above its respective coupon barrier level on the related observation
date.
If, on any observation date, the closing value of any underlying
index is less than the respective coupon barrier level for such underlying index, we will pay no coupon for the applicable monthly
period. It is possible that one or more underlying indices will remain below their respective coupon barrier levels for extended
periods of time or even throughout the entire 1.5-year term of the securities so that you will receive few or no contingent monthly
coupons.
|
Trigger event:
|
A trigger event occurs if, on any index business day from but excluding the pricing date to and including the final observation date, the closing level of any underlying index is less than its respective downside threshold level. 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.
|
Payment at maturity:
|
At maturity, investors will receive, in addition to the final
contingent monthly coupon payment, if payable, a payment at maturity determined as follows:
If a trigger event HAS NOT occurred on any index business
day from but excluding the pricing date to and including the final observation date: the stated principal amount
If a trigger event HAS occurred on any index business day
from but excluding the pricing date to and including the final observation date: (i) the stated principal amount multiplied
by (ii) the 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.
Under no circumstances will investors participate in any appreciation
of any underlying index.
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|
Terms continued on the following page
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Agent:
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Morgan Stanley & Co. LLC (“MS & Co.”), an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley. See “Supplemental information regarding plan of distribution; conflicts of interest.”
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Estimated value on the pricing date:
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$966.10 per security. See “Investment Summary” beginning on page 3.
|
Commissions and issue price:
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Price to public
|
Agent’s commissions(1)
|
Proceeds to us(2)
|
Per security
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$1,000
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$22.50
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$977.50
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Total
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$1,645,000
|
$37,012.50
|
$1,607,987.50
|
We also sold, pursuant to Pricing Supplement No. 2,576, a
separate issuance of securities, being sold only to fee-based advisory accounts, with terms similar to those of this issuance but
with a higher contingent monthly coupon rate.
|
(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 $22.50 for each security they sell. See “Supplemental information regarding plan of distribution;
conflicts of interest.” For additional information, see “Plan of Distribution (Conflicts of Interest)” in the
accompanying product supplement.
|
|
(2)
|
See “Use of proceeds and hedging” on page 32.
|
The
securities involve risks not associated with an investment in ordinary debt securities. See “Risk Factors”
beginning on page 14.
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.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Principal at Risk Securities
|
Terms continued from previous page:
|
Redemption determination dates:
|
Beginning after six months, quarterly, on April 20, 2020, July 20, 2020, October 19, 2020 and January 19, 2021, subject to postponement for non-index business days and certain market disruption events.
|
Early redemption dates:
|
Beginning after six months, quarterly, on April 23, 2020, July 23, 2020, October 22, 2020 and January 22, 2021. If any such day is not a business day, that early redemption payment will be made on the next succeeding business day and no adjustment will be made to any early redemption payment made on that succeeding business day.
|
Coupon barrier level:
|
With respect to the RTY Index: 1,074.837, which is approximately
70% of its initial index value
With respect to the INDU Index: 18,739.14, which is
70% of its initial index value
With respect to the NDX Index: 5,507.944, which is approximately
70% of its initial index value
|
Downside threshold level:
|
With respect to the RTY Index: 1,074.837, which is approximately
70% of its initial index value
With respect to the INDU Index: 18,739.14, which is 70% of its
initial index value
With respect to the NDX Index: 5,507.944, which is approximately
70% of its initial index value
|
Initial index value:
|
With respect to the RTY Index: 1,535.482, which is its index
closing value on the pricing date
With respect to the INDU Index: 26,770.20, which is
its index closing value on the pricing date
With respect to the NDX Index: 7,868.491, which is its index
closing value on the pricing date
|
Final index value:
|
With respect to each index, the respective index closing value on the final observation date
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Worst performing underlying:
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The underlying index with the largest percentage decrease from the respective initial index value to the respective final index value
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Index performance factor:
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Final index value divided by the initial index value
|
Coupon payment dates:
|
Monthly, as set forth under “Observation Dates and Coupon Payment Dates” below; provided that if any such day is not a business day, that contingent monthly coupon, if any, will be paid on the next succeeding business day and no adjustment will be made to any coupon payment made on that succeeding business day; provided further that the contingent monthly coupon, if any, with respect to the final observation date will be paid on the maturity date
|
Observation dates:
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Monthly, as set forth under “Observation Dates and Coupon Payment Dates” below, subject to postponement for non-index business days and certain market disruption events. We also refer to April 19, 2021 as the final observation date.
|
CUSIP / ISIN:
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61769HWH4 / US61769HWH47
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Listing:
|
The securities will not be listed on any securities exchange.
|
|
|
Observation Dates and Coupon
Payment Dates
Observation Dates
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Coupon Payment Dates
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November 18, 2019
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November 21, 2019
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December 18, 2019
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December 23, 2019
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January 21, 2020
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January 24, 2020
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February 18, 2020
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February 21, 2020
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March 18, 2020
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March 23, 2020
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April 20, 2020
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April 23, 2020
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May 18, 2020
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May 21, 2020
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June 18, 2020
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June 23, 2020
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July 20, 2020
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July 23, 2020
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August 18, 2020
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August 21, 2020
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September 18, 2020
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September 23, 2020
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October 19, 2020
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October 22, 2020
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November 18, 2020
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November 23, 2020
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December 18, 2020
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December 23, 2020
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January 19, 2021
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January 22, 2021
|
February 18, 2021
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February 23, 2021
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March 18, 2021
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March 23, 2021
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April 19, 2021 (final observation date)
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April 26, 2021 (maturity date)
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Principal at Risk Securities
|
Investment Summary
Contingent Income Auto-Callable Securities
Principal at Risk Securities
Contingent Income Auto-Callable Securities due April 26, 2021,
with 6-month Initial Non-Call Period All Payments on the Securities Based on the Worst Performing of the Russell 2000®
Index, Dow Jones Industrial AverageSM and the NASDAQ-100 Index® (the “securities”) do not
provide for the regular payment of interest. Instead, the securities will pay a contingent monthly coupon but only
if the index closing value of each underlying index is at or above 70% of its initial index value, which we refer
to as the respective coupon barrier level, on the related observation date. If the index closing value of any underlying
index is less than the respective coupon barrier level on any observation date, we will pay no coupon for the related monthly
period. It is possible that the index closing value of any underlying index could remain below the respective coupon
barrier level for extended periods of time or even throughout the entire 1.5-year term of the securities so that you will receive
few or no contingent monthly coupons during the term of the securities. We refer to these coupons as contingent,
because there is no guarantee that you will receive a coupon payment on any coupon payment date. Even if all underlying
indices were to be at or above their respective coupon barrier levels on some monthly observation dates, one or more underlying
indices may fluctuate below the respective coupon barrier level(s) on others. In addition, if the securities have not
been automatically called prior to maturity and the index closing value of any underlying index is less than 70% of the
respective initial index value, which we refer to as the downside threshold level, on any index business day during the
term of the securities, a trigger event will have occurred and investors will be fully exposed to the decline in the worst performing
underlying index on a 1-to-1 basis and, if the final index value of any underlying index is less than its initial index
value, investors will receive a payment at maturity that is less than the stated principal amount of the securities and could be
zero. Investors will not participate in any appreciation of any underlying index. Accordingly, investors in the securities
must be willing to accept the risk of losing their entire initial investment and also the risk of not receiving any contingent
monthly coupons throughout the entire 1.5-year term of the securities.
Maturity:
|
Approximately 1.5 years
|
Contingent monthly coupon:
|
A contingent monthly coupon at an annual rate of 7.50% (corresponding to approximately $6.25 per month per security) will be paid on the securities on each coupon payment date but only if the closing value of each underlying index is at or above the respective coupon barrier level on the related observation date. If on any observation date, the closing value of any underlying index is less than the respective coupon barrier level, we will pay no coupon for the applicable monthly period.
|
Automatic early redemption (beginning after six months):
|
If the index closing value of each underlying index is greater than or equal to its initial index value on any of the four quarterly redemption determination dates, beginning on April 20, 2020 (approximately six months after the original issue date), the securities will be automatically redeemed for an early redemption payment equal to the stated principal amount plus the contingent monthly coupon with respect to the related observation date.
|
Trigger event:
|
A trigger event occurs if, on any index business day from but excluding the pricing date to and including the final observation date, the closing level of any underlying index is less than its respective downside threshold level. If a trigger event occurs on any index business day during the term of the securities, investors will be exposed to the downside performance of the worst performing underlying index at maturity.
|
Payment at maturity:
|
At maturity, investors will receive, in addition to the final
contingent monthly coupon payment, if payable, a payment at maturity determined as follows:
If a trigger event HAS NOT occurred on any index business
day from but excluding the pricing date to and including the final observation date, investors will receive at maturity the
stated principal amount.
If a trigger event HAS occurred on any index business day
from but excluding
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Principal at Risk Securities
|
|
the pricing date to and including the final observation date,
investors will receive a payment at maturity equal to: (i) the stated principal amount multiplied by (ii) the 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.
Accordingly, investors in the securities must be willing to
accept the risk of losing their entire initial investment. Investors will not participate in any appreciation of any underlying
index.
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Principal at Risk Securities
|
The original issue price of each security is $1,000. This
price includes costs associated with issuing, selling, structuring and hedging the securities, which are borne by you, and, consequently,
the estimated value of the securities on the pricing date is less than $1,000. We estimate that the value of each security
on the pricing date is $966.10.
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.
What determines the economic terms of the securities?
In determining the economic terms of the securities, including
the contingent monthly coupon rate, the coupon barrier levels and the downside threshold levels, we use an internal funding rate,
which is likely to be lower than our secondary market credit spreads and therefore advantageous to us. If the issuing,
selling, structuring and hedging costs borne by you were lower or if the internal funding rate were higher, one or more 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
|
Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Principal at Risk Securities
|
Key Investment Rationale
The securities do not provide for the regular payment of interest. Instead,
the securities will pay a contingent monthly coupon but only if the index closing value of each underlying index is at
or above its respective coupon barrier level on the related observation date. The securities have been designed
for investors who are willing to forgo market floating interest rates and accept the risk of receiving no coupon payments for the
entire 1.5-year term of the securities in exchange for an opportunity to earn interest at a potentially above market rate if each
underlying index closes at or above its respective coupon barrier level on each monthly observation date until the securities are
redeemed early or reach maturity. The following scenarios are for illustrative purposes only to demonstrate how the
coupon and the payment at maturity (if the securities have not previously been redeemed) are calculated, and do not attempt to
demonstrate every situation that may occur. Accordingly, the securities may or may not be redeemed, the contingent coupon
may be payable in none of, or some but not all of, the monthly periods during the 1.5-year term of the securities and the payment
at maturity may be less than the stated principal amount of the securities and may be zero.
Scenario 1: The securities are redeemed prior to maturity
|
This scenario assumes that, prior to early redemption, each underlying
index closes at or above its coupon barrier level on some monthly observation dates, but one or more underlying indices close below
the respective coupon barrier level(s) on the others. Investors receive the contingent monthly coupon for the monthly
periods for which each index closing value is at or above the coupon respective barrier level on the related observation date,
but not for the monthly periods for which any index closing value is below the respective coupon barrier level on the related observation
date.
Starting on April 20, 2020, when each underlying index closes
at or above its initial index value on a quarterly redemption determination date, the securities will be automatically redeemed
for the stated principal amount plus the contingent monthly coupon with respect to the related observation date.
|
Scenario 2: The securities are not redeemed prior to maturity and investors receive principal back at maturity
|
This scenario assumes that a trigger event has not occurred, as each underlying index has closed at or above the respective downside threshold level on each index business day during the term of the securities. In addition, each underlying index closes below the respective initial index value on every quarterly redemption determination date. Consequently, the securities are not automatically redeemed, and investors receive the contingent monthly coupon for each monthly period, as each index closing value was at or above the respective coupon barrier level on each observation date. Because a trigger event has not occurred on any index business day during the term of the securities, at maturity, investors will receive the stated principal amount and the contingent monthly coupon with respect to the final observation date.
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Principal at Risk Securities
|
Scenario 3: The securities are not redeemed prior to maturity, a trigger event occurs on any index business day during the term of the securities and investors suffer a loss of principal at maturity
|
This scenario assumes that each underlying index closes at or
above its respective coupon barrier level on some monthly observation dates, but one or more underlying indices close below the
respective coupon barrier level(s) on the others, and each underlying index closes below the respective initial index value on
every quarterly redemption determination date. Consequently, the securities are not automatically redeemed and a trigger
event will have occurred. Investors receive the contingent monthly coupon for the monthly periods for which each index closing
value is at or above the respective coupon barrier level on the related observation date, but not for the monthly periods for which
any index closing value is below the respective coupon barrier level on the related observation date. On the final observation
date, one or more underlying indices close below the respective initial index value(s). At maturity, investors will
receive an amount equal to the stated principal amount multiplied by the index performance factor of the worst performing underlying
index. Under these circumstances, the payment at maturity will be less than the stated principal amount and could be
zero.
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
|
Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Principal at Risk Securities
|
How the Securities Work
The following diagrams illustrate the potential outcomes for
the securities depending on (1) the index closing values on each monthly observation date, (2) the index closing values on each
quarterly redemption determination date and (3) the final index values. Please see “Hypothetical Examples”
beginning on page 10 for illustration of hypothetical payouts on the securities.
Diagram #1: Contingent Monthly Coupons (Beginning
on the First Coupon Payment Date until Early Redemption or Maturity)
Diagram #2: Automatic Early Redemption (Beginning
Approximately Six Months After the Original Issue Date)
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Principal at Risk Securities
|
Diagram #3: Payment at Maturity
if No Automatic Early Redemption Occurs
For more information about the payout upon an early redemption
or at maturity in different hypothetical scenarios, see “Hypothetical Examples” starting on page 10.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Principal at Risk Securities
|
Hypothetical Examples
The following hypothetical examples illustrate how to determine
whether a contingent monthly coupon is paid with respect to an observation date and how to calculate the payment at maturity if
the securities have not been automatically redeemed early. The following examples are for illustrative purposes only. Whether
you receive a contingent monthly coupon will be determined by reference to the index closing value of each underlying index on
each monthly observation date, and the amount you will receive at maturity, if any, will be determined by reference to the index
closing value of each underlying index throughout the term of the securities. The actual initial index value, coupon
barrier level and downside threshold level for each underlying index are set forth on the cover of this document. All
payments on the securities, if any, are subject to our credit risk. The numbers in the hypothetical examples below may have been
rounded for the ease of analysis. The below examples are based on the following terms:
Contingent Monthly Coupon:
|
7.50% per annum (corresponding to approximately $6.25 per month
per security)*
With respect to each coupon payment date, a contingent monthly
coupon is paid but only if the index closing value of each underlying is at or above its respective coupon barrier level on the
related observation date.
|
Automatic Early Redemption:
|
If the index closing value of each underlying index is greater than or equal to its initial index value on any of the four quarterly redemption determination dates (beginning approximately six months after the original issue date), the securities will be automatically redeemed for an early redemption payment equal to the stated principal amount plus the contingent monthly coupon with respect to the related observation date.
|
Trigger event:
|
A trigger event occurs if, on any index business day from but excluding the pricing date to and including the final observation date, the closing level of any underlying index is less than its respective downside threshold level. If a trigger event occurs on any index business day during the term of the securities, investors will be exposed to the downside performance of the worst performing underlying index at maturity.
|
Payment at Maturity (if the securities have not been automatically redeemed early):
|
At maturity, investors will receive, in addition to the final
contingent monthly coupon payment, if payable, a payment at maturity determined as follows:
If a trigger event HAS NOT occurred on any index business
day from but excluding the pricing date to and including the final observation date: the stated principal amount
If a trigger event HAS occurred on any index business day
from but excluding the pricing date to and including the final observation date: (i) the stated principal amount multiplied
by (ii) the 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.
Under no circumstances will investors participate in any appreciation
of any underlying index.
|
Stated Principal Amount:
|
$1,000
|
Hypothetical Initial Index Value:
|
With respect to the RTY Index: 1,700
With respect to the INDU Index: 24,800
With respect to the NDX Index: 7,200
|
Hypothetical Coupon Barrier Level:
|
With respect to the RTY Index: 1,190, which is 70% of the hypothetical
initial index value for such index
With respect to the INDU Index: 17,360, which is 70% of the hypothetical
initial index value for such index
With respect to the NDX Index: 5,040, which is 70% of the hypothetical
initial index value for such index
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Principal at Risk Securities
|
Hypothetical Downside Threshold Level:
|
With respect to the RTY Index: 1,190, which is 70% of the hypothetical
initial index value for such index
With respect to the INDU Index: 17,360, which is 70% of the hypothetical
initial index value for such index
With respect to the NDX Index: 5,040, which is 70% of the hypothetical
initial index value for such index
|
* The actual contingent monthly coupon will be an amount determined
by the calculation agent based on the number of days in the applicable payment period, calculated on a 30/360 basis. The
hypothetical contingent monthly coupon of $6.25 is used in these examples for ease of analysis.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Principal at Risk Securities
|
How to determine whether a contingent monthly
coupon is payable with respect to an observation date:
|
|
Closing Level
|
Contingent Monthly Coupon
|
|
RTY Index
|
INDU Index
|
NDX Index
|
|
Hypothetical Observation Date 1
|
1,500 (at or above coupon barrier level)
|
17,450 (at or above coupon barrier level)
|
6,300 (at or above coupon barrier level)
|
$6.25
|
Hypothetical Observation Date 2
|
1,000 (below coupon barrier level)
|
21,080 (at or above coupon barrier level)
|
5,850 (at or above coupon barrier level)
|
$0
|
Hypothetical Observation Date 3
|
1,500 (at or above coupon barrier level)
|
20,584 (at or above coupon barrier level)
|
4,500 (below coupon barrier level)
|
$0
|
Hypothetical Observation Date 4
|
900 (below coupon barrier level)
|
11,400 (below coupon barrier level)
|
4,275 (below coupon barrier level)
|
$0
|
On hypothetical observation date 1, the RTY Index, the INDU Index
and the NDX Index all close at or above their respective coupon barrier levels. Therefore a contingent monthly coupon of $6.25
is paid on the relevant coupon payment date.
On each of the hypothetical observation dates 2 and 3, two underlying
indices close at or above their respective coupon barrier levels, but the other underlying index closes below its coupon barrier
level. Therefore, no contingent monthly coupon is paid on the relevant coupon payment date.
On hypothetical observation date 4, each underlying index closes
below its respective coupon barrier level, and, accordingly, no contingent monthly coupon is paid on the relevant coupon payment
date.
You will not receive a contingent monthly coupon on any coupon
payment date if the closing level of any underlying index is below its respective coupon barrier level on the related observation
date.
How to calculate the payment at maturity (if
the securities have not been automatically redeemed early):
Example 1: A trigger event HAS NOT occurred.
Final Index Value
|
|
RTY Index: 2,000
INDU Index: 27,000
|
|
|
NDX Index: 8,000
|
Payment at Maturity
|
=
|
$1,000.00 + $6.25 (contingent monthly coupon for the final monthly period)
|
|
=
|
$1,006.25
|
|
|
|
In example 1, the index closing values of the RTY Index, the
INDU Index and the NDX Index are all at or above their respective downside threshold levels on each index business day during
the term of the securities. Therefore, a trigger event has not occurred and investors receive at maturity the stated principal
amount of the securities and the contingent monthly coupon with respect to the final observation date. However, investors do not
participate in any appreciation of any underlying index.
Example 2: A trigger event HAS occurred.
Final Index Value
|
|
RTY Index: 2,500
INDU Index: 22,100
|
|
|
NDX Index: 5,760
|
|
|
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Principal at Risk Securities
|
Payment at Maturity
|
=
|
$6.25 (contingent monthly coupon for the final monthly period) + [$1,000 x index performance factor of the worst performing underlying index, subject to a maximum of the stated principal amount]
|
|
=
|
$6.25 + [$1,000 x (5,760 / 7,200)]
|
|
=
|
$806.25
|
|
|
|
In example 2, the index closing values of two underlying indices
are at or above their respective downside threshold levels on each index business day during the term of the securities, but the
index closing value of the other underlying index is below its downside threshold level on one or more index business days during
the term of the securities. The final index values of the RTY Index, the INDU Index and the NDX Index are at or above the respective
coupon barrier levels on the final observation date. However, because a trigger event has occurred, investors are exposed to the
downside performance of the worst performing underlying index at maturity, even though two of the underlying indices have appreciated.
Because the final index value of each underlying index is greater than its respective coupon barrier level, investors receive the
contingent monthly coupon with respect to the final observation date. The payment at maturity is an amount equal to the contingent
monthly coupon with respect to the final observation date plus (i) the stated principal amount times (ii) the index
performance factor of the worst performing underlying index.
Example 3: A trigger event HAS occurred.
Final Index Value
|
|
RTY Index: 850
INDU Index: 20,000
|
|
|
NDX Index: 4,680
|
Payment at Maturity
|
=
|
$1,000 x index performance factor of the worst performing underlying index
|
|
=
|
$1,000 x (850 / 1,700) = $500
|
|
=
|
$500
|
|
|
|
In example 3, the index closing values of the RTY Index, the
INDU Index and the NDX Index are all below the respective downside threshold levels on one or more index business days during the
term of the securities. Therefore, a trigger event has occurred, and investors are exposed to the downside performance of the worst
performing underlying index at maturity. Because the final index value of one or more of the underlying indices are below the respective
coupon barrier levels, investors do not receive the contingent monthly coupon with respect to the final observation date. The payment
at maturity is an amount equal to the stated principal amount times the index performance factor of the worst performing
underlying index.
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
|
Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Principal at Risk Securities
|
Risk Factors
The following is a list of certain key risk factors for investors
in the securities. For further discussion of these and other risks, you should read the section entitled “Risk
Factors” in the accompanying product supplement, 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.
|
§
|
The securities do not guarantee the return of any
principal. The terms of the securities differ from those of ordinary debt securities in that they do not guarantee
the repayment of any principal. If the securities have not been automatically redeemed prior to maturity and the index
closing value of any underlying index is less than its respective downside threshold level on any index business day
during the term of the securities, a trigger event will have occurred and you will be exposed to the decline in the closing value
of the worst performing underlying index, as compared to its initial index value, on a 1-to-1 basis at maturity. 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. In this case, you will receive for
each security that you hold at maturity an amount equal to the stated principal amount times the index performance factor
of the worst performing underlying index, subject to a maximum payment at maturity of the stated principal amount. In
this case, the payment at maturity will be less than the stated principal amount and could be zero.
|
|
§
|
The securities do not provide for the regular payment
of interest. The terms of the securities differ from those of ordinary debt securities in that they do not provide
for the regular payment of interest. Instead, the securities will pay a contingent monthly coupon but only if
the index closing value of each underlying index is at or above 70% of its respective initial index value, which
we refer to as the coupon barrier level, on the related observation date. If, on the other hand, the index closing value
of any underlying index is lower than the coupon barrier level for such underlying index on the relevant observation date
for any interest period, we will pay no coupon on the applicable coupon payment date. Moreover, in such a case, a trigger event
will necessarily have occurred, and you will have full downside exposure to the worst performing underlying index at maturity.
It is possible that the index closing value of one or more underlying indices will remain below the respective coupon barrier level(s)
for extended periods of time or even throughout the entire 1.5-year term of the securities so that you will receive few or no contingent
monthly coupons. If you do not earn sufficient contingent monthly coupons over the term of the securities, the overall
return on the securities may be less than the amount that would be paid on a conventional debt security of ours of comparable maturity.
|
|
§
|
You are exposed to the price risk of all three
underlying indices, with respect to both the contingent monthly coupons, if any, and the payment at maturity, if any. Your
return on the securities is not linked to a basket consisting of all three underlying indices. Rather, it will be contingent
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 all three underlying indices. 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. To receive any contingent monthly coupons, each underlying index must close at or above its respective
coupon barrier level on the applicable observation date. In addition, if the securities have not been automatically
redeemed early and the index closing value of any underlying index is less than its respective downside threshold level
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 decline in the worst performing underlying index over the term of the securities on a 1-to-1 basis, even if the other underlying
indices have appreciated or have not declined as much, and even if the worst performing underlying index is not the underlying
index that originally caused the occurrence of the trigger event. Under this scenario, the value of any such payment
will be less than the stated principal amount and could be zero. Accordingly, your investment is subject to the price
risk of all three underlying indices.
|
|
§
|
Because the securities are linked to the performance
of the worst performing underlying index, you are exposed to greater risks of receiving no contingent monthly coupons and sustaining
a significant loss on your investment than if the securities were linked to just one index. The risk that you will
not receive any contingent monthly coupons, or that you will suffer a loss on your investment, is greater if you invest in the
securities as opposed to
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Principal at Risk Securities
|
substantially similar securities that are linked to
the performance of just one underlying index. With three underlying indices, it is more likely that any underlying index
will close below its coupon barrier level on any observation date, or below its downside threshold level on any index business
day during the term of the securities, which would constitute a trigger event, than if the securities were linked to only one underlying
index. Therefore, it is more likely that you will not receive any contingent monthly coupons and that you will suffer
a loss on your investment. In addition, because each underlying index must close above its initial index value on a
monthly determination date in order for the securities to be called prior to maturity, the securities are less likely to be called
on any redemption determination date than if the securities were linked to just one underlying index.
|
§
|
The contingent monthly coupon, if any, is based
on the value of each underlying index on only the related monthly observation date at the end of the related interest period. Whether
the contingent monthly coupon will be paid on any coupon payment date will be determined at the end of the relevant interest period
based on the closing value of each underlying index on the relevant monthly observation date. As a result, you will
not know whether you will receive the contingent monthly coupon on any coupon payment date until near the end of the relevant interest
period. Moreover, because the contingent monthly coupon is based solely on the value of each underlying index on monthly
observation dates, if the closing value of any underlying index on any observation date is below the coupon barrier level for such
index, you will receive no coupon for the related interest period, even if the level of such underlying index was at or above its
respective coupon barrier level on other days during that interest period and even if the closing value of the other underlying
indices are at or above the coupon barrier levels for such indices.
|
|
§
|
Investors will not participate in any appreciation
in any underlying index. Regardless of whether or not a trigger event occurs, investors will not participate in
any appreciation in any underlying index from the initial index value for such index, and the return on the securities will be
limited to the contingent monthly coupons, if any, that are paid with respect to each observation date on which the index closing
value of each underlying index is greater than or equal to its respective coupon barrier level.
|
|
§
|
The market price will be influenced by many unpredictable
factors. Several factors, many of which are beyond our control, will influence the value of the securities in the
secondary market and the price at which MS & Co. may be willing to purchase or sell the securities in the secondary market. We
expect that generally the level of interest rates available in the market and the value of each underlying index on any index business
day, including in relation to its respective coupon barrier level and downside threshold level, will affect the value of the securities
more than any other factors. Other factors that may influence the value of the securities include:
|
|
o
|
the volatility (frequency and magnitude of changes in value) of the underlying indices,
|
|
o
|
whether a trigger event has occurred on any index business day during the term of the securities,
|
|
o
|
whether the index closing value of any underlying index has been below its respective coupon barrier level on any observation
date,
|
|
o
|
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 each underlying index,
|
|
o
|
dividend rates on the securities underlying the underlying indices,
|
|
o
|
the time remaining until the securities mature,
|
|
o
|
interest and yield rates in the market,
|
|
o
|
the availability of comparable instruments,
|
|
o
|
the composition of the underlying indices and changes in the constituent stocks of such indices, and
|
|
o
|
any actual or anticipated changes in our credit ratings or credit spreads.
|
Some or all of these factors will influence the price
that you will receive if you sell your securities prior to maturity. In particular, if any underlying index has closed near or
below its coupon barrier level and downside threshold level, the
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|
Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Principal at Risk Securities
|
market value of the securities is expected to decrease
substantially, and you may have to sell your securities at a substantial discount from the stated principal amount of $1,000 per
security.
You cannot predict the future performance of any underlying
index based on its historical performance. The value of any underlying index may decrease and be below the coupon barrier
level for such index on each observation date so that you will receive no return on your investment, and one or more underlying
indices may close below the respective downside threshold level(s) on any index business day during the term of the securities
so that you are exposed to the negative performance of the worst performing underlying index at maturity. There can
be no assurance that the index closing value of each underlying index will be at or above the respective coupon barrier level on
any observation date so that you will receive a coupon payment on the securities for the applicable interest period, or that it
will be at or above its respective downside threshold level on each index business day during the term of the securities so that
you do not suffer a loss on your initial investment in the securities. See “Russell 2000® Index
Overview,” “Dow Jones Industrial AverageSM Overview” and “NASDAQ-100 Index® Overview”
below.
|
§
|
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, upon early redemption or on any coupon payment
date, and therefore you are subject to our credit risk. The securities are not guaranteed by any other entity. If
we default on our obligations under the securities, your investment would be at risk and you could lose some or all of your investment. As
a result, the market value of the securities prior to maturity will be affected by changes in the market’s view of our creditworthiness. Any
actual or anticipated decline in our credit ratings or increase in the credit spreads charged by the market for taking our credit
risk is likely to adversely affect the market value of the securities.
|
|
§
|
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.
|
|
§
|
The securities are linked to the Russell 2000®
Index and are subject to risks associated with small-capitalization companies. As the Russell 2000®
Index is one of the underlying indices, and the Russell 2000® Index consists of stocks issued by companies with
relatively small market capitalization, the securities are linked to the value of small-capitalization companies. These
companies often have greater stock price volatility, lower trading volume and less liquidity than large-capitalization companies
and therefore the Russell 2000® Index may be more volatile than indices that consist of stocks issued by large-capitalization
companies. Stock prices of small-capitalization companies are also more vulnerable than those of large-capitalization
companies to adverse business and economic developments, and the stocks of small-capitalization companies may be thinly traded. In
addition, small capitalization companies are typically less well-established and less stable financially than large-capitalization
companies and may depend on a small number of key personnel, making them more vulnerable to loss of personnel. Such
companies tend to have smaller revenues, less diverse product lines, smaller shares of their product or service markets, fewer
financial resources and less competitive strengths than large-capitalization companies and are more susceptible to adverse developments
related to their products.
|
|
§
|
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 any underlying index.
|
|
§
|
Reinvestment risk. The term of your
investment in the securities may be shortened due to the automatic early redemption feature of the securities. If the
securities are redeemed prior to maturity, you will receive no more
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Principal at Risk Securities
|
contingent monthly coupons and may be forced to invest
in a lower interest rate environment and may not be able to reinvest at comparable terms or returns. However, under no circumstances
will the securities be redeemed in the first six months of the term of the securities.
|
§
|
The securities will not be listed on any securities
exchange and secondary trading may be limited. Accordingly, you should be willing to hold your securities for the entire
1.5-year term of the securities. The securities will not be listed on any securities exchange. Therefore,
there may be little or no secondary market for the securities. MS & Co. may, but is not obligated to, make a market
in the securities and, if it once chooses to make a market, may cease doing so at any time. When it does make a market,
it will generally do so for transactions of routine secondary market size at prices based on its estimate of the current value
of the securities, taking into account its bid/offer spread, our credit spreads, market volatility, the notional size of the proposed
sale, the cost of unwinding any related hedging positions, the time remaining to maturity and the likelihood that it will be able
to resell the securities. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade
or sell the securities easily. Since other broker-dealers may not participate significantly in the secondary market
for the securities, the price at which you may be able to trade your securities is likely to depend on the price, if any, at which
MS & Co. is willing to transact. If, at any time, MS & Co. were to cease making a market in the securities,
it is likely that there would be no secondary market for the securities. Accordingly, you should be willing to hold
your securities to maturity.
|
|
§
|
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.
|
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 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 will be influenced by many unpredictable
factors” above.
|
|
§
|
Hedging and trading activity by our affiliates
could potentially affect the value of the securities. One or more of our affiliates and/or third-party dealers have
carried out, and will continue to carry out, hedging activities related to the
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Principal at Risk Securities
|
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 final observation 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
have increased the initial index value of an underlying index, and, therefore, could have increased (i) the value at or above which
such underlying index must close on the redemption determination dates so that the securities are redeemed prior to maturity for
the early redemption payment (depending also on the performance of the other underlying indices), (ii) the coupon barrier level
for such underlying index, which is the value at or above which such underlying index must close on the observation dates in order
for you to earn a contingent monthly coupon (depending also on the performance of the other underlying indices) and (iii) the downside
threshold level for such underlying index, which is 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 at maturity (depending also on the performance of the other underlying indices). Additionally, such
hedging or trading activities during the term of the securities could affect the value of an underlying index throughout the term
of the securities, and, accordingly, whether we redeem the securities prior to maturity, whether we pay a contingent monthly coupon
on the securities and the amount of cash you receive at maturity, if any (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. has determined the initial index value, the coupon barrier level and the downside threshold level for each
underlying index and will determine whether you receive a contingent monthly coupon on each coupon payment date and/or at maturity,
whether the securities will be redeemed on any early redemption date, whether a trigger event has occurred and the payment 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 value 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 Auto-Callable
Securities—Postponement of Determination Dates," "—Alternate Exchange Calculation in Case of an Event of
Default,” "—Discontinuance of Any Underlying Index; Alteration of Method of Calculation” 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.
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|
§
|
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 component
stocks of such underlying 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 each 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
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 any relevant date of calculation,
the determination of whether a contingent monthly coupon will be payable on the securities on the applicable coupon payment date,
and/or the amount payable at maturity, will be based on the value of such underlying index, based on the closing prices of the
stocks constituting such underlying 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 such underlying index last in effect prior to
such discontinuance, as compared to the coupon barrier level or downside threshold level, as applicable (depending also on the
performance of the other underlying index).
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Principal at Risk Securities
|
|
§
|
The U.S. federal income tax consequences of an
investment in the securities are uncertain. There is no direct legal authority as to the proper treatment of the securities
for U.S. federal income tax purposes, and, therefore, significant aspects of the tax treatment of the securities are uncertain.
|
Please read the discussion under “Additional
Information—Tax considerations” in this document concerning the U.S. federal income tax consequences of an investment
in the securities. We intend to treat a security for U.S. federal income tax purposes as a single financial contract
that provides for a coupon that will be treated as gross income to you at the time received or accrued, in accordance with your
regular method of tax accounting. Under this treatment, the ordinary income treatment of the coupon payments, in conjunction
with the capital loss treatment of any loss recognized upon the sale, exchange or settlement of the securities, could result in
adverse tax consequences to holders of the securities because the deductibility of capital losses is subject to limitations. We
do not plan to request a ruling from the Internal Revenue Service (the “IRS”) regarding the tax treatment of the securities,
and the IRS or a court may not agree with the tax treatment described herein. If the IRS were successful in asserting
an alternative treatment for the securities, the timing and character of income or loss on the securities might differ significantly
from the tax treatment described herein. For example, under one possible treatment, the IRS could seek to recharacterize
the securities as debt instruments. In that event, U.S. Holders (as defined below) would be required to accrue into
income original issue discount on the securities every year at a “comparable yield” determined at the time of issuance
(as adjusted based on the difference, if any, between the actual and the projected amount of any contingent payments on the securities)
and recognize all income and gain in respect of the securities as ordinary income. The risk that financial instruments
providing for buffers, triggers or similar downside protection features, such as the securities, would be recharacterized as debt
is greater than the risk of recharacterization for comparable financial instruments that do not have such features.
Non-U.S. Holders (as defined below) should note
that we currently intend to withhold on any coupon paid to Non-U.S. Holders generally at a rate of 30%, or at a reduced rate specified
by an applicable income tax treaty under an “other income” or similar provision, and will not be required to pay any
additional amounts with respect to amounts withheld.
In 2007, the U.S. Treasury Department and the IRS
released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar
instruments. While it is not clear whether the securities would be viewed as similar to the prepaid forward contracts
described in the notice, it is possible that any Treasury regulations or other guidance promulgated after consideration of these
issues could materially and adversely affect the tax consequences of an investment in the securities, possibly with retroactive
effect. The notice focuses on a number of issues, the most relevant of which for holders of the securities are the character
and timing of income or loss and the degree, if any, to which income realized by non-U.S. investors should be subject to withholding
tax. Both U.S. and Non-U.S. Holders should consult their tax advisers regarding the U.S. federal income tax consequences
of an investment in the securities, including possible alternative treatments, the issues presented by this notice and any tax
consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Principal at Risk Securities
|
Russell 2000® Index Overview
The Russell 2000® Index is an index calculated,
published and disseminated by FTSE Russell, and measures the composite price performance of stocks of 2,000 companies incorporated
in the U.S. and its territories. All 2,000 stocks are traded on a major U.S. exchange and are the 2,000 smallest securities
that form the Russell 3000® Index. The Russell 3000® Index is composed of the 3,000
largest U.S. companies as determined by market capitalization and represents approximately 98% of the U.S. equity market. The
Russell 2000® Index consists of the smallest 2,000 companies included in the Russell 3000®
Index and represents a small portion of the total market capitalization of the Russell 3000® Index. The
Russell 2000® Index is designed to track the performance of the small capitalization segment of the U.S.
equity market. For additional information about the Russell 2000® Index, see the information set forth
under “Russell 2000® Index” in the accompanying index supplement.
Information as of market close on October 18, 2019:
Bloomberg Ticker Symbol:
|
RTY
|
52 Week High (on 5/6/2019):
|
1,614.976
|
Current Index Value:
|
1,535.482
|
52 Week Low (on 12/24/2018):
|
1,266.925
|
52 Weeks Ago:
|
1,560.752
|
|
|
|
|
|
|
The following graph sets forth the daily closing values of the
RTY Index for the period from January 1, 2014 through October 18, 2019. The related table sets forth the published high
and low closing values, as well as end-of-quarter closing values, of the RTY Index for each quarter in the same period. The
closing value of the RTY Index on October 18, 2019 was 1,535.482. We obtained the information in the table and graph
below from Bloomberg Financial Markets, without independent verification. The RTY Index has at times experienced periods
of high volatility, and you should not take the historical values of the RTY Index as an indication of its future performance.
RTY Index Daily Closing
Values
January 1, 2014 to October
18, 2019
|
|
*The red solid line indicates both the downside threshold level and the coupon barrier level of 1,074.837, which is approximately 70% of the initial index value.
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Principal at Risk Securities
|
Russell 2000® Index
|
High
|
Low
|
Period End
|
2014
|
|
|
|
First Quarter
|
1,208.651
|
1,093.594
|
1,173.038
|
Second Quarter
|
1,192.960
|
1,095.986
|
1,192.960
|
Third Quarter
|
1,208.150
|
1,101.676
|
1,101.676
|
Fourth Quarter
|
1,219.109
|
1,049.303
|
1,204.696
|
2015
|
|
|
|
First Quarter
|
1,266.373
|
1,154.709
|
1,252.772
|
Second Quarter
|
1,295.799
|
1,215.417
|
1,253.947
|
Third Quarter
|
1,273.328
|
1,083.907
|
1,100.688
|
Fourth Quarter
|
1,204.159
|
1,097.552
|
1,135.889
|
2016
|
|
|
|
First Quarter
|
1,114.028
|
953.715
|
1,114.028
|
Second Quarter
|
1,188.954
|
1,089.646
|
1,151.923
|
Third Quarter
|
1,263.438
|
1,139.453
|
1,251.646
|
Fourth Quarter
|
1,388.073
|
1,156.885
|
1,357.130
|
2017
|
|
|
|
First Quarter
|
1,413.635
|
1,345.598
|
1,385.920
|
Second Quarter
|
1,425.985
|
1,345.244
|
1,415.359
|
Third Quarter
|
1,490.861
|
1,356.905
|
1,490.861
|
Fourth Quarter
|
1,548.926
|
1,464.095
|
1,535.511
|
2018
|
|
|
|
First Quarter
|
1,610.706
|
1,463.793
|
1,529.427
|
Second Quarter
|
1,706.985
|
1,492.531
|
1,643.069
|
Third Quarter
|
1,740.753
|
1,653.132
|
1,696.571
|
Fourth Quarter
|
1,672.992
|
1,266.925
|
1,348.559
|
2019
|
|
|
|
First Quarter
|
1,590.062
|
1,330.831
|
1,539.739
|
Second Quarter
|
1,614.976
|
1,465.487
|
1,566.572
|
Third Quarter
|
1,585.599
|
1,456.039
|
1,523.373
|
Fourth Quarter (through October 18, 2019)
|
1,541.844
|
1,472.598
|
1,535.482
|
|
|
|
|
The “Russell 2000® Index” is a trademark
of FTSE Russell. For more information, see “Russell 2000® Index” in the accompanying index
supplement.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Principal at Risk Securities
|
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 18, 2019:
Bloomberg Ticker Symbol:
|
INDU
|
52 Week High (on 7/15/2019):
|
27,359.16
|
Current Index Value:
|
26,770.20
|
52 Week Low (on 12/24/2018):
|
21,792.20
|
52 Weeks Ago:
|
25,379.45
|
|
|
|
|
|
|
The following graph sets forth the daily closing values of the
INDU Index for the period from January 1, 2014 through October 18, 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 18, 2019 was 26,770.20. We obtained the information in the table and graph
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 18, 2019
|
|
* The red solid line indicates both the downside threshold
level and the coupon barrier level of 18,739.14, which is 70% of the initial index value.
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Principal at Risk Securities
|
Dow Jones Industrial AverageSM
|
High
|
Low
|
Period End
|
2014
|
|
|
|
First Quarter
|
16,530.94
|
15,372.80
|
16,457.66
|
Second Quarter
|
16,947.08
|
16,026.75
|
16,826.60
|
Third Quarter
|
17,279.74
|
16,368.27
|
17,042.90
|
Fourth Quarter
|
18,053.71
|
16,117.24
|
17,823.07
|
2015
|
|
|
|
First Quarter
|
18,288.63
|
17,164.95
|
17,776.12
|
Second Quarter
|
18,312.39
|
17,596.35
|
17,619.51
|
Third Quarter
|
18,120.25
|
15,666.44
|
16,284.70
|
Fourth Quarter
|
17,918.15
|
16,272.01
|
17,425.03
|
2016
|
|
|
|
First Quarter
|
17,716.66
|
15,660.18
|
17,685.09
|
Second Quarter
|
18,096.27
|
17,140.24
|
17,929.99
|
Third Quarter
|
18,636.05
|
17,840.62
|
18,308.15
|
Fourth Quarter
|
19,974.62
|
17,888.28
|
19,762.60
|
2017
|
|
|
|
First Quarter
|
21,115.55
|
19,732.40
|
20,663.22
|
Second Quarter
|
21,528.99
|
20,404.49
|
21,349.63
|
Third Quarter
|
22,412.59
|
21,320.04
|
22,405.09
|
Fourth Quarter
|
24,837.51
|
22,557.60
|
24,719.22
|
2018
|
|
|
|
First Quarter
|
26,616.71
|
23,533.20
|
24,103.11
|
Second Quarter
|
25,322.31
|
23,644.19
|
24,271.41
|
Third Quarter
|
26,743.50
|
24,174.82
|
26,458.31
|
Fourth Quarter
|
26,828.39
|
21,792.20
|
23,327.46
|
2019
|
|
|
|
First Quarter
|
26,091.95
|
22,686.22
|
25,928.68
|
Second Quarter
|
26,753.17
|
24,815.04
|
26,599.96
|
Third Quarter
|
27,359.16
|
25,479.42
|
26,916.83
|
Fourth Quarter (through October 18, 2019)
|
27,025.88
|
26,078.62
|
26,770.20
|
|
|
|
|
“Dow Jones,” “Dow Jones Industrial Average,”
“Dow Jones Indexes” and “DJIA” are service marks of Dow Jones Trademark Holdings LLC. See “Dow Jones
Industrial AverageSM” in the accompanying index supplement.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
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 18, 2019:
Bloomberg Ticker Symbol:
|
NDX
|
52 Week High (on 7/26/2019):
|
8,016.953
|
Current Index Value:
|
7,868.491
|
52 Week Low (on 12/24/2018):
|
5,899.354
|
52 Weeks Ago:
|
7,116.088
|
|
|
|
|
|
|
The following graph sets forth the daily closing values of the
NDX Index for the period from January 1, 2014 through October 18, 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 18, 2019 was 7,868.491. We obtained the information in the table and graph
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
18, 2019
|
|
* The red solid line indicates both the downside threshold level and the coupon barrier level of 5,507.944, which is approximately 70% of the initial index value.
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
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 18, 2019)
|
7,942.851
|
7,550.786
|
7,868.491
|
|
|
|
|
“Nasdaq®,” “NASDAQ-100®”
and “NASDAQ-100 Index®” are trademarks of Nasdaq, Inc. For more information, see “NASDAQ-100 Index®”
in the accompanying index supplement.
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
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.
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 publishers:
|
With respect to the RTY Index, FTSE Russell, or any successor
thereof.
With respect to 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.
|
Index closing value:
|
With respect to the RTY Index, the index closing value on any
index business day shall be determined by the calculation agent and shall equal the closing value of the RTY Index, or any successor
underlying index (as defined under “Discontinuance of an Underlying Index; Alteration of Method of Calculation” in
the accompanying product supplement), reported by Bloomberg Financial Services, or any successor reporting service the calculation
agent may select, on such index business day. In certain circumstances, the index closing value for the RTY Index shall be based
on the alternate calculation of the RTY Index described under “Discontinuance of an Underlying Index; Alteration of Method
of Calculation” in the accompanying product supplement.
With respect to each of the INDU Index and the NDX Index, the
index closing value on any index business day shall be determined by the calculation agent and shall equal the official closing
value of such underlying index, or any successor underlying index (as defined under “Discontinuance of an Underlying Index;
Alteration of Method of Calculation” in the accompanying product supplement), published at the regular official weekday close
of trading on such index business day by the underlying index publisher for such underlying index. In certain circumstances, the
index closing value for the INDU Index or the NDX Index shall be based on the alternate calculation of such underlying index described
under “Discontinuance of an Underlying Index; Alteration of Method of Calculation” in the accompanying product supplement.
|
Interest period:
|
The monthly period from and including the original issue date (in the case of the first interest period) or the previous scheduled coupon payment date, as applicable, to but excluding the following scheduled coupon payment date, with no adjustment for any postponement thereof.
|
Record date:
|
The record date for each coupon payment date shall be the date one business day prior to such scheduled coupon payment date; provided, however, that any coupon payable at maturity (or upon early redemption) shall be payable to the person to whom the payment at maturity or early redemption payment, as the case may be, shall be payable.
|
Downside threshold level:
|
The accompanying product supplement refers to the downside threshold level as the “trigger level.”
|
Day count convention:
|
Interest will be computed on the basis of a 360-day year of twelve 30-day months.
|
Postponement of coupon payment dates (including the maturity date) and early redemption dates:
|
If any observation date or redemption determination date is postponed due to a non-index business day or certain market disruption events so that it falls less than two business days prior to the relevant scheduled coupon payment date (including the maturity date) or early redemption date, as applicable, the coupon payment date (or the maturity date) or the early redemption date will be postponed to the second business day following that observation date or redemption determination date as postponed, and no adjustment will be made to any coupon payment or early redemption payment made on that postponed date.
|
Denominations:
|
$1,000 per security and integral multiples thereof
|
Trustee:
|
The Bank of New York Mellon
|
Calculation agent:
|
MS & Co.
|
Issuer notices to registered security holders, the trustee and the depositary:
|
In the event that the maturity date is postponed due to postponement
of the final observation date, the issuer shall give notice of such postponement and, once it has been determined, of the date
to which the maturity date has been rescheduled (i) to each registered holder of the securities by mailing notice of such postponement
by first class mail, postage prepaid, to such registered holder’s last address as it shall appear upon the registry books,
(ii) to the trustee by facsimile, confirmed by mailing such notice to the trustee by first class mail, postage prepaid, at its
New York office and (iii) to The Depository Trust Company (the “depositary”) by telephone or facsimile confirmed by
mailing such notice to the depositary by first class mail, postage prepaid. Any notice that is mailed to a registered holder of
the securities in the
|
Morgan Stanley Finance LLC
|
Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Principal at Risk Securities
|
|
manner herein provided shall be conclusively presumed to have
been duly given to such registered holder, whether or not such registered holder receives the notice. The issuer shall give such
notice as promptly as possible, and in no case later than (i) with respect to notice of postponement of the maturity date, the
business day immediately preceding the scheduled maturity date and (ii) with respect to notice of the date to which the maturity
date has been rescheduled, the business day immediately following the final observation date as postponed.
In the event that the securities are subject to early redemption,
the issuer shall, (i) on the business day following the applicable redemption determination date, give notice of the early redemption
and the early redemption payment, including specifying the payment date of the amount due upon the early redemption, (x) to each
registered holder of the securities by mailing notice of such early redemption by first class mail, postage prepaid, to such registered
holder’s last address as it shall appear upon the registry books, (y) to the trustee by facsimile confirmed by mailing such
notice to the trustee by first class mail, postage prepaid, at its New York office and (z) to the depositary by telephone or facsimile
confirmed by mailing such notice to the depositary by first class mail, postage prepaid, and (ii) on or prior to the early redemption
date, deliver the aggregate cash amount due with respect to the securities to the trustee for delivery to the depositary, as holder
of the securities. Any notice that is mailed to a registered holder of the securities in the manner herein provided shall be conclusively
presumed to have been duly given to such registered holder, whether or not such registered holder receives the notice. This notice
shall be given by the issuer or, at the issuer’s request, by the trustee in the name and at the expense of the issuer, with
any such request to be accompanied by a copy of the notice to be given.
The issuer shall, or shall cause the calculation agent to, (i)
provide written notice to the trustee, on which notice the trustee may conclusively rely, and to the depositary of the amount of
cash to be delivered as contingent monthly coupon, if any, with respect to each security on or prior to 10:30 a.m. (New York City
time) on the business day preceding each coupon payment date, and (ii) deliver the aggregate cash amount due, if any, with respect
to the contingent monthly coupon to the trustee for delivery to the depositary, as holder of the securities, on the applicable
coupon payment date.
The issuer shall, or shall cause the calculation agent to, (i)
provide written notice to the trustee, on which notice the trustee may conclusively rely, and to the depositary of the amount of
cash to be delivered with respect to each stated principal amount of the securities, on or prior to 10:30 a.m. (New York City time)
on the business day preceding the maturity date, and (ii) deliver the aggregate cash amount due with respect to the securities
to the trustee for delivery to the depositary, as holder of the securities, on the maturity date.
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Morgan Stanley Finance LLC
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Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Principal at Risk Securities
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Additional Information About the Securities
Minimum ticketing size:
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$1,000 / 1 security
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Tax considerations:
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Prospective investors should note that the discussion under
the section called “United States Federal Taxation” in the accompanying product supplement does not apply to the securities
issued under this document and is superseded by the following discussion.
The following is a general discussion of the material U.S. federal
income tax consequences and certain estate tax consequences of the ownership and disposition of the securities. This
discussion applies only to investors in the securities who:
· purchase
the securities in the original offering; and
· hold
the securities as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”).
This discussion does not describe all of the tax consequences
that may be relevant to a holder in light of the holder’s particular circumstances or to holders subject to special rules,
such as:
· certain
financial institutions;
· insurance
companies;
· certain
dealers and traders in securities or commodities;
· investors
holding the securities as part of a “straddle,” wash sale, conversion transaction, integrated transaction or constructive
sale transaction;
· U.S.
Holders (as defined below) whose functional currency is not the U.S. dollar;
· partnerships
or other entities classified as partnerships for U.S. federal income tax purposes;
· regulated
investment companies;
· real
estate investment trusts; or
· tax-exempt
entities, including “individual retirement accounts” or “Roth IRAs” as defined in Section 408 or 408A of
the Code, respectively.
If an entity that is classified as a partnership for U.S. federal
income tax purposes holds the securities, the U.S. federal income tax treatment of a partner will generally depend on the status
of the partner and the activities of the partnership. If you are a partnership holding the securities or a partner in such a partnership,
you should consult your tax adviser as to the particular U.S. federal tax consequences of holding and disposing of the securities
to you.
As the law applicable to the U.S. federal income taxation of
instruments such as the securities is technical and complex, the discussion below necessarily represents only a general summary.
The effect of any applicable state, local or non-U.S. tax laws is not discussed, nor are any alternative minimum tax consequences
or consequences resulting from the Medicare tax on investment income. Moreover, the discussion below does not address the consequences
to taxpayers subject to special tax accounting rules under Section 451(b) of the Code.
This discussion is based on the Code, administrative pronouncements,
judicial decisions and final, temporary and proposed Treasury regulations, all as of the date hereof, changes to any of which subsequent
to the date hereof may affect the tax consequences described herein. Persons considering the purchase of the securities
should consult their tax advisers with regard to the application of the U.S. federal income tax laws to their particular situations
as well as any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
General
Due to the absence of statutory, judicial or administrative authorities
that directly address the treatment of the securities or instruments that are similar to the securities for U.S. federal income
tax purposes, no assurance can be given that the IRS or a court will agree with the tax
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Morgan Stanley Finance LLC
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Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Principal at Risk Securities
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treatment described herein. We intend to treat a security
for U.S. federal income tax purposes as a single financial contract that provides for a coupon that will be treated as gross income
to you at the time received or accrued in accordance with your regular method of tax accounting. In the opinion of our
counsel, Davis Polk & Wardwell LLP, this treatment of the securities is reasonable under current law; however, our counsel
has advised us that it is unable to conclude affirmatively that this treatment is more likely than not to be upheld, and that alternative
treatments are possible.
You should consult your tax adviser regarding all aspects
of the U.S. federal tax consequences of an investment in the securities (including possible alternative treatments of the securities). Unless
otherwise stated, the following discussion is based on the treatment of each security as described in the previous paragraph.
Tax Consequences to U.S. Holders
This section applies to you only if you are a U.S. Holder. As
used herein, the term “U.S. Holder” means a beneficial owner of a security that is, for U.S. federal income tax purposes:
· a
citizen or individual resident of the United States;
· a
corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state
thereof or the District of Columbia; or
· an
estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.
Tax Treatment of the Securities
Assuming the treatment of the securities
as set forth above is respected, the following U.S. federal income tax consequences should result.
Tax Basis. A U.S. Holder’s
tax basis in the securities should equal the amount paid by the U.S. Holder to acquire the securities.
Tax Treatment of Coupon Payments. Any
coupon payment on the securities should be taxable as ordinary income to a U.S. Holder at the time received or accrued, in accordance
with the U.S. Holder’s regular method of accounting for U.S. federal income tax purposes.
Sale, Exchange or Settlement of the Securities. Upon
a sale, exchange or settlement of the securities, a U.S. Holder should recognize gain or loss equal to the difference between the
amount realized on the sale, exchange or settlement and the U.S. Holder’s tax basis in the securities sold, exchanged or
settled. For this purpose, the amount realized does not include any coupon paid at settlement and may not include sale
proceeds attributable to an accrued coupon, which may be treated as a coupon payment. Any such gain or loss recognized
should be long-term capital gain or loss if the U.S. Holder has held the securities for more than one year at the time of the sale,
exchange or settlement, and should be short-term capital gain or loss otherwise. The ordinary income treatment of the
coupon payments, in conjunction with the capital loss treatment of any loss recognized upon the sale, exchange or settlement of
the securities, could result in adverse tax consequences to holders of the securities because the deductibility of capital losses
is subject to limitations.
Possible Alternative Tax Treatments of an Investment in
the Securities
Due to the absence of authorities that directly address the proper
tax treatment of the securities, no assurance can be given that the IRS will accept, or that a court will uphold, the treatment
described above. In particular, the IRS could seek to analyze the U.S. federal income tax consequences of owning the securities
under Treasury regulations governing contingent payment debt instruments (the “Contingent Debt Regulations”). If the
IRS were successful in asserting that the Contingent Debt Regulations applied to the securities, the timing and character of income
thereon would be significantly affected. Among other things, a U.S. Holder would be required to accrue into income original issue
discount on the securities every year at a “comparable yield” determined at the time of their issuance, adjusted upward
or downward to reflect the difference, if any, between the actual and the projected amount of any contingent payments on the securities.
Furthermore, any gain realized by a U.S. Holder at
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Morgan Stanley Finance LLC
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Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Principal at Risk Securities
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maturity or upon a sale, exchange or other disposition of the
securities would be treated as ordinary income, and any loss realized would be treated as ordinary loss to the extent of the U.S.
Holder’s prior accruals of original issue discount and as capital loss thereafter. The risk that financial instruments
providing for buffers, triggers or similar downside protection features, such as the securities, would be recharacterized as debt
is greater than the risk of recharacterization for comparable financial instruments that do not have such features.
Other alternative federal income tax treatments of the securities
are possible, which, if applied, could significantly affect the timing and character of the income or loss with respect to the
securities. In 2007, the U.S. Treasury Department and the IRS released a notice requesting comments on the U.S. federal
income tax treatment of “prepaid forward contracts” and similar instruments. The notice focuses on whether
to require holders of “prepaid forward contracts” and similar instruments to accrue income over the term of their investment. It
also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments;
whether short-term instruments should be subject to any such accrual regime; the relevance of factors such as the exchange–traded
status of the instruments and the nature of the underlying property to which the instruments are linked; whether these instruments
are or should be subject to the “constructive ownership” rule, which very generally can operate to recharacterize certain
long-term capital gain as ordinary income and impose an interest charge; and appropriate transition rules and effective dates. While
it is not clear whether instruments such as the securities would be viewed as similar to the prepaid forward contracts described
in the notice, any Treasury regulations or other guidance promulgated after consideration of these issues could materially and
adversely affect the tax consequences of an investment in the securities, possibly with retroactive effect. U.S. Holders
should consult their tax advisers regarding the U.S. federal income tax consequences of an investment in the securities, including
possible alternative treatments and the issues presented by this notice.
Backup Withholding and Information Reporting
Backup withholding may apply in respect of payments on the securities
and the payment of proceeds from a sale, exchange or other disposition of the securities, unless a U.S. Holder provides proof of
an applicable exemption or a correct taxpayer identification number and otherwise complies with applicable requirements of the
backup withholding rules. The amounts withheld under the backup withholding rules are not an additional tax and may
be refunded, or credited against the U.S. Holder’s U.S. federal income tax liability, provided that the required information
is timely furnished to the IRS. In addition, information returns will be filed with the IRS in connection with payments
on the securities and the payment of proceeds from a sale, exchange or other disposition of the securities, unless the U.S. Holder
provides proof of an applicable exemption from the information reporting rules.
Tax Consequences to Non-U.S. Holders
This section applies to you only if you are a Non-U.S. Holder. As
used herein, the term “Non-U.S. Holder” means a beneficial owner of a security that is for U.S. federal income tax
purposes:
· an
individual who is classified as a nonresident alien;
· a
foreign corporation; or
· a
foreign estate or trust.
The term “Non-U.S. Holder” does not include any of
the following holders:
· a
holder who is an individual present in the United States for 183 days or more in the taxable year of disposition and who is not
otherwise a resident of the United States for U.S. federal income tax purposes;
· certain
former citizens or residents of the United States; or
· a
holder for whom income or gain in respect of the securities is effectively connected with the conduct of a trade or business in
the United States.
Such holders should consult their tax advisers regarding the
U.S. federal income tax consequences of an investment in the securities.
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Morgan Stanley Finance LLC
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Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Principal at Risk Securities
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Although significant aspects of the tax treatment of each security
are uncertain, we intend to withhold on any coupon paid to a Non-U.S. Holder generally at a rate of 30% or at a reduced rate specified
by an applicable income tax treaty under an “other income” or similar provision. We will not be required
to pay any additional amounts with respect to amounts withheld. In order to claim an exemption from, or a reduction
in, the 30% withholding tax, a Non-U.S. Holder of the securities must comply with certification requirements to establish that
it is not a U.S. person and is eligible for such an exemption or reduction under an applicable tax treaty. If you are
a Non-U.S. Holder, you should consult your tax adviser regarding the tax treatment of the securities, including the possibility
of obtaining a refund of any withholding tax and the certification requirement described above.
Section 871(m) Withholding Tax on Dividend Equivalents
Section 871(m) of the Code and Treasury regulations promulgated
thereunder (“Section 871(m)”) generally impose a 30% (or a lower applicable treaty rate) withholding tax on dividend
equivalents paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments linked to U.S. equities or indices
that include U.S. equities (each, an “Underlying Security”). Subject to certain exceptions, Section 871(m)
generally applies to securities that substantially replicate the economic performance of one or more Underlying Securities, as
determined based on tests set forth in the applicable Treasury regulations (a “Specified Security”). However,
pursuant to an IRS notice, Section 871(m) will not apply to securities issued before January 1, 2021 that do not have a delta of
one with respect to any Underlying Security. Based on our determination that the securities do not have a delta of one
with respect to any Underlying Security, our counsel is of the opinion that the securities should not be Specified Securities and,
therefore, should not be subject to Section 871(m).
Our determination is not binding on the IRS, and the IRS may
disagree with this determination. Section 871(m) is complex and its application may depend on your particular circumstances,
including whether you enter into other transactions with respect to an Underlying Security. If Section 871(m) withholding
is required, we will not be required to pay any additional amounts with respect to the amounts so withheld. You should
consult your tax adviser regarding the potential application of Section 871(m) to the securities.
U.S. Federal Estate Tax
Individual Non-U.S. Holders and entities the property of which
is potentially includible in such an individual’s gross estate for U.S. federal estate tax purposes (for example, a trust
funded by such an individual and with respect to which the individual has retained certain interests or powers) should note that,
absent an applicable treaty exemption, the securities may be treated as U.S.-situs property subject to U.S. federal estate tax. Prospective
investors that are non-U.S. individuals, or are entities of the type described above, should consult their tax advisers regarding
the U.S. federal estate tax consequences of an investment in the securities.
Backup Withholding and Information Reporting
Information returns will be filed with the IRS in connection
with any coupon payment and may be filed with the IRS in connection with the payment at maturity on the securities and the payment
of proceeds from a sale, exchange or other disposition. A Non-U.S. Holder may be subject to backup withholding in respect
of amounts paid to the Non-U.S. Holder, unless such Non-U.S. Holder complies with certification procedures to establish that it
is not a U.S. person for U.S. federal income tax purposes or otherwise establishes an exemption. The amount of any backup
withholding from a payment to a Non-U.S. Holder will be allowed as a credit against the Non-U.S. Holder’s U.S. federal income
tax liability and may entitle the Non-U.S. Holder to a refund, provided that the required information is timely furnished to the
IRS.
FATCA
Legislation commonly referred to as “FATCA” generally
imposes a withholding tax of 30% on payments to certain non-U.S. entities (including financial intermediaries) with respect to
certain financial instruments, unless various U.S. information reporting and due diligence requirements have been satisfied. An
intergovernmental agreement between the United States and the non-U.S. entity’s jurisdiction may modify these requirements. FATCA
generally applies to certain financial instruments that are treated as paying U.S.-source interest or other
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Morgan Stanley Finance LLC
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Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Principal at Risk Securities
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U.S.-source “fixed or determinable annual or periodical”
income (“FDAP income”). Withholding (if applicable) applies to payments of U.S.-source FDAP income and to
payments of gross proceeds of the disposition (including upon retirement) of certain financial instruments treated as providing
for U.S.-source interest or dividends. Under recently proposed regulations (the preamble to which specifies that taxpayers
are permitted to rely on them pending finalization), no withholding will apply on payments of gross proceeds (other than amounts
treated as FDAP income). While the treatment of the securities is unclear, you should assume that any coupon payment
with respect to the securities will be subject to the FATCA rules. If withholding applies to the securities, we will
not be required to pay any additional amounts with respect to amounts withheld. Both U.S. and Non-U.S. Holders should
consult their tax advisers regarding the potential application of FATCA to the securities.
The discussion in the preceding paragraphs, insofar as it
purports to describe provisions of U.S. federal income tax laws or legal conclusions with respect thereto, constitutes the full
opinion of Davis Polk & Wardwell LLP regarding the material U.S. federal tax consequences of an investment in the securities.
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Use of proceeds and hedging:
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The proceeds from the sale of the securities will be used by
us for general corporate purposes. We will receive, in aggregate, $1,000 per security issued, because, when we enter
into hedging transactions in order to meet our obligations under the securities, our hedging counterparty will reimburse the cost
of the agent’s commissions. The costs of the securities borne by you and described beginning on page 5 above comprise
the agent’s commissions and the cost of issuing, structuring and hedging the securities.
On or prior to the pricing date, we hedged our anticipated exposure
in connection with the securities by entering into hedging transactions with our affiliates and/or third party dealers. We
expect our hedging counterparties to have taken positions in the stocks constituting the underlying indices and in futures and/or
options contracts on the underlying indices or the component stocks of the underlying indices listed on major securities markets. Such
purchase activity could have increased the initial index value of an underlying index, and, as a result, could have increased (i)
the level at or above which such underlying index must close on any redemption determination date so that the securities are redeemed
prior to maturity for the early redemption payment (depending also on the performance of the other underlying indices), (ii) the
coupon barrier level for such underlying index, which is the level at or above which such underlying index must close on each observation
date in order for you to earn a contingent monthly coupon (depending also on the performance of the other underlying indices) and
(iii) the downside threshold level for such underlying index, which is the level 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 at maturity (depending also on the performance of the other underlying indices). These entities
may be unwinding or adjusting hedge positions during the term of the securities, and the hedging strategy may involve greater and
more frequent dynamic adjustments to the hedge as the final observation date approaches. Additionally, our hedging activities,
as well as our other trading activities, during the term of the securities could potentially affect the value of an underlying
index throughout the term of the securities, and, accordingly, whether we redeem the securities prior to maturity, whether we pay
a contingent monthly coupon on the securities and the amount of cash you receive at maturity, if any (depending also on the performance
of the other underlying indices).
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Benefit plan investor considerations:
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Each fiduciary of a pension, profit-sharing or other employee
benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (a “Plan”),
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
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Morgan Stanley Finance LLC
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Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Principal at Risk Securities
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acquired by or with the assets of a Plan with respect
to which MS & Co. or any of its affiliates is a service provider or other party in interest, unless the securities are acquired
pursuant to an exemption from the “prohibited transaction” rules. A violation of these “prohibited
transaction” rules could result in an excise tax or other liabilities under ERISA and/or Section 4975 of the Code for those
persons, unless exemptive relief is available under an applicable statutory or administrative exemption.
The U.S. Department of Labor has issued five prohibited
transaction class exemptions (“PTCEs”) that may provide exemptive relief for direct or indirect prohibited transactions
resulting from the purchase or holding of the securities. Those class exemptions are PTCE 96-23 (for certain transactions
determined by in-house asset managers), PTCE 95-60 (for certain transactions involving insurance company general accounts), PTCE
91-38 (for certain transactions involving bank collective investment funds), PTCE 90-1 (for certain transactions involving insurance
company separate accounts) and PTCE 84-14 (for certain transactions determined by independent qualified professional asset managers). In
addition, ERISA Section 408(b)(17) and Code Section 4975(d)(20) provide an exemption for the purchase and sale of securities and
the related lending transactions, provided that neither the issuer of the securities nor any of its affiliates has or exercises
any discretionary authority or control or renders any investment advice with respect to the assets of the Plan involved in the
transaction and provided further that the Plan pays no more, and receives no less, than “adequate consideration”
in connection with the transaction (the so-called “service provider” exemption). There can be no assurance
that any of these class or statutory exemptions will be available with respect to transactions involving the securities.
Because we may be considered a party in interest with
respect to many Plans, the securities may not be purchased, held or disposed of by any Plan, any entity whose underlying assets
include “plan assets” by reason of any Plan’s investment in the entity (a “Plan Asset Entity”) or
any person investing “plan assets” of any Plan, unless such purchase, holding or disposition is eligible for exemptive
relief, including relief available under PTCEs 96-23, 95-60, 91-38, 90-1, 84-14 or the service provider exemption or such purchase,
holding or disposition is otherwise not prohibited. Any purchaser, including any fiduciary purchasing on behalf of a
Plan, transferee or holder of the securities will be deemed to have represented, in its corporate and its fiduciary capacity, by
its purchase and holding of the securities that either (a) it is not a Plan or a Plan Asset Entity and is not purchasing such securities
on behalf of or with “plan assets” of any Plan or with any assets of a governmental, non-U.S. or church plan that is
subject to any federal, state, local or non-U.S. law that is substantially similar to the provisions of Section 406 of ERISA or
Section 4975 of the Code (“Similar Law”) or (b) its purchase, holding and disposition of these securities will not
constitute or result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or violate any
Similar Law.
Due to the complexity of these rules and the penalties
that may be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries
or other persons considering purchasing the securities on behalf of or with “plan assets” of any Plan consult with
their counsel regarding the availability of exemptive relief.
The securities are contractual financial instruments. The
financial exposure provided by the securities is not a substitute or proxy for, and is not intended as a substitute or proxy for,
individualized investment management or advice for the benefit of any purchaser or holder of the securities. The securities
have not been designed and will not be administered in a 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;
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Morgan Stanley Finance LLC
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Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Principal at Risk Securities
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(iii)
any and all assets and positions relating to hedging
transactions by us or our affiliates are assets and positions of those entities and are not assets and positions held for the benefit
of the purchaser or holder;
(iv)
our interests are adverse to the interests of the purchaser
or holder; and
(v)
neither we nor any of our affiliates is a fiduciary
or adviser of the purchaser or holder in connection with any such assets, positions or transactions, and any information that we
or any of our affiliates may provide is not intended to be impartial investment advice.
Each purchaser and holder of the securities has exclusive
responsibility for ensuring that its purchase, holding and disposition of the securities do not violate the prohibited transaction
rules of ERISA or the Code or any Similar Law. The sale of any securities to any Plan or plan subject to Similar Law
is in no respect a representation by us or any of our affiliates or representatives that such an investment meets all relevant
legal requirements with respect to investments by plans generally or any particular plan, or that such an investment is appropriate
for plans generally or any particular plan. In this regard, neither this discussion nor anything provided in this document is or
is intended to be investment advice directed at any potential Plan purchaser or at Plan purchasers generally and such purchasers
of these securities should consult and rely on their own counsel and advisers as to whether an investment in these securities is
suitable.
However, individual retirement accounts, individual retirement
annuities and Keogh plans, as well as employee benefit plans that permit participants to direct the investment of their accounts,
will not be permitted to purchase or hold the securities if the account, plan or annuity is for the benefit of an employee of Morgan
Stanley, Morgan Stanley Wealth Management or a family member and the employee receives any compensation (such as, for example,
an addition to bonus) based on the purchase of the securities by the account, plan or annuity.
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Additional considerations:
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Client accounts over which Morgan Stanley, Morgan Stanley Wealth Management or any of their respective subsidiaries have investment discretion are not permitted to purchase the securities, either directly or indirectly.
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Supplemental information regarding plan of distribution; conflicts of interest:
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Selected dealers, which may include our affiliates, and their
financial advisors will collectively receive from the agent a fixed sales commission of $22.50 for each security they sell.
We also sold, pursuant to Pricing Supplement No. 2,576, a separate
issuance of securities, being sold only to fee-based advisory accounts, with terms similar to those of this issuance but with a
higher contingent monthly coupon rate.
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.
MS & Co. will conduct this offering in compliance with the
requirements of FINRA Rule 5121 of the Financial Industry Regulatory Authority, Inc., which is commonly referred to as FINRA, regarding
a FINRA member firm’s distribution of the securities of an affiliate and related conflicts of interest. MS & Co. or any
of our other affiliates may not make sales in this offering to any discretionary account. See “Plan of Distribution (Conflicts
of Interest)” and “Use of Proceeds and Hedging” in the accompanying product supplement for auto-callable securities.
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Validity of the securities:
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In the opinion of Davis Polk & Wardwell LLP, as special counsel to MSFL and Morgan Stanley, when the securities offered by this pricing supplement have been executed and issued by MSFL, authenticated by the trustee pursuant to the MSFL Senior Debt Indenture (as defined in the accompanying prospectus) and delivered against payment as contemplated herein, such securities will be valid and binding obligations of MSFL and the related guarantee will be a valid and binding obligation of Morgan Stanley, enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, concepts of reasonableness and equitable principles of general applicability (including, without limitation, concepts of good faith, fair dealing and the lack of bad faith), provided that such counsel expresses no opinion as to (i) the effect of fraudulent conveyance, fraudulent transfer or similar provision of applicable law on the conclusions expressed above and (ii) any provision of the MSFL Senior Debt Indenture that purports to avoid the effect of fraudulent conveyance, fraudulent transfer or similar provision of applicable law by limiting the
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Morgan Stanley Finance LLC
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Contingent Income Auto-Callable Securities due April 26, 2021, with 6-month Initial Non-Call Period
All Payments on the Securities Based on the Worst Performing of the Russell 2000® Index, the Dow Jones Industrial AverageSM and the NASDAQ-100 Index®
Principal at Risk Securities
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amount of Morgan Stanley’s obligation under the related guarantee. This opinion is given as of the date hereof and is limited to the laws of the State of New York, the General Corporation Law of the State of Delaware and the Delaware Limited Liability Company Act. In addition, this opinion is subject to customary assumptions about the trustee’s authorization, execution and delivery of the MSFL Senior Debt Indenture and its authentication of the securities and the validity, binding nature and enforceability of the MSFL Senior Debt Indenture with respect to the trustee, all as stated in the letter of such counsel dated November 16, 2017, which is Exhibit 5-a to the Registration Statement on Form S-3 filed by Morgan Stanley on November 16, 2017.
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Where you can find more information:
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Morgan Stanley and MSFL have filed a registration statement (including
a prospectus, as supplemented by the product supplement for auto-callable 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 auto-callable 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 about Morgan Stanley,
MSFL and this offering. You may get these documents without cost by visiting EDGAR on the SEC web site at.www.sec.gov. Alternatively,
Morgan Stanley, MSFL or any underwriter or any dealer participating in the offering will arrange to send you the prospectus, the
product supplement for auto-callable securities and the index supplement if you so request by calling toll-free 1-(800)-584-6837.
You may access these documents on the SEC web site at.www.sec.gov
as follows:
Product Supplement for Auto-Callable Securities dated November 16, 2017
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 auto-callable securities, in the index supplement or in the prospectus.
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Morgan Stanley Depository Shares Representing 1/1000TH Preferred Series 1 Fixed TO Floating Non (Cum) (NYSE:MSPI)
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