CALCULATION
OF REGISTRATION FEE
Title of Each Class of Securities
Offered
|
|
Maximum Aggregate
Offering Price
|
|
Amount of Registration
Fee
|
Dual Directional Buffered Jump Securities due 2024
|
|
$250,000
|
|
$32.45
|
October 2019
Pricing Supplement No. 2,627
Registration Statement Nos. 333-221595;
333-221595-01
Dated October 28, 2019
Filed pursuant to Rule 424(b)(2)
Morgan
Stanley Finance LLC
Structured Investments
Opportunities in U.S. Equities
Dual Directional Buffered Jump Securities Based
on the Value of the Worst Performing of the Dow Jones Industrial AverageSM and the Russell 2000® Index
due October 31, 2024
Fully and Unconditionally Guaranteed by Morgan
Stanley
Principal at Risk Securities
The Dual Directional Buffered
Jump Securities, which we refer to as the securities, are unsecured obligations of Morgan Stanley Finance LLC (“MSFL”)
and are fully and unconditionally guaranteed by Morgan Stanley. The securities will pay no interest, provide a minimum payment
at maturity of only 20% of the stated principal amount at maturity and have the terms described in the accompanying product supplement
for Jump Securities, index supplement and prospectus, as supplemented and modified by this document. If the final index value of
each underlying index is greater than or equal to its respective initial index value, you will receive for each security
that you hold at maturity a minimum of $280 per security in addition to the stated principal amount. If the worst performing
underlying index appreciates by more than 28% over the term of the securities, you will receive for each security that you hold
at maturity the stated principal amount plus an amount based on the percentage increase of such worst performing underlying index.
If the final index value of either underlying index is less than its respective initial index value but the final index
value of each underlying index is greater than or equal to its respective downside threshold value, investors will receive
the stated principal amount of their investment plus an unleveraged positive return based on the absolute value of the performance
of the worst performing underlying index, which will be effectively limited to a 20% return. However, if the final index value
of either underlying index is less than 80% of its respective initial index value, meaning that either underlying
index has decreased from its initial index value by an amount greater than the buffer amount of 20%, you will lose 1% of
the stated principal amount for every 1% decline beyond the specified buffer amount, subject to the minimum payment at maturity
of only 20% of the stated principal amount. Accordingly, you could lose up to 80% of your investment in the securities. Because
the payment at maturity on the securities is based on the worst performing of the underlying indices, a decline in either
final index value below 80% of its respective initial index value will result in a loss, and potentially a significant loss, on
your investment, even if the other underlying index has appreciated or has not declined as much. These long-dated securities are
for investors who seek an equity index-based return and who are willing to risk their principal, risk exposure to the worst performing
of two underlying indices and forgo current income in exchange for the upside payment, absolute return and buffer features that
in each case apply to a limited range of performance of the worst performing underlying index. The securities are notes issued
as part of MSFL’s Series A Global Medium-Term Notes Program.
The securities differ from
the Jump Securities described in the accompanying product supplement for Jump Securities in that the securities offer the potential
for a positive return at maturity if the worst performing underlying index depreciates by no more than 20%.
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
|
Issuer:
|
Morgan Stanley Finance LLC
|
Guarantor:
|
Morgan Stanley
|
Issue price:
|
$1,000 per security
|
Stated principal amount:
|
$1,000 per security
|
Pricing date:
|
October 28, 2019
|
Original issue date:
|
October 31, 2019 (3 business days after the pricing date)
|
Maturity date:
|
October 31, 2024
|
Aggregate principal amount:
|
$250,000
|
Interest:
|
None
|
Underlying indices:
|
The Dow Jones Industrial AverageSM (the “INDU Index”) and the Russell 2000® Index (the “RTY Index”)
|
Payment at maturity:
|
· If the final index value of each underlying index is greater than or equal to its respective initial index
value:
$1,000
+ the greater of (i) $1,000 x the index percent change of the worst performing underlying index and (ii) the upside payment
· If
the final index value of either underlying index is less than its respective initial index value but the final
index value of each underlying index is greater than or equal to its respective downside threshold value:
$1,000 + ($1,000 ×
absolute index return of the worst performing underlying index)
·
If the final index value of either underlying index is less than its respective downside threshold value,
meaning the value of either underlying index has declined by more than the buffer amount of 20% from its respective initial
index value to its respective final index value:
$1,000 × (index performance
factor of the worst performing underlying index + 20%)
Under these circumstances, the payment at maturity
will be less than the stated principal amount of $1,000. However, under no circumstances will the securities pay less than $200
per security at maturity.
|
Upside payment:
|
$280 per security (28% of the stated principal amount)
|
Index percent change:
|
With respect to each underlying index, (final index value − initial index value) / initial index value
|
Index performance factor:
|
With respect to each underlying index, final index value / initial index value
|
Absolute index return:
|
The absolute value of the index percent change. For example, a -5% index percent change will result in a +5% absolute index return.
|
Worst performing underlying index:
|
The underlying index with the lesser index performance factor
|
Buffer amount:
|
20%. As a result of the buffer amount of 20%, the value at or
above which each underlying index must close on the valuation date so that investors do not suffer a loss on their initial investment
in the securities is as follows:
With respect to the INDU Index, 21,672.576, which is 80% of the
initial index value for such index
With respect to the RTY Index, 1,256.746, which is approximately
80% of the initial index value for such index
|
Downside threshold value:
|
With respect to the INDU Index, 21,672.576, which is 80% of the
initial index value for such index
With respect to the RTY Index, 1,256.746, which is approximately
80% of the initial index value for such index
|
Minimum payment at maturity:
|
$200 per security (20% of the stated principal amount)
|
Initial index value:
|
With respect to the INDU Index, 27,090.72, which is the index
closing value of such index on the pricing date
With respect to the RTY Index, 1,571.933, which is the index
closing value of such index on the pricing date
|
Final index value:
|
With respect to each underlying index, the index closing value of such index on the valuation date
|
Valuation date:
|
October 28, 2024, subject to postponement for non-index business days and certain market disruption events
|
CUSIP / ISIN:
|
61769HYG4 / US61769HYG46
|
Listing:
|
The securities will not be listed on any securities exchange.
|
Agent:
|
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.”
|
Estimated value on the pricing date:
|
$950.50 per security. See “Investment Summary” on page 2.
|
Commissions and issue price:
|
Price to public
|
Agent’s commissions(1)
|
Proceeds to us(2)
|
Per security
|
$1,000
|
$41.25
|
$958.75
|
Total
|
$250,000
|
$10,312.50
|
$239,687.50
|
|
(1)
|
Selected dealers and their financial advisors will collectively receive from the agent, MS & Co., a fixed sales commission
of $41.25 for each security they sell. See “Supplemental information regarding plan of distribution; conflicts of interest.”
For additional information, see “Plan of Distribution (Conflicts of Interest)” in the accompanying product supplement
for Jump Securities.
|
|
(2)
|
See “Use of proceeds and hedging” on page 19.
|
The securities
involve risks not associated with an investment in ordinary debt securities. See “Risk Factors” beginning on page
8.
The Securities and Exchange Commission and
state securities regulators have not approved or disapproved these securities, or determined if this document or the accompanying
product supplement, index supplement and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The securities are not deposits or savings
accounts and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality,
nor are they obligations of, or guaranteed by, a bank.
You should read this document together with
the related product supplement, index supplement and prospectus, each of which can be accessed via the hyperlinks below. Please
also see “Additional Terms of the Securities” and “Additional Information About the Securities” at the
end of this document.
References to “we,” “us”
and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Product Supplement for Jump Securities dated November 16, 2017 Index Supplement dated November 16, 2017 Prospectus dated November 16, 2017
Morgan Stanley Finance LLC
Dual Directional Buffered Jump Securities Based on the Value of the Worst Performing of the Dow Jones Industrial AverageSM and the Russell 2000® Index due October 31, 2024
Principal at Risk Securities
Investment Summary
Principal at Risk Securities
The Dual Directional Buffered Jump Securities Based on the Value
of the Worst Performing of the Dow Jones Industrial AverageSM and the Russell 2000® Index due October
31, 2024 (the “securities”) can be used:
|
§
|
As an alternative to direct exposure to the underlying indices that provides a minimum positive return of 28% if the final
index value of each underlying index is greater than or equal to its respective initial index value and offers uncapped 1-to-1
participation in the worst performing underlying index if the appreciation of such underlying index is greater than 28%;
|
|
§
|
To potentially outperform the worst performing of the Dow Jones Industrial AverageSM and the Russell 2000®
Index in a moderately bullish or moderately bearish scenario;
|
|
§
|
To obtain an unleveraged positive return for a limited range of negative performance of the worst performing underlying index
|
|
§
|
To obtain a buffer against a specified level of negative performance of the worst performing underlying index
|
If the final index value of either underlying
index decreases in value by more than the buffer amount of 20%, the securities are exposed on a 1-to-1 basis to the percentage
decline of the final index value of the worst performing underlying index from its respective initial index value beyond the buffer
amount. Accordingly, investors may lose up to 80% of their investment.
Maturity:
|
5 years
|
Upside payment:
|
$280 per security (28% of the stated principal amount)
|
Downside threshold value:
|
For each underlying index, 80% of the respective initial index value
|
Buffer amount:
|
20%
|
Minimum payment at maturity:
|
$200 per security. You could lose up to 80% of the stated principal amount of the securities.
|
Interest:
|
None
|
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 $950.50.
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 upside payment, the downside threshold values, the buffer amount and the minimum payment at maturity, we use an internal
funding rate, which is likely to be lower than our secondary market credit spreads and therefore advantageous to us. If the issuing,
selling, structuring and hedging costs borne by you were lower or if the internal funding rate were higher, one or more of the
economic terms of the securities would be more favorable to you.
Morgan Stanley Finance LLC
Dual Directional Buffered Jump Securities Based on the Value of the Worst Performing of the Dow Jones Industrial AverageSM and the Russell 2000® Index due October 31, 2024
Principal at Risk Securities
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
Dual Directional Buffered Jump Securities Based on the Value of the Worst Performing of the Dow Jones Industrial AverageSM and the Russell 2000® Index due October 31, 2024
Principal at Risk Securities
Key Investment Rationale
The securities do not pay interest but provide a minimum positive
return of 28% if the final index value of each of the Dow Jones Industrial AverageSM and the Russell 2000®
Index is greater than or equal to its respective initial index value and offer an uncapped 1-to-1 participation in the worst performing
underlying index if the appreciation of such underlying index is greater than 28%. However, if, as of the valuation date, the value
of either underlying index is less than 80% of its respective initial index value, investors will lose 1% for every 1% decline
in the worst performing underlying index beyond the specified buffer amount, subject to the minimum payment at maturity of 20%
of the stated principal amount. Investors may lose up to 80% of the stated principal amount of the securities. All payments
on the securities are subject to our credit risk.
Absolute
Return Feature
|
The securities enable investors to obtain an unleveraged positive return if the final index value of either underlying index is less than its respective initial index value but the final index value of each underlying index is greater than or equal to 80% of its respective initial index value.
|
Upside
Scenario
|
If the final index value of each underlying index is greater than or equal to its respective initial index value, the payment at maturity for each security will be equal to $1,000 plus the greater of (i) $1,000 times the index percent change of the worst performing underlying index and (ii) the upside payment of $280.
|
Absolute
Return Scenario
|
The final index value of either underlying index is less than its respective initial index value but the final index value of each underlying index is greater than or equal to its respective downside threshold value. In this case, you receive a 1% positive return on the securities for each 1% negative return on the worst performing underlying index. For example, if the final index value of the worst performing underlying index is 10% less than its respective initial index value, the securities will provide a total positive return of 10% at maturity. The maximum return you may receive in this scenario is a positive 20% return at maturity.
|
Downside
Scenario
|
If the final index value of either underlying index
is less than 80% of its initial index value, you will lose 1% for every 1% decline in the value of the worst performing
underlying index from its initial index value beyond the buffer amount of 20% (e.g., a 60% depreciation in the worst performing
underlying index from the respective initial index value to the respective final index value will result in a payment at maturity
of $600 per security).
Because the payment at maturity of the securities is based on
the worst performing of the underlying indices, a decline in either underlying index below 80% of its respective initial index
value will result in a loss of some or a significant portion of your investment, even if the other underlying index has appreciated
or has not declined as much.
|
Morgan Stanley Finance LLC
Dual Directional Buffered Jump Securities Based on the Value of the Worst Performing of the Dow Jones Industrial AverageSM and the Russell 2000® Index due October 31, 2024
Principal at Risk Securities
Hypothetical Examples
The following hypothetical examples illustrate how to calculate
the payment at maturity on the securities. The following examples are for illustrative purposes only. The payment at maturity on
the securities is subject to our credit risk. The below examples are based on the following terms. The actual initial index values
and downside threshold values are set forth on the cover of this document.
Stated Principal Amount:
|
$1,000 per security
|
Hypothetical Initial Index Value:
|
With respect to the INDU Index: 25,000
With respect to the RTY Index: 1,400
|
Hypothetical Downside Threshold Value:
|
With respect to the INDU Index: 20,000, which is 80% of its hypothetical
initial index value
With respect to the RTY Index: 1,120, which is 80% of its hypothetical
initial index value
|
Upside Payment:
|
$280 per security (28% of the stated principal amount)
|
Buffer amount:
|
20%
|
Interest:
|
None
|
EXAMPLE 1: Both underlying indices appreciate substantially,
and investors therefore receive the stated principal amount plus a return reflecting the index percent change of the worst
performing underlying index.
Final index value
|
|
INDU Index: 40,000
|
|
|
|
RTY Index: 2,170
|
Index percent change
|
|
INDU Index: (40,000 – 25,000) / 25,000 = 60%
RTY Index: (2,170 – 1,400) / 1,400 = 55%
|
Index performance factor
|
|
INDU Index: 40,000 / 25,000 = 160%
RTY Index: 2,170 / 1,400 = 155%
|
Payment at maturity
|
=
|
$1,000 + ($1,000 x the index percent change of the worst performing underlying index)
|
|
=
|
$1,000 + $550
|
|
=
|
$1,550
|
In example 1, the final index value for the INDU Index has increased
from its initial index value by 60%, and the final index value for the RTY Index has increased from its initial index value by
55%. Because the final index value of each underlying index is at or above its respective initial index value, and the index percent
change of the worst performing underlying index is greater than the minimum positive return of 28%, investors receive at maturity
the stated principal amount plus 1-to-1 participation in the performance of the worst performing underlying index. Investors
receive $1,550 per security at maturity.
EXAMPLE 2: The final index values of both underlying
indices are at or above their respective initial index values but the worst performing underling index has not appreciated by more
than 28%, and investors therefore receive the stated principal amount plus the upside payment.
Final index value
|
|
INDU Index: 31,250
|
|
|
|
RTY Index: 1,680
|
Index percent change
|
|
INDU Index: (31,250 – 25,000) / 25,000 = 25%
RTY Index: (1,680 – 1,400) / 1,400 = 20%
|
Index performance factor
|
|
INDU Index: 31,250 / 25,000 = 125%
RTY Index: 1,680 / 1,400 = 120%
|
Payment at maturity
|
=
|
$1,000 + upside payment
|
Morgan Stanley Finance LLC
Dual Directional Buffered Jump Securities Based on the Value of the Worst Performing of the Dow Jones Industrial AverageSM and the Russell 2000® Index due October 31, 2024
Principal at Risk Securities
In example 2, the final index value for the INDU Index has increased
from its initial index value by 25%, and the final index value for the RTY Index has increased from its initial index value by
20%. Because the final index value of each underlying index is at or above its respective initial index value, investors receive
at maturity the stated principal amount plus the upside payment of $280. Investors receive $1,280 per security at maturity.
EXAMPLE 3: The final index value of one underlying index is
greater than its respective initial index value while the final index value of the other underlying index is less than its respective
initial index value but greater than its respective downside threshold value.
Final index value
|
|
INDU Index: 37,500
|
|
|
|
RTY Index: 1,190
|
Index percent change
|
|
INDU Index: (37,500 – 25,000) / 25,000 = 50%
RTY Index: (1,190 – 1,400) / 1,400 = -15%
|
Index performance factor
|
|
INDU Index: 37,500 / 25,000 = 150%
RTY Index: 1,190 / 1,400 = 85%
|
Payment at maturity
|
=
|
$1,000 + ($1,000 × absolute index return of the worst performing underlying index)
|
|
=
|
$1,000 + ($1,000 × 15%)
|
|
=
|
$1,150
|
In example 3, the final index value of the INDU Index is greater
than its respective initial index value, while the final index value of the RTY Index is less than its respective initial index
value but greater than its respective downside threshold value. While the INDU Index has appreciated by 50%, the RTY index has
declined by 15%. Therefore, investors receive at maturity the stated principal amount plus a return reflecting the absolute
value of the performance of the worst performing underlying index, which is the RTY Index in this example. Investors receive $1,150
per security at maturity. In this example, investors receive a positive return even though one of the underlying indices declined
in value by 15%, due to the absolute return feature of the securities and because neither underlying index declined beyond its
respective downside threshold value.
EXAMPLE 4: The final index value of one underlying
index is greater than its respective initial index value while the final index value of the other underlying index is less than
its respective downside threshold value.
Final index value
|
|
INDU Index: 30,000
|
|
|
|
RTY Index: 630
|
Index percent change
|
|
INDU Index: (30,000 – 25,000) / 25,000 = 20%
RTY Index: (630 – 1,400) / 1,400 = -55%
|
Index performance factor
|
|
INDU Index: 30,000 / 25,000 = 120%
RTY Index: 630 / 1,400 = 45%
|
Payment at maturity
|
=
|
$1,000 × (index performance factor of the worst performing underlying index + 20%)
|
|
=
|
$1,000 × 65%
|
|
=
|
$650
|
In example 4, the final index value for the INDU Index has increased
from its initial index value by 20%, and the final index value for the RTY Index has decreased from its initial index value by
55%. Because one of the underlying indices has declined below its respective downside threshold value, investors do not receive
the upside payment and instead are exposed to the negative performance of the RTY Index, which is the worst performing underlying
index in this example. Under these circumstances, investors lose 1% of the stated principal amount for every 1% decline in the
value of the worst performing underlying index from its initial index value beyond the buffer amount of 20%. In this example, investors
receive a payment at maturity equal to $650 per security.
Morgan Stanley Finance LLC
Dual Directional Buffered Jump Securities Based on the Value of the Worst Performing of the Dow Jones Industrial AverageSM and the Russell 2000® Index due October 31, 2024
Principal at Risk Securities
EXAMPLE 5: The final index value of each underlying
index is less than its respective initial index value but is greater than its respective downside threshold value.
Final index value
|
|
INDU Index: 21,250
|
|
|
|
RTY Index: 1,176
|
Index percent change
|
|
INDU Index: (21,250 – 25,000) / 25,000 = -15%
RTY Index: (1,176 – 1,400) / 1,400 = -16%
|
Index performance factor
|
|
INDU Index: 21,250 / 25,000 = 85%
RTY Index: 1,176 / 1,400 = 84%
|
Payment at maturity
|
=
|
$1,000 + ($1,000 × absolute index return of the worst performing underlying index)
|
|
=
|
$1,000 + ($1,000 × 16%)
|
|
=
|
$1,160
|
In example 5, the final index value of each underlying index
is less than its respective initial index value but is greater than its respective downside threshold value. The INDU index has
declined by 15% while the RTY Index has declined by 16%. Therefore, investors receive at maturity the stated principal amount plus
a return reflecting the absolute value of the performance of the worst performing underlying index, which is the RTY Index in this
example. Investors receive $1,160 per security at maturity.
EXAMPLE 6: The final index values of both underlying
indices are less than their respective downside threshold values. Investors are therefore exposed to the full decline in the worst
performing underlying index from its initial index value.
Final index value
|
|
INDU Index: 5,000
|
|
|
|
RTY Index: 560
|
Index percent change
|
|
INDU Index: (5,000 – 25,000) / 25,000 = -80%
RTY Index: (560 – 1,400) / 1,400 = -60%
|
Index performance factor
|
|
INDU Index: 5,000 / 25,000 = 20%
RTY Index: 560 / 1,400 = 40%
|
Payment at maturity
|
=
|
$1,000 × (index performance factor of the worst performing underlying index + 20%)
|
|
=
|
$1,000 × (20% + 20%)
|
|
=
|
$400
|
In example 6, the final index value for the INDU Index has decreased
from its initial index value by 80%, and the final index value for the RTY Index has decreased from its initial index value by
60%. Because one or more underlying indices have declined below their respective downside threshold values, investors do not receive
the upside payment and instead are exposed to the negative performance of the INDU Index, which is the worst performing underlying
index in this example, beyond the buffer amount. Under these circumstances, investors lose 1% of the stated principal amount for
every 1% decline in the value of the worst performing underlying index from its initial index value beyond the buffer amount of
20%. In this example, investors receive a payment at maturity equal to $400 per security.
If the final index value of either of the underlying indices
is less than its respective downside threshold value, you will receive an amount in cash that is less than the $1,000 stated principal
amount of each security by an amount proportionate to the full decline in the level of the worst performing underlying index from
its initial index value over the term of the securities beyond the buffer amount of 20%, and you will lose some, or up to 80%,
of your investment.
Morgan Stanley Finance LLC
Dual Directional Buffered Jump Securities Based on the Value of the Worst Performing of the Dow Jones Industrial AverageSM and the Russell 2000® Index due October 31, 2024
Principal at Risk Securities
Risk Factors
The following is a non-exhaustive list of certain key risk
factors for investors in the securities. For further discussion of these and other risks, you should read the section entitled
“Risk Factors” in the accompanying product supplement, index supplement and prospectus. You should also consult with
your investment, legal, tax, accounting and other advisers in connection with your investment in the securities.
|
§
|
The securities do not pay interest and provide for the minimum payment at maturity of only 20% of your principal. The
terms of the securities differ from those of ordinary debt securities in that the securities do not pay interest and will provide
for a minimum payment at maturity of only 20% of the principal amount of the securities at maturity. At maturity, you will receive
for each $1,000 stated principal amount of securities that you hold an amount in cash based upon the final index value of each
underlying index. If the final index value of either underlying index has declined by an amount greater than the buffer
amount of 20% from its initial index value, the absolute return feature will no longer be available and the payment at maturity
will be an amount in cash that is less than the stated principal amount of each security by an amount proportionate to the decline
in the final index value of the worst performing underlying index from its initial index value beyond the buffer amount of 20%.
Accordingly, investors may lose up to 80% of the stated principal amount of the securities.
|
|
§
|
You are exposed to the price risk of both underlying indices. Your return on the securities is not linked to a basket
consisting of both underlying indices. Rather, it will be based upon the independent performance of each underlying index. Unlike
an instrument with a return linked to a basket of underlying assets, in which risk is mitigated and diversified among all the components
of the basket, you will be exposed to the risks related to both underlying indices. Poor performance by either 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 index. If the final index value of either underlying index declines to below 80% of its respective initial
index value, you will lose some or a substantial portion of your investment, even if the other underlying index has appreciated
or has not declined as much. Accordingly, your investment is subject to the price risk of both underlying indices.
|
|
§
|
Because the securities are linked to the performance of the worst performing underlying index, you are exposed to greater
risk of sustaining a loss on your investment than if the securities were linked to just one underlying index. The risk that
you will suffer a loss on your investment is greater if you invest in the securities as opposed to substantially similar securities
that are linked to the performance of just one underlying index. With two underlying indices, it is more likely that the final
index value of either underlying index will decline to below 80% of its initial index value than if the securities were linked
to only one underlying index. Therefore, it is more likely that you will suffer a loss on your investment.
|
|
§
|
The amount payable on the securities is not linked to the values of the underlying indices at any time other than the valuation
date. The final index values will be the index closing values on the valuation date, subject to postponement for non-index
business days and certain market disruption events. Even if the value of the worst performing underlying index appreciates prior
to the valuation date but then drops by the valuation date by an amount greater than the buffer amount, the payment at maturity
will be significantly less than it would have been had the payment at maturity been linked to the value of the worst performing
underlying index prior to such drop. Although the actual value of the worst performing underlying index on the stated
maturity date or at other times during the term of the securities may be higher than its respective final index value, the payment
at maturity will be based solely on the index closing value of the worst performing underlying index on the valuation date.
|
|
§
|
The securities will not be listed on any securities exchange and secondary trading may be limited. The securities will
not be listed on any securities exchange. Therefore, there may be little or no secondary market for the securities. Morgan Stanley
& Co. LLC, which we refer to as MS & Co., may, but is not obligated to, make a market in the securities and, if it once
chooses to make a market, may cease doing so at any time. When it does make a market, it will generally do so for transactions
of routine secondary market size at prices based on its estimate of the current value of the securities, taking into account its
bid/offer spread, our credit spreads, market 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
|
Morgan Stanley Finance LLC
Dual Directional Buffered Jump Securities Based on the Value of the Worst Performing of the Dow Jones Industrial AverageSM and the Russell 2000® Index due October 31, 2024
Principal at Risk Securities
any time, MS & Co. were to cease making a market in the securities,
it is likely that there would be no secondary market for the securities. Accordingly, you should be willing to hold your securities
to maturity.
|
§
|
The market price of the securities may be influenced by many unpredictable factors. Several factors, many of which are
beyond our control, will influence the value of the securities in the secondary market and the price at which MS & Co. may
be willing to purchase or sell the securities in the secondary market, including:
|
|
§
|
the values of the underlying indices at any time (including
in relation to their initial index values),
|
|
§
|
the volatility (frequency and magnitude of changes in
value) of the underlying indices,
|
|
§
|
dividend rates on the securities underlying the underlying
indices,
|
|
§
|
interest and yield rates in the market,
|
|
§
|
geopolitical conditions and economic, financial, political, regulatory or judicial events that affect the component stocks
of the underlying indices or securities markets generally and which may affect the value of the underlying indices,
|
|
§
|
the time remaining until the maturity of the securities,
|
|
§
|
the composition of the underlying indices and changes in the constituent stocks of the underlying indices, and
|
|
§
|
any actual or anticipated changes in our credit ratings
or credit spreads.
|
Generally, the longer the time remaining
to maturity, the more the market price of the securities will be affected by the other factors described above. Some or all of
these factors will influence the price you will receive if you sell your securities prior to maturity. In particular, you may have
to sell your securities at a substantial discount from the stated principal amount if at the time of sale the value of either underlying
index is near, at or below its respective downside threshold value.
You cannot predict the future performance
of the underlying indices based on their historical performance. If the final index value of either underlying index is less than
80% of its respective initial index value, you will be exposed on a 1-to-1 basis to the decline in the final index value of the
worst performing underlying index from its respective initial index value beyond the buffer amount. There can be no assurance that
the final index value of each underlying index will be greater than or equal to 80% of its respective initial index value so that
you will receive at maturity an amount that is greater than the $1,000 stated principal amount for each security you hold, or that
you will not lose some or a significant portion of your investment.
|
§
|
The securities are subject to our credit risk, and any actual or anticipated changes to our credit ratings or credit spreads
may adversely affect the market value of the securities. You are dependent on our ability to pay all amounts due on the securities
at maturity and therefore you are subject to our credit risk. If we default on our obligations under the securities, your investment
would be at risk and you could lose some or all of your investment. As a result, the market value of the securities prior to maturity
will be affected by changes in the market’s view of our creditworthiness. Any actual or anticipated decline in our credit
ratings or increase in the credit spreads charged by the market for taking our credit risk is likely to adversely affect the market
value of the securities.
|
|
§
|
As a finance subsidiary, MSFL has no independent operations and will have no independent assets. As a finance subsidiary,
MSFL has no independent operations beyond the issuance and administration of its securities and will have no independent assets
available for distributions to holders of MSFL securities if they make claims in respect of such securities in a bankruptcy, resolution
or similar proceeding. Accordingly, any recoveries by such holders will be limited to those available under the related guarantee
by Morgan Stanley and that guarantee will rank pari passu with all other unsecured, unsubordinated obligations of Morgan
Stanley. Holders will have recourse only to a single claim against Morgan Stanley and its assets under the guarantee. Holders of
securities issued by MSFL should accordingly assume that in any such proceedings they would not have any priority over and should
be treated pari passu with the claims of other unsecured, unsubordinated creditors of Morgan Stanley, including holders
of Morgan Stanley-issued securities.
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|
§
|
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
|
Morgan Stanley Finance LLC
Dual Directional Buffered Jump Securities Based on the Value of the Worst Performing of the Dow Jones Industrial AverageSM and the Russell 2000® Index due October 31, 2024
Principal at Risk Securities
rate and the inclusion of costs associated with issuing, selling,
structuring and hedging the securities in the original issue price reduce the economic terms of the securities, cause the estimated
value of the securities to be less than the original issue price and will adversely affect secondary market prices. Assuming no
change in market conditions or any other relevant factors, the prices, if any, at which dealers, including MS & Co., are willing
to purchase the securities in secondary market transactions will likely be significantly lower than the original issue price, because
secondary market prices will exclude the issuing, selling, structuring and hedging-related costs that are included in the original
issue price and borne by you and because the secondary market prices will reflect our secondary market credit spreads and the bid-offer
spread that any dealer would charge in a secondary market transaction of this type as well as other factors.
The inclusion of the costs of issuing,
selling, structuring and hedging the securities in the original issue price and the lower rate we are willing to pay as issuer
make the economic terms of the securities less favorable to you than they otherwise would be.
However, because the costs associated
with issuing, selling, structuring and hedging the securities are not fully deducted upon issuance, for a period of up to 6 months
following the issue date, to the extent that MS & Co. may buy or sell the securities in the secondary market, absent changes
in market conditions, including those related to the underlying indices, and to our secondary market credit spreads, it would do
so based on values higher than the estimated value, and we expect that those higher values will also be reflected in your brokerage
account statements.
|
§
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The estimated value of the securities is determined by reference to our pricing and valuation models, which may differ from
those of other dealers and is not a maximum or minimum secondary market price. These pricing and valuation models are proprietary
and rely in part on subjective views of certain market inputs and certain assumptions about future events, which may prove to be
incorrect. As a result, because there is no market-standard way to value these types of securities, our models may yield a higher
estimated value of the securities than those generated by others, including other dealers in the market, if they attempted to value
the securities. In addition, the estimated value on the pricing date does not represent a minimum or maximum price at which dealers,
including MS & Co., would be willing to purchase your notes in the secondary market (if any exists) at any time. The value
of your securities at any time after the date of this document will vary based on many factors that cannot be predicted with accuracy,
including our creditworthiness and changes in market conditions. See also “The market price of the securities may be influenced
by many unpredictable factors” above.
|
|
§
|
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.
|
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§
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Investing in the securities is not equivalent to investing in the underlying indices. Investing in the securities is
not equivalent to investing in either underlying index or the component stocks of either underlying index. Investors in the securities
will not have voting rights or rights to receive dividends or other distributions or any other rights with respect to stocks that
constitute the underlying indices.
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§
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Adjustments to the underlying indices could adversely affect the value of the securities. The publisher of either underlying
index may add, delete or substitute the stocks underlying such index or make other methodological changes that could change the
value of such underlying index. Any of these actions could adversely affect the value of the securities. The publisher of such
underlying index may also discontinue or suspend calculation or publication of such underlying index at any time. In these circumstances,
MS & Co., as the calculation agent, will have the sole discretion to substitute a successor index that is comparable to the
discontinued underlying index. MS & Co. could have an economic interest that is different than that of investors in
|
Morgan Stanley Finance LLC
Dual Directional Buffered Jump Securities Based on the Value of the Worst Performing of the Dow Jones Industrial AverageSM and the Russell 2000® Index due October 31, 2024
Principal at Risk Securities
the securities insofar as, for example, MS & Co. is permitted
to consider indices that are calculated and published by MS & Co. or any of its affiliates. If MS & Co. determines that
there is no appropriate successor index, the payout on the securities at maturity will be an amount based on the closing prices
on the valuation date of the stocks underlying the relevant index at the time of such discontinuance, without rebalancing or substitution,
computed by the calculation agent in accordance with the formula for calculating such underlying index last in effect prior to
such discontinuance (depending also on the performance of the other underlying index).
|
§
|
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 values and the downside threshold values
and will determine the final index values, the index percent changes or the index performance factors, as applicable, and the payment
that you will receive at maturity. Moreover, certain determinations made by MS & Co., in its capacity as calculation agent,
may require it to exercise discretion and make subjective judgments, such as with respect to the occurrence or non-occurrence of
market disruption events and the selection of a successor index or calculation of the index closing values in the event of a market
disruption event or discontinuance of an underlying index. These potentially subjective determinations may adversely
affect the payout to you at maturity. For further information regarding these types of determinations, see “Description of
Securities—Postponement of Valuation Date(s),” “—Discontinuance of Any Underlying Index or Basket Index;
Alteration of Method of Calculation,” “—Alternate Exchange Calculation in case of an Event of Default”
and “—Calculation Agent and Calculations” in the accompanying product supplement. In addition, MS
& Co. has determined the estimated value of the securities on the pricing date.
|
|
§
|
Hedging and trading activity by our affiliates could potentially adversely affect the value of the securities. One or
more of our affiliates and/or third-party dealers have carried out, and will continue to carry out, hedging activities related
to the securities (and to other instruments linked to the underlying indices or their component stocks), including trading in the
stocks that constitute the underlying indices as well as in other instruments related
to the underlying indices. As a result, these entities may be unwinding or adjusting hedge positions during the term of the securities,
and the hedging strategy may involve greater and more frequent dynamic adjustments to the hedge as the valuation date approaches.
Some of our affiliates also trade the stocks that constitute the underlying indices and
other financial instruments related to the underlying indices on a regular basis as part of their general broker-dealer and other
businesses. Any of these hedging or trading activities on or prior to the pricing date could have increased the initial index value
of an underlying index, and, therefore, could have increased the value at or above which such underlying index must close on the
valuation date so that you do not suffer a loss on your initial investment in the securities (depending also on the performance
of the other underlying index). Additionally, such hedging or trading activities during the term of the securities, including on
the valuation date, could adversely affect the value of either underlying index on the valuation date, and, accordingly, the amount
of cash an investor will receive at maturity (depending also on the performance of the other underlying index).
|
|
§
|
The U.S. federal income tax consequences of an investment in the securities are uncertain. Please read the discussion
under “Additional Information—Tax considerations” in this document and the discussion under “United States
Federal Taxation” in the accompanying product supplement for Jump Securities (together, the “Tax Disclosure Sections”)
concerning the U.S. federal income tax consequences of an investment in the securities. If the Internal Revenue Service (the “IRS”)
were successful in asserting an alternative treatment, the timing and character of income on the securities might differ significantly
from the tax treatment described in the Tax Disclosure Sections. For example, under one possible treatment, the IRS could seek
to recharacterize the securities as debt instruments. In that event, U.S. Holders would be required to accrue into income original
issue discount on the securities every year at a “comparable yield” determined at the time of issuance and recognize
all income and gain in respect of the securities as ordinary income. Additionally, as discussed under “United States Federal
Taxation—FATCA” in the accompanying product supplement for Jump Securities, the withholding rules commonly referred
to as “FATCA” would apply to the securities if they were recharacterized as debt instruments. However, recently proposed
regulations (the preamble to which specifies that taxpayers are permitted to rely on them pending finalization) eliminate the withholding
requirement on payments of gross proceeds of a taxable disposition (other than amounts treated as “FDAP income,” as
defined in the accompanying product supplement for Jump Securities). The risk that financial instruments providing for buffers,
triggers or similar downside protection features, such as the securities, would be recharacterized as debt is greater than the
risk of recharacterization for comparable financial instruments that do not have such features. We do not plan to request
|
Morgan Stanley Finance LLC
Dual Directional Buffered Jump Securities Based on the Value of the Worst Performing of the Dow Jones Industrial AverageSM and the Russell 2000® Index due October 31, 2024
Principal at Risk Securities
a ruling from the IRS regarding the tax treatment of the securities,
and the IRS or a court may not agree with the tax treatment described in the Tax Disclosure Sections.
In 2007, the U.S. Treasury Department
and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts”
and similar instruments. The notice focuses in particular on whether to require holders of these instruments to accrue income over
the term of their investment. It also asks for comments on a number of related topics, including the character of income or loss
with respect to these instruments; whether short-term instruments should be subject to any such accrual regime; the relevance of
factors such as the exchange-traded status of the instruments and the nature of the underlying property to which the instruments
are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors should be subject
to withholding tax; and whether these instruments are or should be subject to the “constructive ownership” rule, which
very generally can operate to recharacterize certain long-term capital gain as ordinary income and impose an interest charge. While
the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated
after consideration of these issues could materially and adversely affect the tax consequences of an investment in the securities,
possibly with retroactive effect. Both U.S. and Non-U.S. Holders should consult their tax advisers regarding the U.S. federal income
tax consequences of an investment in the securities, including possible alternative treatments, the issues presented by this notice
and any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
Morgan Stanley Finance LLC
Dual Directional Buffered Jump Securities Based on the Value of the Worst Performing of the Dow Jones Industrial AverageSM and the Russell 2000® Index due October 31, 2024
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 28, 2019:
Bloomberg Ticker Symbol:
|
INDU
|
Current Index Value:
|
27,090.72
|
52 Weeks Ago:
|
24,442.92
|
52 Week High (on 7/15/2019):
|
27,359.16
|
52 Week Low (on 12/24/2018):
|
21,792.20
|
The following graph sets forth the daily closing values of the
INDU Index for the period from January 1, 2014 through October 28, 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 28, 2019 was 27,090.72. 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 28, 2019
|
|
Morgan Stanley Finance LLC
Dual Directional Buffered Jump Securities Based on the Value of the Worst Performing of the Dow Jones Industrial AverageSM and the Russell 2000® Index due October 31, 2024
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 28, 2019)
|
27,090.72
|
26,078.62
|
27,090.72
|
“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
Dual Directional Buffered Jump Securities Based on the Value of the Worst Performing of the Dow Jones Industrial AverageSM and the Russell 2000® Index due October 31, 2024
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 28, 2019:
Bloomberg Ticker Symbol:
|
RTY
|
Current Index Value:
|
1,571.933
|
52 Weeks Ago:
|
1,477.306
|
52 Week High (on 5/6/2019):
|
1,614.976
|
52 Week Low (on 12/24/2018):
|
1,266.925
|
The following graph sets forth the daily closing values of the
RTY Index for the period from January 1, 2014 through October 28, 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 28, 2019 was 1,571.933. We obtained the information in the table 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 28, 2019
|
|
Morgan Stanley Finance LLC
Dual Directional Buffered Jump Securities Based on the Value of the Worst Performing of the Dow Jones Industrial AverageSM and the Russell 2000® Index due October 31, 2024
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
|
1,192.964
|
1,095.986
|
1,192.964
|
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 28, 2019)
|
1,571.933
|
1,472.598
|
1,571.933
|
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
Dual Directional Buffered Jump Securities Based on the Value of the Worst Performing of the Dow Jones Industrial AverageSM and the Russell 2000® Index due October 31, 2024
Principal at Risk Securities
Additional Terms of the Securities
Please read this information in conjunction with the summary
terms on the front cover of this document.
Additional Terms:
|
If the terms described herein are inconsistent with those described in the accompanying product supplement, index supplement or prospectus, the terms described herein shall control.
|
Underlying
index publishers:
|
With respect to the INDU Index, S&P
Dow Jones Indices LLC, or any successor thereof.
With respect to the RTY Index, FTSE Russell,
or any successor thereof.
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Index closing value:
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With respect to the INDU 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 index as defined under “Discontinuance of Any Underlying Index or Basket 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, as determined by the calculation
agent. In certain circumstances, the index closing value for the INDU Index will be based on the alternate calculation of such
underlying index as described under “Discontinuance of Any Underlying Index or Basket Index; Alteration of Method of Calculation”
in the accompanying product supplement.
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 such
underlying index or any successor index 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 will be based
on the alternate calculation of such underlying index as described under “Discontinuance of Any Underlying Index or Basket
Index; Alteration of Method of Calculation” in the accompanying product supplement. The closing value of the RTY Index reported
by Bloomberg Financial Services may be lower or higher than the official closing value of the RTY Index published by the underlying
index publisher for such underlying index.
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Trustee:
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The Bank of New York Mellon
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Calculation agent:
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Morgan Stanley & Co. LLC (“MS & Co.”)
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Issuer notice to registered security holders, the trustee and the depositary:
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In the event that the maturity date is postponed due to postponement
of the valuation date, the issuer shall give notice of such postponement and, once it has been determined, of the date to which
the maturity date has been rescheduled (i) to each registered holder of the securities by mailing notice of such postponement by
first class mail, postage prepaid, to such registered holder’s last address as it shall appear upon the registry books, (ii)
to the trustee by facsimile confirmed by mailing such notice to the trustee by first class mail, postage prepaid, at its New York
office and (iii) to The Depository Trust Company (the “depositary”) by telephone or facsimile, confirmed by mailing
such notice to the depositary by first class mail, postage prepaid. Any notice that is mailed to a registered holder of the securities
in the manner herein provided shall be conclusively presumed to have been duly given to such registered holder, whether or not
such registered holder receives the notice. The issuer shall give such notice as promptly as possible, and in no case later than
(i) with respect to notice of postponement of the maturity date, the business day immediately preceding the scheduled maturity
date, and (ii) with respect to notice of the date to which the maturity date has been rescheduled, the business day immediately
following the actual valuation date.
The issuer shall, or shall cause the calculation agent
to, (i) provide written notice to the trustee, on which notice the trustee may conclusively rely, and to the depositary of the
amount of cash to be delivered, with respect to 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
Dual Directional Buffered Jump Securities Based on the Value of the Worst Performing of the Dow Jones Industrial AverageSM and the Russell 2000® Index due October 31, 2024
Principal at Risk Securities
Additional Information About the Securities
Additional Information:
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Minimum ticketing size:
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$1,000 / 1 security
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Tax considerations:
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Although there is uncertainty regarding the U.S. federal income tax consequences of an investment in the securities due to the lack of governing authority, in the opinion of our counsel, Davis Polk & Wardwell LLP, under current law, and based on current market conditions, a security should be treated as a single financial contract that is an “open transaction” for U.S. federal income tax purposes.
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Assuming this treatment of the securities is respected and subject to the discussion in “United States Federal Taxation” in the accompanying product supplement for Jump Securities, the following U.S. federal income tax consequences should result based on current law:
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§ A U.S. Holder should not be required to recognize taxable income over the term of the securities prior to settlement, other than pursuant to a sale or exchange.
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§ Upon sale, exchange or settlement of the securities, a U.S. Holder should recognize gain or loss equal to the difference between the amount realized and the U.S. Holder’s tax basis in the securities. Such gain or loss should be long-term capital gain or loss if the investor has held the securities for more than one year, and short-term capital gain or loss otherwise.
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In 2007, the U.S. Treasury Department and
the Internal Revenue Service (the “IRS”) released a notice requesting comments on the U.S. federal income tax treatment
of “prepaid forward contracts” and similar instruments. The notice focuses in particular on whether to require holders
of these instruments to accrue income over the term of their investment. It also asks for comments on a number of related topics,
including the character of income or loss with respect to these instruments; whether short-term instruments should be subject to
any such accrual regime; the relevance of factors such as the exchange-traded status of the instruments and the nature of the underlying
property to which the instruments are linked; the degree, if any, to which income (including any mandated accruals) realized by
non-U.S. investors should be subject to withholding tax; and whether these instruments are or should be subject to the “constructive
ownership” rule, which very generally can operate to recharacterize certain long-term capital gain as ordinary income and
impose an interest charge. While the notice requests comments on appropriate transition rules and effective dates, any Treasury
regulations or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences
of an investment in the securities, possibly with retroactive effect.
As discussed
in the accompanying product supplement for Jump Securities, Section 871(m) of the Internal Revenue Code of 1986, as amended, and
Treasury regulations promulgated thereunder (“Section 871(m)”) generally impose a 30% (or a lower applicable treaty
rate) withholding tax on dividend equivalents paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments
linked to U.S. equities or indices that include U.S. equities (each, an “Underlying Security”). Subject to certain
exceptions, Section 871(m) generally applies to securities that substantially replicate the economic performance of one or more
Underlying Securities, as determined based on tests set forth in the applicable Treasury regulations (a “Specified Security”).
However, pursuant to an IRS notice, Section 871(m) will not apply to securities issued before January 1, 2021 that do not have
a delta of one with respect to any Underlying Security. Based on our determination that the securities do not have a delta of one
with respect to any Underlying Security, our counsel is of the opinion that the securities should not be Specified Securities and,
therefore, should not be subject to Section 871(m).
Our determination is not binding on the
IRS, and the IRS may disagree with this determination. Section 871(m) is complex and its application may depend on your particular
circumstances, including whether you enter into other transactions with respect to an Underlying Security. If withholding is required,
we will not be required to pay any additional amounts with respect to the amounts so withheld. You should consult your tax adviser
regarding the potential application of Section 871(m) to the securities.
Both U.S. and non-U.S. investors considering
an investment in the securities should read the discussion under “Risk Factors” in this document and the discussion
under “United States Federal Taxation” in the accompanying product supplement for Jump Securities and consult their
tax advisers regarding all aspects of the U.S. federal income tax consequences of an investment in the securities, including possible
alternative treatments, the issues presented by the aforementioned notice and any tax consequences arising under the laws of any
state, local or non-U.S. taxing jurisdiction.
The discussion in the preceding
paragraphs under “Tax considerations” and the discussion contained in the section entitled “United States Federal
Taxation” in the accompanying product supplement for Jump Securities, insofar as they purport to describe provisions of
U.S. federal income tax laws or legal conclusions with respect thereto, constitute the full opinion of Davis Polk & Wardwell
LLP regarding the material U.S. federal tax consequences of an investment in the securities.
|
Morgan Stanley Finance LLC
Dual Directional Buffered Jump Securities Based on the Value of the Worst Performing of the Dow Jones Industrial AverageSM and the Russell 2000® Index due October 31, 2024
Principal at Risk Securities
Use of proceeds and hedging:
|
The proceeds from the sale of the securities will be used by
us for general corporate purposes. We will receive, in aggregate, $1,000 per security issued, because, when we enter into hedging
transactions in order to meet our obligations under the securities, our hedging counterparty will reimburse the cost of the agent’s
commissions. The costs of the securities borne by you and described on page 2 above comprise the agent’s commissions and
the cost of issuing, structuring and hedging the securities.
On or prior to the pricing date, we 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 stocks of the underlying indices and in futures and options contracts on
the underlying indices and any component stocks of the underlying indices listed on major securities markets. Such purchase activity
could have increased the initial index value of either underlying index, and, therefore, could have increased the value at or above
which such underlying index must close on the valuation date so that you do not suffer a loss on your initial investment in the
securities (depending also on the performance of the other underlying index). In addition, through our affiliates, we are likely
to modify our hedge position throughout the term of the securities, including on the valuation date, by purchasing and selling
the stocks constituting the underlying indices, futures or options contracts on the underlying indices or their component stocks
listed on major securities markets or positions in any other available securities or instruments that we may wish to use in connection
with such hedging activities. As a result, these entities may be unwinding or adjusting hedge positions during the term of the
securities, and the hedging strategy may involve greater and more frequent dynamic adjustments to the hedge as the valuation date
approaches. We cannot give any assurance that our hedging activities will not affect the value of either underlying index, and,
therefore, adversely affect the value of the securities or the payment you will receive at maturity (depending also on the performance
of the other underlying index). For further information on our use of proceeds and hedging, see “Use of Proceeds and Hedging”
in the accompanying product supplement.
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Benefit plan investor considerations:
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Each fiduciary of a pension, profit-sharing or other employee
benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (a “Plan”),
should consider the fiduciary standards of ERISA in the context of the Plan’s particular circumstances before authorizing
an investment in the securities. Accordingly, among other factors, the fiduciary should consider whether the investment would satisfy
the prudence and diversification requirements of ERISA and would be consistent with the documents and instruments governing the
Plan.
In addition, we and certain of our affiliates, including MS &
Co., may each be considered a “party in interest” within the meaning of ERISA, or a “disqualified person”
within the meaning of the Internal Revenue Code of 1986, as amended (the “Code”), with respect to many Plans, as well
as many individual retirement accounts and Keogh plans (such accounts and plans, together with other plans, accounts and arrangements
subject to Section 4975 of the Code, also “Plans”). ERISA Section 406 and Code Section 4975 generally prohibit transactions
between Plans and parties in interest or disqualified persons. Prohibited transactions within the meaning of ERISA or the Code
would likely arise, for example, if the securities are acquired by or with the assets of a Plan with respect to which MS &
Co. or any of its affiliates is a service provider or other party in interest, unless the securities are acquired pursuant to an
exemption from the “prohibited transaction” rules. A violation of these “prohibited transaction” rules
could result in an excise tax or other liabilities under ERISA and/or Section 4975 of the Code for those persons, unless exemptive
relief is available under an applicable statutory or administrative exemption.
The U.S. Department of Labor has issued five prohibited transaction
class exemptions (“PTCEs”) that may provide exemptive relief for direct or indirect prohibited transactions resulting
from the purchase or holding of the securities. Those class exemptions are PTCE 96-23 (for certain transactions determined by in-house
asset managers), PTCE 95-60 (for certain transactions involving insurance company general accounts), PTCE 91-38 (for certain transactions
involving bank collective investment funds), PTCE 90-1 (for certain transactions involving insurance company separate accounts)
and PTCE 84-14 (for certain transactions determined by independent qualified professional asset managers). In addition, ERISA Section
408(b)(17) and Code Section 4975(d)(20) of the Code provide an exemption for the purchase and sale of securities and the related
lending transactions, provided that neither the issuer of the securities nor any of its affiliates has or exercises any discretionary
authority or control or renders any investment advice with respect to the assets of the Plan involved in the transaction and provided
further that the Plan pays no more, and receives no less, than “adequate consideration” in connection with the transaction
(the so-called “service provider” exemption). There can be no assurance that any of these class or statutory exemptions
will be available with respect to transactions involving the securities.
Because we may be considered a party in interest with
respect to many Plans, the securities may not be purchased, held or disposed of by any Plan, any entity whose underlying assets
include “plan assets” by reason of any Plan’s investment in the entity (a “Plan Asset Entity”) or
any person investing “plan assets” of any Plan, unless such purchase, holding or disposition is eligible for exemptive
relief, including relief available under PTCEs 96-23, 95-60, 91-38, 90-1, 84-14 or the service provider exemption or such purchase,
holding or disposition is otherwise not prohibited. Any purchaser, including any fiduciary purchasing on behalf of a Plan, transferee
or holder of the securities will be deemed to have represented, in its corporate and its fiduciary capacity, by its purchase and
holding of the securities that either (a) it is not a Plan or a Plan Asset Entity and is not purchasing such securities on behalf
of or with “plan assets” of any Plan or with any assets of a governmental, non-U.S. or church plan that is subject
to any federal, state, local or non-U.S. law that is substantially similar to the provisions of Section 406 of ERISA or Section
4975 of the Code (“Similar Law”) or (b) its purchase, holding and disposition of these securities will
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Morgan Stanley Finance LLC
Dual Directional Buffered Jump Securities Based on the Value of the Worst Performing of the Dow Jones Industrial AverageSM and the Russell 2000® Index due October 31, 2024
Principal at Risk Securities
|
not constitute or result in a non-exempt prohibited transaction
under Section 406 of ERISA or Section 4975 of the Code or violate any Similar Law.
Due to the complexity of these rules and the penalties that may
be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries or other
persons considering purchasing the securities on behalf of or with “plan assets” of any Plan consult with their counsel
regarding the availability of exemptive relief.
The securities are contractual financial instruments. The financial
exposure provided by the securities is not a substitute or proxy for, and is not intended as a substitute or proxy for, individualized
investment management or advice for the benefit of any purchaser or holder of the securities. The securities have not been designed
and will not be administered in a manner intended to reflect the individualized needs and objectives of any purchaser or holder
of the securities.
Each purchaser or holder of any securities acknowledges and agrees
that:
(i) the
purchaser or holder or its fiduciary has made and shall make all investment decisions for the purchaser or holder and the purchaser
or holder has not relied and shall not rely in any way upon us or our affiliates to act as a fiduciary or adviser of the purchaser
or holder with respect to (A) the design and terms of the securities, (B) the purchaser or holder’s investment in the securities,
or (C) the exercise of or failure to exercise any rights we have under or with respect to the securities;
(ii) we
and our affiliates have acted and will act solely for our own account in connection with (A) all transactions relating to the securities
and (B) all hedging transactions in connection with our obligations under the securities;
(iii) any
and all assets and positions relating to hedging transactions by us or our affiliates are assets and positions of those entities
and are not assets and positions held for the benefit of the purchaser or holder;
(iv) our
interests are adverse to the interests of the purchaser or holder; and
(v) neither
we nor any of our affiliates is a fiduciary or adviser of the purchaser or holder in connection with any such assets, positions
or transactions, and any information that we or any of our affiliates may provide is not intended to be impartial investment advice.
Each purchaser and holder of the securities has exclusive responsibility
for ensuring that its purchase, holding and disposition of the securities do not violate the prohibited transaction rules of ERISA
or the Code or any Similar Law. The sale of any securities to any Plan or plan subject to Similar Law is in no respect a representation
by us or any of our affiliates or representatives that such an investment meets all relevant legal requirements with respect to
investments by plans generally or any particular plan, or that such an investment is appropriate for plans generally or any particular
plan. In this regard, neither this discussion nor anything provided in this document is or is intended to be investment advice
directed at any potential Plan purchaser or at Plan purchasers generally and such purchasers of these securities should consult
and rely on their own counsel and advisers as to whether an investment in these securities is suitable.
However, individual retirement accounts, individual retirement
annuities and Keogh plans, as well as employee benefit plans that permit participants to direct the investment of their accounts,
will not be permitted to purchase or hold the securities if the account, plan or annuity is for the benefit of an employee of Morgan
Stanley or Morgan Stanley Wealth Management or a family member and the employee receives any compensation (such as, for example,
an addition to bonus) based on the purchase of the securities by the account, plan or annuity.
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Additional considerations:
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Client accounts over which Morgan Stanley, Morgan Stanley Wealth Management or any of their respective subsidiaries have investment discretion are not permitted to purchase the securities, either directly or indirectly.
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Supplemental information regarding plan of distribution; conflicts of interest:
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Selected dealers, which may include our affiliates, and their
financial advisors will collectively receive from the agent a fixed sales commission of $41.25 for each security they sell.
MS & Co. is an affiliate of MSFL and a wholly owned subsidiary
of Morgan Stanley, and it and other affiliates of ours expect to make a profit by selling, structuring and, when applicable, hedging
the securities.
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.
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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
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Morgan Stanley Finance LLC
Dual Directional Buffered Jump Securities Based on the Value of the Worst Performing of the Dow Jones Industrial AverageSM and the Russell 2000® Index due October 31, 2024
Principal at Risk Securities
|
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 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 Jump 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 Jump 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, any underwriter or any dealer participating in the offering will arrange to send you the prospectus, the product
supplement for Jump Securities and the index supplement if you so request by calling toll-free 800-584-6837.
You may access these documents on the SEC web site at.www.sec.gov
as follows:
Product Supplement for Jump 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 Jump Securities, in the index supplement or in the prospectus.
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