CALCULATION
OF REGISTRATION FEE
Title of Each Class of Securities
Offered
|
|
Maximum Aggregate
Offering Price
|
|
Amount of Registration
Fee
|
Performance Leveraged Upside Securities due 2021
|
|
$5,303,320
|
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$688.37
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October 2019
Pricing Supplement
No. 2,698
Registration Statement
Nos. 333-221595; 333-221595-01
Dated October 31,
2019
Filed pursuant to
Rule 424(b)(2)
Morgan
Stanley Finance LLC
Structured
Investments
Opportunities in U.S. Equities
PLUS Based on the Value of the S&P 500®
Index due February 4, 2021
Performance Leveraged Upside SecuritiesSM
Fully and Unconditionally Guaranteed by Morgan
Stanley
Principal at Risk Securities
The PLUS are unsecured obligations of Morgan Stanley Finance
LLC (“MSFL”) and are fully and unconditionally guaranteed by Morgan Stanley. The PLUS will pay no interest, do not
guarantee any return of principal at maturity and have the terms described in the accompanying product supplement for PLUS, index
supplement and prospectus, as supplemented or modified by this document. At maturity, if the underlying index has appreciated
in value, investors will receive the stated principal amount of their investment plus leveraged upside performance of the underlying
index, subject to the maximum payment at maturity. However, if the underlying index has depreciated in value, investors
will lose 1% for every 1% decline in the index value over the term of the securities. Under these circumstances, the payment at
maturity will be less than the stated principal amount and could be zero. Accordingly, you may lose your entire investment.
The PLUS are for investors who seek an equity index-based return and who are willing to risk their principal and forgo current
income and upside above the maximum payment at maturity in exchange for the leverage feature, which applies for a limited range
of upside performance of the underlying index. Investors may lose their entire initial investment in the PLUS. The PLUS
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 PLUS 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:
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Morgan Stanley Finance LLC
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Guarantor:
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Morgan Stanley
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Maturity date:
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February 4, 2021
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Underlying index:
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S&P 500® Index
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Aggregate principal amount:
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$5,303,320
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Payment at maturity per PLUS:
|
If the final index value is greater than the initial index value:
$10 + leveraged upside payment
In no event will the payment at maturity exceed the maximum
payment at maturity
If the final index value is less than or equal to the initial
index value:
$10 × index performance factor
Under these circumstances, the payment at maturity will be
less than or equal to the stated principal amount of $10.
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Leveraged upside payment:
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$10 × leverage factor × index percent increase
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Index percent increase:
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(final index value – initial index value) / initial index value
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Initial index value:
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3,037.56, which is the index closing value on the pricing date
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Final index value:
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The index closing value on the valuation date
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Valuation date:
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February 1, 2021, subject to postponement for non-index business days and certain market disruption events
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Leverage factor:
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300%
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Index performance factor:
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Final index value divided by the initial index value
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Maximum payment at maturity:
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$11.40 per PLUS (114.00% of the stated principal amount)
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Stated principal amount:
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$10 per PLUS
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Issue price:
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$10 per PLUS (see “Commissions and issue price” below)
|
Pricing date:
|
October 31, 2019
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Original issue date:
|
November 5, 2019 (3 business days after the pricing date)
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CUSIP:
|
61770C475
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ISIN:
|
US61770C4758
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Listing:
|
The PLUS will not be listed on any securities exchange.
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Agent:
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Morgan Stanley & Co. LLC (“MS & Co.”), an affiliate of MSFL and a wholly owned subsidiary of Morgan Stanley. See “Supplemental information regarding plan of distribution; conflicts of interest.”
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Estimated value on the pricing date:
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$9.784 per PLUS. See “Investment Summary” beginning on page 2.
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Commissions and issue price:
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Price to public
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Agent’s commissions and fees
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Proceeds to us(3)
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Per PLUS
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$10
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$0.175(1)
|
|
|
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$0.05(2)
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$9.775
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Total
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$5,303,320
|
$119,324.70
|
$5,183,995.30
|
|
(1)
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Selected dealers, including Morgan Stanley Wealth Management (an affiliate of the agent), and their financial advisors will
collectively receive from the agent, MS & Co., a fixed sales commission of $0.175 for each PLUS 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 PLUS.
|
|
(2)
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Reflects a structuring fee payable to Morgan Stanley Wealth Management by the agent or its affiliates of $0.05 for each PLUS.
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(3)
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See “Use of proceeds and hedging” on page 12.
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The PLUS involve risks not
associated with an investment in ordinary debt securities. See “Risk Factors” beginning on page 5.
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 PLUS 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 PLUS” and “Additional Information About the PLUS” at the end of this document.
As used in this document, “we,” “us”
and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Product Supplement for PLUS dated November 16, 2017 Index Supplement dated November 16, 2017
Prospectus dated November 16, 2017
Morgan Stanley Finance LLC
PLUS Based on the Value of the S&P 500® Index due February 4, 2021
Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
Investment Summary
Performance Leveraged Upside Securities
Principal at Risk Securities
The PLUS Based on the Value of the S&P 500® Index
due February 4, 2021 (the “PLUS”) can be used:
|
§
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As an alternative to direct exposure to the underlying index that enhances returns for a certain range of positive performance
of the underlying index, subject to the maximum payment at maturity
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|
§
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To enhance returns and potentially outperform the underlying index in a moderately bullish scenario
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|
§
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To achieve similar levels of upside exposure to the underlying index as a direct investment, subject to the maximum payment
at maturity, while using fewer dollars by taking advantage of the leverage factor
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|
§
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The PLUS are exposed on a 1:1 basis to the negative performance of the underlying index
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Maturity:
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Approximately 1 year and 3 months
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Leverage factor:
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300% (applicable only if the final index value is greater than the initial index value)
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Maximum payment at maturity:
|
$11.40 per PLUS (114.00% of the stated principal amount)
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Minimum payment at maturity:
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None. You could lose your entire initial investment in the PLUS.
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Coupon:
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None
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The original issue price of each PLUS is $10. This price includes
costs associated with issuing, selling, structuring and hedging the PLUS, which are borne by you, and, consequently, the estimated
value of the PLUS on the pricing date is less than $10. We estimate that the value of each PLUS on the pricing date is $9.784.
What goes into the estimated value on the pricing date?
In valuing the PLUS on the pricing date, we take into account
that the PLUS comprise both a debt component and a performance-based component linked to the underlying index. The estimated value
of the PLUS is determined using our own pricing and valuation models, market inputs and assumptions relating to the underlying
index, instruments based on the underlying index, volatility and other factors including current and expected interest rates, as
well as an interest rate related to our secondary market credit spread, which is the implied interest rate at which our conventional
fixed rate debt trades in the secondary market.
What determines the economic terms of the PLUS?
In determining the economic terms of the PLUS, including the
leverage factor and the maximum 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 PLUS 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 PLUS?
The price at which MS & Co. purchases the PLUS in the secondary
market, absent changes in market conditions, including those related to the underlying index, may vary from, and be lower than,
the estimated value on the pricing date, because the secondary market price takes into account our secondary market credit spread
as well as the bid-offer spread that MS & Co. would charge in a secondary market transaction of this type and other factors.
However, because the costs associated with issuing, selling, structuring and hedging the PLUS 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 PLUS in the secondary
market, absent changes in market conditions, including those related to the underlying index, and to our secondary market credit
spreads, it would do so based on values higher than the estimated value. We expect that those higher values will also be reflected
in your brokerage account statements.
MS & Co. may, but is not obligated to, make a market in the
PLUS, and, if it once chooses to make a market, may cease doing so at any time.
Morgan Stanley Finance LLC
PLUS Based on the Value of the S&P 500® Index due February 4, 2021
Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
Key Investment Rationale
The PLUS offer leveraged exposure to a certain range of positive
performance of the S&P 500® Index. In exchange for enhanced performance of 300% of the appreciation of the underlying
index, investors forgo performance above the maximum payment at maturity of $11.40 per PLUS. At maturity, if the underlying index
has appreciated in value, investors will receive the stated principal amount of their investment plus leveraged upside performance
of the underlying index, subject to the maximum payment at maturity. However, if the underlying index has depreciated in value,
investors will lose 1% for every 1% decline in the index value over the term of the securities. Under these circumstances, the
payment at maturity will be less than the stated principal amount and could be zero. Investors may lose their entire initial investment
in the PLUS. All payments on the PLUS are subject to our credit risk.
Leveraged Performance
|
The PLUS offer investors an opportunity to capture enhanced returns for a certain range of positive performance relative to a direct investment in the underlying index.
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Upside Scenario
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The underlying index increases in value, and, at maturity, the PLUS redeem for the stated principal amount of $10 plus 300% of the index percent increase, subject to the maximum payment at maturity of $11.40 per PLUS (114.00% of the stated principal amount).
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Par Scenario
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The final index value is equal to the initial index value. In this case, you receive the stated principal amount of $10 at maturity.
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Downside Scenario
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The underlying index declines in value, and, at maturity, the PLUS redeem for less than the stated principal amount by an amount proportionate to the decline in the value of the underlying index over the term of the PLUS. For example, if the final index value is 30% less than the initial index value, the PLUS will redeem at maturity for a loss of 30% of principal at $7.00, or 70% of the stated principal amount. There is no minimum payment at maturity on the PLUS, and you could lose your entire investment.
|
Morgan Stanley Finance LLC
PLUS Based on the Value of the S&P 500® Index due February 4, 2021
Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
How the PLUS Work
Payoff Diagram
The payoff diagram below illustrates the payment at maturity
on the PLUS based on the following terms:
Stated principal amount:
|
$10 per PLUS
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Leverage factor:
|
300%
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Maximum payment at maturity:
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$11.40 per PLUS (114.00% of the stated principal amount)
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Minimum payment at maturity:
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None
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PLUS Payoff Diagram
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How it works
§
Upside Scenario. If the final index value is greater than the initial index value,
investors will receive the $10 stated principal amount plus 300% of the appreciation of the underlying index over the term
of the PLUS, subject to the maximum payment at maturity. Under the terms of the PLUS, an investor will realize the maximum payment
at maturity of $11.40 per PLUS (114.00% of the stated principal amount) at a final index value of approximately 104.667% of the
initial index value.
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§
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If the underlying index appreciates 2%, the investor would receive a 6% return, or $10.60 per PLUS.
|
|
§
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If the underlying index appreciates 30%, the investor would receive only the maximum payment at maturity of $11.40 per PLUS,
or 114.00% of the stated principal amount.
|
|
§
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Par Scenario. If the final index value is equal to the initial index value, the
investor would receive the $10 stated principal amount.
|
|
§
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Downside Scenario. If the final index value is less than the initial index value,
the investor would receive an amount that is less than the $10 stated principal amount, based on a 1% loss of principal for each
1% decline in the underlying index. Under these circumstances, the payment at maturity will be less than the stated principal amount
per PLUS. There is no minimum payment at maturity on the PLUS.
|
|
§
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If
the underlying index depreciates 30%, the investor would lose 30% of the investor’s principal and receive only $7.00 per
PLUS at maturity, or 70% of the stated principal amount.
|
Morgan Stanley Finance LLC
PLUS Based on the Value of the S&P 500® Index due February 4, 2021
Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
Risk Factors
The following is a non-exhaustive list of certain key risk
factors for investors in the PLUS. For further discussion of these and other risks, you should read the section entitled “Risk
Factors” in the accompanying product supplement for PLUS, index supplement and prospectus. We also urge you to consult your
investment, legal, tax, accounting and other advisers in connection with your investment in the PLUS.
|
§
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The PLUS do not pay interest or guarantee return of any principal. The terms of the PLUS differ from those of ordinary
debt securities in that the PLUS do not pay interest or guarantee the payment of any principal amount at maturity. If the final
index value is less than the initial index value, the payout at maturity will be an amount in cash that is less than the $10 stated
principal amount of each PLUS by an amount proportionate to the full decline in the value of the underlying index over the term
of the PLUS. There is no minimum payment at maturity on the PLUS, and, accordingly, you could lose your entire initial investment
in the PLUS.
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|
§
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The appreciation potential of the PLUS is limited by the maximum payment at maturity. The appreciation potential of
the PLUS is limited by the maximum payment at maturity of $11.40 per PLUS, or 114.00% of the stated principal amount. Although
the leverage factor provides 300% exposure to any increase in the final index value over the initial index value, because the payment
at maturity will be limited to 114.00% of the stated principal amount for the PLUS, any increase in the final index value over
the initial index value by more than approximately 4.667% of the initial index value will not further increase the return on the
PLUS.
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§
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The market price of the PLUS will be influenced by many unpredictable factors. Several factors, many of which are beyond
our control, will influence the value of the PLUS in the secondary market and the price at which MS & Co. may be willing to
purchase or sell the PLUS in the secondary market, including the value, volatility (frequency and magnitude of changes in value)
and dividend yield of the underlying index, interest and yield rates in the market, time remaining until the PLUS mature, geopolitical
conditions and economic, financial, political, regulatory or judicial events that affect the underlying index or equities markets
generally and which may affect the final index value of the underlying index and any actual or anticipated changes in our credit
ratings or credit spreads. The value of the underlying index may be, and has recently been, volatile, and we can give you no assurance
that the volatility will lessen. See “S&P 500® Index Overview” below. You may receive less, and
possibly significantly less, than the stated principal amount per PLUS if you try to sell your PLUS prior to maturity.
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§
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The PLUS 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 PLUS. You are dependent on our ability to pay all amounts due on the PLUS at maturity
and therefore you are subject to our credit risk. If we default on our obligations under the PLUS, your investment would be at
risk and you could lose some or all of your investment. As a result, the market value of the PLUS 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 PLUS.
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§
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As a finance subsidiary, MSFL has no independent operations and will have no independent assets. As a finance subsidiary,
MSFL has no independent operations beyond the issuance and administration of its securities and will have no independent assets
available for distributions to holders of MSFL securities if they make claims in respect of such securities in a bankruptcy, resolution
or similar proceeding. Accordingly, any recoveries by such holders will be limited to those available under the related guarantee
by Morgan Stanley and that guarantee will rank pari passu with all other unsecured, unsubordinated obligations of Morgan
Stanley. Holders will have recourse only to a single claim against Morgan Stanley and its assets under the guarantee. Holders of
securities issued by MSFL should accordingly assume that in any such proceedings they would not have any priority over and should
be treated pari passu with the claims of other unsecured, unsubordinated creditors of Morgan Stanley, including holders
of Morgan Stanley-issued securities.
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|
§
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The amount payable on the PLUS is not linked to the value of the underlying index at any time other than the valuation date.
The final index value will be based on the index closing value on the valuation date, subject to postponement for non-index
business days and certain market disruption events. Even if the value of the underlying index appreciates prior to the valuation
date but then drops by the valuation date, the payment at maturity may be less, and may be significantly less, than it would have
been had the payment at maturity been linked to the value of the underlying index prior to such drop. Although the actual value
of the underlying index on the stated maturity date or at other times during the term of the PLUS may be higher than the index
closing value on the valuation date, the payment at maturity will be based solely on the index closing value on the valuation date.
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§
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Investing in the PLUS is not equivalent to investing in the underlying index. Investing in the PLUS is not equivalent
to investing in the underlying index or its component stocks. As an investor in the PLUS, you will not have voting rights or rights
to receive dividends or other distributions or any other rights with respect to stocks that constitute the underlying index.
|
Morgan Stanley Finance LLC
PLUS Based on the Value of the S&P 500® Index due February 4, 2021
Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
|
§
|
The rate we are willing to pay for securities of this type, maturity and issuance size is likely to be lower than the rate
implied by our secondary market credit spreads and advantageous to us. Both the lower rate and the inclusion of costs associated
with issuing, selling, structuring and hedging the PLUS in the original issue price reduce the economic terms of the PLUS, cause
the estimated value of the PLUS 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 PLUS 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 PLUS in the original issue price and the lower rate we are willing to pay as issuer make the economic terms of
the PLUS less favorable to you than they otherwise would be.
However, because the costs associated with issuing,
selling, structuring and hedging the PLUS 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 PLUS in the secondary market, absent changes in market conditions, including
those related to the underlying index, and to our secondary market credit spreads, it would do so based on values higher than the
estimated value, and we expect that those higher values will also be reflected in your brokerage account statements.
|
§
|
Adjustments to the underlying index could adversely affect the value of the PLUS. The underlying index publisher may
add, delete or substitute the stocks constituting the underlying index or make other methodological changes that could change the
value of the underlying index. The underlying index publisher may discontinue or suspend calculation or publication of the underlying
index at any time. In these circumstances, the calculation agent will have the sole discretion to substitute a successor index
that is comparable to the discontinued underlying index and is not precluded from considering indices that are calculated and published
by the calculation agent or any of its affiliates. If the calculation agent determines that there is no appropriate successor index,
the payment at maturity on the PLUS will be an amount based on the closing prices at maturity of the securities composing the underlying
index at the time of such discontinuance, without rebalancing or substitution, computed by the calculation agent in accordance
with the formula for calculating the underlying index last in effect prior to discontinuance of the underlying index.
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|
§
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The estimated value of the PLUS 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 PLUS than those generated by others, including other dealers in the market, if they attempted to value the
PLUS. 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 PLUS in the secondary market (if any exists) at any time. The value of your PLUS
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 PLUS will be influenced by many unpredictable
factors” above.
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|
§
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The PLUS will not be listed on any securities exchange and secondary trading may be limited. The PLUS will not be listed
on any securities exchange. Therefore, there may be little or no secondary market for the PLUS. MS & Co. may, but is not obligated
to, make a market in the PLUS 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 PLUS, 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 PLUS. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the
PLUS easily. Since other broker-dealers may not participate significantly in the secondary market for the PLUS, the price at which
you may be able to trade your PLUS 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 PLUS, it is likely that there would be no secondary market for the
PLUS. Accordingly, you should be willing to hold your PLUS to maturity.
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|
§
|
The calculation agent, which is a subsidiary of Morgan Stanley and an affiliate of MSFL, will make determinations with respect
to the PLUS. As calculation agent, MS & Co. has determined the initial index value, will determine the final index value
and will calculate the amount of cash you receive at maturity, if any. Moreover, certain determinations made by MS & Co., in
its capacity as calculation agent, may require it to exercise discretion and make subjective judgments, such as with respect to
the occurrence or non-occurrence of market disruption events and the selection of a successor index or calculation of the final
index value in the event of a market disruption event or discontinuance of the underlying index. These potentially subjective determinations
may adversely affect the payout to you at maturity, if any. For further information regarding these types of
|
Morgan Stanley Finance LLC
PLUS Based on the Value of the S&P 500® Index due February 4, 2021
Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
determinations, see “Description
of PLUS—Postponement of Valuation Date(s)” and “—Calculation Agent and Calculations” and related
definitions in the accompanying product supplement. In addition, MS & Co. has determined the estimated value of the PLUS on
the pricing date.
|
§
|
Hedging and trading activity by our affiliates could potentially adversely affect the value of the PLUS. 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
PLUS (and to other instruments linked to the underlying index or its component stocks), including trading in the stocks that constitute
the underlying index as well as in other instruments related to the underlying index. As a result, these entities may be unwinding
or adjusting hedge positions during the term of the PLUS, 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
index and other financial instruments related to the underlying index on a regular basis as part of their general broker-dealer
and other businesses. Any of these hedging or trading activities on or prior to the pricing date could have increased the initial
index value, and, therefore, could have increased the value at or above which the underlying index must close on the valuation
date so that investors do not suffer a loss on their initial investment in the PLUS. Additionally, such hedging or trading activities
during the term of the PLUS, including on the valuation date, could adversely affect the value of the underlying index on the valuation
date, and, accordingly, the amount of cash an investor will receive at maturity, if any.
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|
§
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The U.S. federal income tax consequences of an investment in the PLUS 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 PLUS (together, the “Tax Disclosure Sections”) concerning
the U.S. federal income tax consequences of an investment in the PLUS. If the Internal Revenue Service (the “IRS”)
were successful in asserting an alternative treatment, the timing and character of income on the PLUS 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 PLUS as debt instruments. In that event, U.S. Holders would be required to accrue into income original issue
discount on the PLUS every year at a “comparable yield” determined at the time of issuance and recognize all income
and gain in respect of the PLUS as ordinary income. Additionally, as discussed under “United States Federal Taxation—FATCA”
in the accompanying product supplement for PLUS, the withholding rules commonly referred to as “FATCA” would apply
to the PLUS 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 PLUS). We do not plan to request a ruling from the IRS regarding the tax treatment of the PLUS, 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 PLUS, 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 PLUS, 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
PLUS Based on the Value of the S&P 500® Index due February 4, 2021
Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
S&P 500® Index Overview
The S&P 500® Index, which is calculated, maintained
and published by S&P Dow Jones Indices LLC (“S&P”), consists of stocks of 500 component companies selected
to provide a performance benchmark for the U.S. equity markets. The calculation of the S&P 500® Index is based
on the relative value of the float adjusted aggregate market capitalization of the 500 component companies as of a particular time
as compared to the aggregate average market capitalization of 500 similar companies during the base period of the years 1941 through
1943. For additional information about the S&P 500® Index, see the information set forth under “S&P
500® Index” in the accompanying index supplement.
Information as of market close on October 31, 2019:
Bloomberg Ticker Symbol:
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SPX
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Current Index Value:
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3,037.56
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52 Weeks Ago:
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2,711.74
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52 Week High (on 10/30/2019):
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3,046.77
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52 Week Low (on 12/24/2018):
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2,351.10
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The following graph sets forth the daily index closing values
of the underlying index for each quarter in the period from January 1, 2014 through October 31, 2019. The related table sets forth
the published high and low closing values, as well as end-of-quarter closing values, of the underlying index for each quarter in
the same period. The index closing value of the underlying index on October 31, 2019 was 3,037.56. We obtained the information
in the table and graph below from Bloomberg Financial Markets, without independent verification. The underlying index has at times
experienced periods of high volatility. You should not take the historical values of the underlying index as an indication of its
future performance, and no assurance can be given as to the index closing value of the underlying index on the valuation date.
S&P 500®
Index Daily Index Closing Values
January 1, 2014 to October
31, 2019
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|
Morgan Stanley Finance LLC
PLUS Based on the Value of the S&P 500® Index due February 4, 2021
Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
S&P 500® Index
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High
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Low
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Period End
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2014
|
|
|
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First Quarter
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1,878.04
|
1,741.89
|
1,872.34
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Second Quarter
|
1,962.87
|
1,815.69
|
1,960.23
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Third Quarter
|
2,011.36
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1,909.57
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1,972.29
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Fourth Quarter
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2,090.57
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1,862.49
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2,058.90
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2015
|
|
|
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First Quarter
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2,117.39
|
1,992.67
|
2,067.89
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Second Quarter
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2,130.82
|
2,057.64
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2,063.11
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Third Quarter
|
2,128.28
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1,867.61
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1,920.03
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Fourth Quarter
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2,109.79
|
1,923.82
|
2,043.94
|
2016
|
|
|
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First Quarter
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2,063.95
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1,829.08
|
2,059.74
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Second Quarter
|
2,119.12
|
2,000.54
|
2,098.86
|
Third Quarter
|
2,190.15
|
2,088.55
|
2,168.27
|
Fourth Quarter
|
2,271.72
|
2,085.18
|
2,238.83
|
2017
|
|
|
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First Quarter
|
2,395.96
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2,257.83
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2,362.72
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Second Quarter
|
2,453.46
|
2,328.95
|
2,423.41
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Third Quarter
|
2,519.36
|
2,409.75
|
2,519.36
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Fourth Quarter
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2,690.16
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2,529.12
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2,673.61
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2018
|
|
|
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First Quarter
|
2,872.87
|
2,581.00
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2,640.87
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Second Quarter
|
2,786.85
|
2,581.88
|
2,718.37
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Third Quarter
|
2,930.75
|
2,713.22
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2,913.98
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Fourth Quarter
|
2,925.51
|
2,351.10
|
2,506.85
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2019
|
|
|
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First Quarter
|
2,854.88
|
2,447.89
|
2,834.40
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Second Quarter
|
2,945.83
|
2,744.45
|
2,879.84
|
Third Quarter
|
3,025.86
|
2,840.60
|
2,976.74
|
Fourth Quarter (through October 31, 2019)
|
3,046.77
|
2,887.61
|
3,037.56
|
“Standard & Poor’s®,” “S&P®,”
“S&P 500®,” “Standard & Poor’s 500” and “500” are trademarks of
Standard and Poor’s Financial Services LLC. See “S&P 500® Index” in the accompanying index
supplement.
Morgan Stanley Finance LLC
PLUS Based on the Value of the S&P 500® Index due February 4, 2021
Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities
Additional Terms of the PLUS
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.
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Underlying index publisher:
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S&P Dow Jones Indices LLC, or any successor thereof
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Interest:
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None
|
Bull market or bear market PLUS:
|
Bull market PLUS
|
Postponement of maturity date:
|
If the scheduled valuation date is not an index business day or if a market disruption event occurs on that day so that the valuation date as postponed falls less than two business days prior to the scheduled maturity date, the maturity date of the PLUS will be postponed to the second business day following that valuation date as postponed.
|
Denominations:
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$10 per PLUS and integral multiples thereof
|
Trustee:
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The Bank of New York Mellon
|
Calculation agent:
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MS & Co.
|
Issuer notice to registered security holders, the trustee and the depositary:
|
In the event that the maturity date is postponed due to postponement
of the 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 PLUS 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 PLUS
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 for determining the final index value.
The issuer shall, or shall cause the calculation agent to, (i)
provide written notice to the trustee and to the depositary of the amount of cash to be delivered with respect to each stated principal
amount of the PLUS, 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 PLUS to the trustee for delivery to the depositary, as holder of the PLUS, on
the maturity date.
|
Morgan Stanley Finance LLC
PLUS Based on the Value of the S&P 500® Index due February 4, 2021
Performance Leveraged Upside SecuritiesSM
Principal at Risk Securities