November 2019
Filed pursuant to Rule 433 dated
November 6, 2019
Relating to Amendment No. 1
to Preliminary Pricing Supplement No. 2,803 dated November 5, 2019
to Registration Statement Nos.
333-221595; 333-221595-01
Morgan
Stanley Finance LLC
Structured
Investments
Opportunities in Commodities
Trigger Securities due December 1, 2022 Based
on the Performance of Gold
Fully and Unconditionally Guaranteed by Morgan
Stanley
Principal at Risk Securities
The Trigger Securities due December 1, 2022
Based on the Performance of Gold, 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. Unlike ordinary debt securities,
the securities do not pay interest and do not guarantee the return of any principal at maturity. Instead, at maturity,
you will receive for each $1,000 stated principal amount of securities that you hold an amount in cash that will vary depending
on the commodity price of gold, which we refer to as the underlying commodity, on the valuation date. If the final commodity
price is greater than the initial commodity price, you will receive a return on your investment equal to the commodity percent
change, subject to the maximum payment at maturity. If the final commodity price is less than or equal to the initial
commodity price but greater than or equal to the trigger price, the securities will redeem for par. However, if the
final commodity price is less than the trigger price, investors will lose 1% for every 1% that the final commodity price is less
than the initial commodity price. There is no minimum payment at maturity on the securities. Accordingly,
you could lose your entire initial investment in the securities. The securities are for investors who seek a gold-based
return and who are willing to risk their principal and forgo current income and upside returns above the maximum payment at maturity
in exchange for the potential of receiving a return based on the performance of the underlying commodity. The securities
are notes issued as part of MSFL’s Series A Global Medium-Term Notes program.
All payments are subject to our credit
risk. If we default on our obligations, you could lose some or all of your investment. These securities are
not secured obligations and you will not have any security interest in, or otherwise have any access to, any underlying reference
asset or assets.
SUMMARY TERMS
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|
Issuer:
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Morgan Stanley Finance LLC
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Guarantor:
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Morgan Stanley
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Issue price:
|
$1,000 per security
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Stated principal amount:
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$1,000 per security
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Pricing date:
|
November 26, 2019
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Original issue date:
|
December 2, 2019 (3 business days after the pricing date)
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Maturity date:
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December 1, 2022
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Aggregate principal amount:
|
$
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Interest:
|
None
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Underlying commodity:
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Gold
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Payment at maturity:
|
·
If the final commodity price is greater than
the initial commodity price:
$1,000 + ($1,000 × the commodity percent change),
subject to the maximum payment at maturity
In no event will the payment at maturity
exceed the maximum payment at maturity.
·
If the final commodity price is less than
or equal to the initial commodity price but greater than or equal to the trigger price, meaning that the price of the underlying
commodity has remained unchanged or has declined by no more than 20% from the initial commodity price:
$1,000
·
If the final commodity price is less than
the trigger price, meaning that the price of the underlying commodity has declined by more than 20% from the initial commodity
price:
$1,000 × commodity performance factor
This amount will be less than the stated principal
amount of $1,000, and will represent a loss of at least 20%, and possibly all, of your investment.
|
Maximum payment at maturity:
|
$1,375 to $1,425 per security (137.50% to 142.50% of the stated principal amount). The actual maximum payment at maturity will be determined on the pricing date.
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Commodity percent change:
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(final commodity price – initial commodity price) / initial commodity price
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Trigger price:
|
$ , which is 80% of the initial commodity price
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Commodity performance factor:
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final commodity price / initial commodity price
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Initial commodity price:
|
$ , which is the commodity price on the pricing date, subject to postponement due to a non-trading day or certain market disruption events.
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Final commodity price:
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The commodity price on the valuation date, subject to postponement due to a non-trading day or certain market disruption events.
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Commodity price:
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For any trading day, the afternoon London gold price per troy ounce of gold for delivery in London through a member of the London Bullion Market Association (the “LBMA”) authorized to effect such delivery, stated in U.S. dollars, as calculated and administered by independent service provider(s) pursuant to an agreement with the LBMA and published by the LBMA on such day.
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Valuation date:
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November 28, 2022, subject to postponement due to a non-trading day or certain market disruption events.
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CUSIP / ISIN:
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61766YEQ0 / US61766YEQ08
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Listing:
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The securities will not be listed on any securities exchange.
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Agent:
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Morgan Stanley & Co. LLC (“MS & Co.”), a wholly-owned subsidiary of Morgan Stanley. See “Supplemental information concerning plan of distribution; conflicts of interest.”
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Estimated value on the pricing date:
|
Approximately $975.30 per security, or within $25.30 of that estimate. See “Investment Overview” beginning on page 2.
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Commissions and issue price:
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Price to public
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Agent’s commissions(1)
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Proceeds to us(2)
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Per security
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$1,000
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$
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$
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Total
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$
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$
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$
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(1)
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Selected dealers and their financial advisors will
collectively receive from the agent, MS & Co., a fixed sales commission of $ for each security they
sell. See “Supplemental information concerning plan of distribution; conflicts of interest” on page 8. For
additional information, see “Plan of Distribution (Conflicts of Interest)” in the accompanying prospectus supplement.
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(2)
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See “Use of proceeds and hedging” beginning
on page 7.
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You should read this document together
with the preliminary pricing supplement describing the offering and the related prospectus supplement and prospectus, each of
which can be accessed via the hyperlinks below, before you decide to invest.
Amendment No. 1 to Preliminary Pricing Supplement No. 2,803 dated November 6, 2019
The securities are not bank deposits and are not insured by
the Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations of, or guaranteed by, a bank.
The issuer has filed a registration statement (including a prospectus)
with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration
statement and other documents the issuer has filed with the SEC for more complete information about the issuer and this offering.
You may get these documents for free by visiting EDGAR on the SEC Web site at.www.sec.gov. Alternatively,
the issuer, any underwriter or any dealer participating in this offering will arrange to send you the prospectus if you request
it by calling toll-free 1-800-584-6837.
As used in this document, “we,” “us”
and “our” refer to Morgan Stanley or MSFL, or Morgan Stanley and MSFL collectively, as the context requires.
Morgan Stanley Finance LLC
|
Trigger Securities due December 1, 2022 Based on the Performance of Gold
Principal at Risk Securities
|
Investment Overview
The Trigger Securities due December 1, 2022 Based on the Performance
of Gold (the “securities”) can be used:
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§
|
As an alternative to direct exposure to the underlying
commodity that offers a 1-to-1 participation in the underlying commodity if the final commodity price is greater than the initial
commodity price, subject to the maximum payment at maturity; and
|
|
§
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To obtain limited protection against the loss of principal
in the event of a decline of the underlying commodity on the valuation date, but only if the final commodity price is greater
than or equal to the trigger price.
|
If the final commodity price is less than the trigger price,
the securities are exposed on a 1:1 basis to the percentage decline of the final commodity price from the initial commodity price. Accordingly,
investors may lose their entire initial investment in the securities.
Maturity:
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Approximately 3 years
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Maximum payment at maturity:
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$1,375 to $1,425 per security (137.50% to 142.50% of the stated principal amount). The actual maximum payment at maturity will be determined on the pricing date.
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Trigger price:
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80% of the initial commodity price
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Interest:
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None
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The original issue price of each security is $1,000. This
price includes costs associated with issuing, selling, structuring and hedging the securities, which are borne by you, and, consequently,
the estimated value of the securities on the pricing date will be less than $1,000. We estimate that the value of each
security on the pricing date will be approximately $975.30, or within $25.30 of that estimate. Our estimate of the value
of the securities as determined on the pricing date will be set forth in the final pricing supplement.
What goes into the estimated value on the pricing date?
In valuing the securities on the pricing date, we take into account
that the securities comprises both a debt component and a performance-based component linked to the underlying commodity. The
estimated value of the securities is determined using our own pricing and valuation models, market inputs and assumptions relating
to the underlying commodity, instruments based on the underlying commodity, 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 trigger price and 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 securities would be more
favorable to you.
What is the relationship between the estimated value on the
pricing date and the secondary market price of the securities?
The price at which MS & Co. purchases the securities in the
secondary market, absent changes in market conditions, including those related to the underlying commodity, 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.
MS & Co. may, but is not obligated to, make a market in the
securities, and, if it once chooses to make a market, may cease doing so at any time.
Morgan Stanley Finance LLC
|
Trigger Securities due December 1, 2022 Based on the Performance of Gold
Principal at Risk Securities
|
Underlying Commodity Overview
The price of gold to which the return on the security is linked
is the afternoon London gold price per troy ounce of gold for delivery in London through a member of the London Bullion Market
Association (the “LBMA”) authorized to effect such delivery, stated in U.S. dollars, as calculated and administered
by independent service provider(s) pursuant to an agreement with the LBMA and published by the LBMA on such day.
Underlying commodity information as of November 5, 2019
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Bloomberg Ticker Symbol*
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Current Price
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52 Weeks Ago
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52 Week
High
|
52 Week
Low
|
Gold (in U.S. dollars)
|
GOLDLNPM
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$1,488.95
|
$1,232.25
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$1,546.10 (on 9/4/2019)
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$1,202.10 (on 11/13/2018)
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* The Bloomberg ticker symbol is being provided for reference
purposes only. The commodity price on any trading day will be determined based on the price published by the LBMA.
Daily Afternoon Prices
of Gold
January 1, 2014 to November
5, 2019
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Morgan Stanley Finance LLC
|
Trigger Securities due December 1, 2022 Based on the Performance of Gold
Principal at Risk Securities
|
Key Investment Rationale
This 3-year investment offers a 1-to-1 participation in the underlying
commodity if the final commodity price is greater than the initial commodity price, subject to the maximum payment at maturity,
and provides limited protection against a decline in the underlying commodity of up to 20%. However, if as of the valuation
date the price of the underlying commodity has declined by more than 20% from the initial commodity price, the payment at maturity
will be less than $200 and could be zero. There is no minimum payment at maturity on the securities. Accordingly,
you could lose your entire initial investment in the securities.
Scenario 1
|
If the final commodity price is greater than the initial commodity price, the payment at maturity for each security will be equal to $1,000 plus $1,000 times the commodity percent change, subject to the maximum payment at maturity.
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Scenario 2
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If the final commodity price is less than or equal to the initial commodity price but greater than or equal to the trigger price, which means that the underlying commodity has remained unchanged or depreciated by no more than 20% from its initial price, the payment at maturity will be $1,000 per security.
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Scenario 3
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If the final commodity price is less than the trigger price, which means that the underlying commodity has depreciated by more than 20%, you will lose 1% for every 1% decline in the price of the underlying commodity from the initial commodity price (e.g., a 70% depreciation in the underlying commodity will result in the payment at maturity of $300 per security).
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Summary of Selected Key Risks (see page 12)
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§
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No guaranteed return of principal.
|
|
§
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The securities do not pay interest or guarantee a
return of any principal at maturity.
|
|
§
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Your appreciation potential is limited.
|
|
§
|
The securities are subject to our credit risk, and
any actual or anticipated changes to its credit ratings or credit spreads may adversely affect the market value of the securities.
|
|
§
|
As a finance subsidiary, MSFL has no independent operations
and will have no independent assets
|
|
§
|
The amount payable on the securities is not linked
to the value of the underlying commodity at any time other than the valuation date.
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|
§
|
The market price of the securities may be influenced
by many unpredictable factors.
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|
§
|
The return on the securities is linked to a single
commodity, and the price of gold may change unpredictably and affect the value of the securities in unforeseeable ways.
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|
§
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Suspensions or disruptions of market trading in commodity
and related futures markets could adversely affect the price of the securities.
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|
§
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Single commodity prices tend to be more volatile than,
and may not correlate with, the prices of commodities generally.
|
|
§
|
Investing in the securities is not equivalent to investing
in futures contracts or in forward contracts on gold.
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|
§
|
Legal and regulatory changes could adversely affect
the return on and value of your securities.
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|
§
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There are risks relating to trading of commodities
on the London Bullion Market Association.
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§
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The securities will not be listed on any securities
exchange and secondary trading may be limited. Accordingly, you should be willing to hold your securities for the entire
3-year term of the securities.
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§
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Hedging and trading activity by our affiliates could
potentially adversely affect the value of the securities.
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§
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The rate we are willing to pay for securities of this
type, maturity and issuance size is likely to be lower than the rate implied by our secondary market credit spreads and advantageous
to us. Both the lower rate and the inclusion of costs associated with issuing, selling, structuring and hedging the
securities in the original issue price reduce the economic terms of the securities, cause the estimated value of the securities
to be less than the original issue price and will adversely affect secondary market prices.
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|
§
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The estimated value of the securities is determined
by reference to our pricing and valuation models, which may differ from those of other dealers and is not a maximum or minimum
secondary market price.
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|
§
|
The calculation agent, which is a subsidiary of Morgan
Stanley and an affiliate of MSFL, will make determinations with respect to the securities.
|
|
§
|
The U.S. federal income tax consequences of an investment
in the securities are uncertain.
|
Morgan Stanley Finance LLC
|
Trigger Securities due December 1, 2022 Based on the Performance of Gold
Principal at Risk Securities
|
Fact Sheet
The securities offered are unsecured obligations of Morgan Stanley,
will pay no interest, do not guarantee any return of principal at maturity and have the terms described in the accompanying prospectus
supplement and prospectus, as supplemented and modified by these preliminary terms. At maturity, an investor will receive
for each stated principal amount of securities that the investor holds an amount in cash that may be greater than, equal to or
less than the stated principal amount depending on the performance of gold on the valuation date. The securities are
issued as part of Morgan Stanley Finance LLC’s Series A Global Medium-Term Notes program. All payments on the
securities are subject to our credit risk.
Pricing date:
|
Original issue date (settlement date):
|
Maturity date:
|
November 26, 2019
|
December 2, 2019 (3 business days after the pricing date)
|
December 1, 2022 (subject to postponement as described below)
|
Issuer:
|
Morgan Stanley Finance LLC
|
Guarantor:
|
Morgan Stanley
|
Aggregate principal amount:
|
$
|
Issue price:
|
$1,000 per security
|
Stated principal amount:
|
$1,000 per security
|
Denominations:
|
$1,000 and integral multiples thereof
|
Interest:
|
None
|
Underlying commodity:
|
Gold
|
Payment at maturity:
|
·
If the final commodity price is greater than the initial
commodity price:
$1,000 + ($1,000 × the commodity percent
change), subject to the maximum payment at maturity
In no event will the payment at maturity exceed
the maximum payment at maturity.
·
If the final commodity price is less than or equal
to the initial commodity price but greater than or equal to the trigger price, meaning that the price of the underlying commodity
has remained unchanged or has declined by no more than 20% from the initial commodity price:
$1,000
·
If the final commodity price is less than the trigger
price, meaning that the price of the underlying commodity has declined by more than 20% from the initial commodity price:
$1,000 × commodity performance factor
This amount will be less than the stated principal
amount of $1,000, and will represent a loss of at least 20%, and possibly all, of your investment.
|
Maximum
payment at maturity:
|
$1,375 to $1,425 per security (137.50% to 142.50% of the stated principal amount). The actual maximum payment at maturity will be determined on the pricing date.
|
Commodity percent change:
|
(final commodity price – initial commodity price) / initial commodity price
|
Trigger level:
|
$ , which is 80% of the initial commodity price
|
Commodity performance factor:
|
final commodity price / initial commodity price
|
Initial commodity price:
|
$ , which is the commodity price on the pricing date, subject to postponement due to a non-trading day or certain market disruption events.
|
Final commodity price:
|
The commodity price on the valuation date, subject to postponement due to a non-trading day or certain market disruption events.
|
Commodity price:
|
For any trading day, the afternoon London gold price per troy ounce of gold for delivery in London through a member of the LBMA authorized to effect such delivery, stated in U.S. dollars, as calculated and administered by independent service provider(s) pursuant to an agreement with the LBMA and published by the LBMA on such day.
|
Valuation date:
|
November 28, 2022, subject to postponement due to a non-trading day or certain market disruption events.
|
Postponement of maturity date:
|
If, due to a market disruption event or otherwise, the valuation date is postponed so that it falls less than two business days prior to the scheduled maturity date, the maturity date will be postponed to the second business day following the valuation date as postponed.
|
Risk factors:
|
Please see “Risk Factors” beginning on page 12.
|
Morgan Stanley Finance LLC
|
Trigger Securities due December 1, 2022 Based on the Performance of Gold
Principal at Risk Securities
|
Listing:
|
The securities will not be listed on any securities exchange.
|
CUSIP:
|
61766YEQ0
|
ISIN:
|
US61766YEQ08
|
Minimum ticketing size:
|
$1,000 / 1 security
|
Tax considerations:
|
You should review carefully the section
entitled “United States Federal Taxation” in the accompanying preliminary pricing supplement.
Although there is uncertainty
regarding the U.S. federal income tax consequences of an investment in the securities due to the lack of governing authority, in
the opinion of our counsel, Davis Polk & Wardwell LLP, under current law, and based on current market conditions, a security
should be treated as a single financial contract that is an “open transaction” for U.S. federal income tax purposes. However,
because our counsel’s opinion is based in part on market conditions as of the date of this document, it is subject to confirmation
on the pricing date.
|
|
Assuming this treatment of the securities is respected and subject to the discussion in “United States Federal Taxation” in the accompanying preliminary pricing supplement, the following U.S. federal income tax consequences should result based on current law:
|
|
§
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.
|
|
§
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.
|
|
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.
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 preliminary pricing supplement 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 preliminary pricing supplement, insofar as they purport to describe provisions of U.S. federal income tax laws
or legal conclusions with respect thereto, constitute the full opinion of Davis Polk & Wardwell LLP regarding the material
U.S. federal tax consequences of an investment in the securities.
|
Trustee:
|
The Bank of New York Mellon
|
Calculation agent:
|
Morgan Stanley Capital Group Inc. and its successors (“MSCG”)
|
Morgan Stanley Finance LLC
|
Trigger Securities due December 1, 2022 Based on the Performance of Gold
Principal at Risk Securities
|
Use of proceeds and hedging:
|
The proceeds we receive from the sale of the securities will
be used for general corporate purposes. We will receive, in aggregate, $1,000 per security issued, because, when we
enter into hedging transactions in order to meet our obligations under the securities, our hedging counterparty will reimburse
the cost of the agent’s commissions. The costs of the securities borne by you and described beginning on page
2 above comprise the agent’s commissions and the cost of issuing, structuring and hedging the securities.
On or prior to the pricing date, we expect to hedge our anticipated
exposure in connection with the securities by entering into hedging transactions with our subsidiaries and/or third-party dealers. We
expect our hedging counterparties to take positions in futures contracts on the underlying commodity or positions in any other
available instruments that they may wish to use in connection with such hedging. 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. Such purchase activity could potentially
increase the initial commodity price, and, as a result, could increase the trigger price, which is the price at or above which
the final commodity price must be on the valuation date so that you do not suffer a loss on your initial investment in the securities. In
addition, through our subsidiaries, we are likely to modify our hedge position throughout the life of the securities by purchasing
and selling futures contracts on the underlying commodity or positions in any other available instruments that we may wish to use
in connection with such hedging activities, including by selling any such instruments during the term of the securities, including
on the valuation date. We cannot give any assurance that our hedging activities will not affect the commodity price,
and, therefore, adversely affect the value of the securities or the payment you will receive at maturity, if any. For
further information on our use of proceeds and hedging, see “Additional Information About the Securities––Use
of Proceeds and Hedging” in the accompanying preliminary pricing supplement.
|
Benefit plan investor considerations:
|
Each fiduciary of a pension, profit-sharing or other employee
benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (a “plan”),
should consider the fiduciary standards of ERISA in the context of the plan’s particular circumstances before authorizing
an investment in the securities. Accordingly, among other factors, the fiduciary should consider whether the investment
would satisfy the prudence and diversification requirements of ERISA and would be consistent with the documents and instruments
governing the plan.
In addition, we and certain of our affiliates, including MS &
Co., may each be considered a “party in interest” within the meaning of ERISA, or a “disqualified person”
within the meaning of the Internal Revenue Code of 1986, as amended (the “Code”), with respect to many plans, as well
as many individual retirement accounts and Keogh plans (such accounts and plans, together with other plans, accounts and arrangements
subject to Section 4975 of the Code, also “plans”). ERISA Section 406 and Code Section 4975 generally prohibit
transactions between plans and parties in interest or disqualified persons. Prohibited transactions within the meaning
of ERISA or the Code would likely arise, for example, if the securities are acquired by or with the assets of a plan with respect
to which MS & Co. or any of its affiliates is a service provider or other party in interest, unless the securities are acquired
pursuant to an exemption from the “prohibited transaction” rules. A violation of these “prohibited
transaction” rules could result in an excise tax or other liabilities under ERISA and/or Section 4975 of the Code for those
persons, unless exemptive relief is available under an applicable statutory or administrative exemption.
The U.S. Department of Labor has issued five prohibited transaction
class exemptions (“PTCEs”) that may provide exemptive relief for direct or indirect prohibited transactions resulting
from the purchase or holding of the securities. Those class exemptions are PTCE 96-23 (for certain transactions determined
by in-house asset managers), PTCE 95-60 (for certain transactions involving insurance company general accounts), PTCE 91-38 (for
certain transactions involving bank collective investment funds), PTCE 90-1 (for certain transactions involving insurance company
separate accounts) and PTCE 84-14 (for certain transactions determined by independent qualified professional asset managers). In
addition, ERISA Section 408(b)(17) and Code Section 4975(d)(20) provide an exemption for the purchase and sale of securities and
the related lending transactions, provided that neither the issuer of the securities nor any of its affiliates has or exercises
any discretionary authority or control or renders any investment advice with respect to the assets of the plan involved in the
transaction and provided further that the plan pays no more, and receives no less, than “adequate consideration” in
connection with the transaction (the so-called “service provider” exemption). There can be no assurance
that any of these class or statutory exemptions will be available with respect to transactions involving the securities.
Because we may be considered a party in interest with respect
to many plans, the securities may not be purchased, held or disposed of by any plan, any entity whose underlying assets include
“plan assets” by reason of any plan’s investment in the entity (a “plan asset entity”) or any person
investing “plan assets” of any plan, unless such purchase, holding or disposition is eligible for exemptive relief,
including relief available
|
Morgan Stanley Finance LLC
|
Trigger Securities due December 1, 2022 Based on the Performance of Gold
Principal at Risk Securities
|
|
under PTCEs 96-23, 95-60, 91-38, 90-1, 84-14 or the service provider
exemption or such purchase, holding or disposition is otherwise not prohibited. Any purchaser, including any fiduciary
purchasing on behalf of a plan, transferee or holder of the securities will be deemed to have represented, in its corporate and
its fiduciary capacity, by its purchase and holding of the securities that either (a) it is not a plan or a plan asset entity and
is not purchasing such securities on behalf of or with “plan assets” of any plan or with any assets of a governmental,
non-U.S. or church plan that is subject to any federal, state, local or non-U.S. law that is substantially similar to the provisions
of Section 406 of ERISA or Section 4975 of the Code (“Similar Law”) or (b) its purchase, holding and disposition of
these securities will not constitute or result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975
of the Code or violate any Similar Law.
Due to the complexity of these rules and the penalties that may
be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries or other
persons considering purchasing the securities on behalf of or with “plan assets” of any plan consult with their counsel
regarding the availability of exemptive relief.
The securities are contractual financial instruments. The
financial exposure provided by the securities is not a substitute or proxy for, and is not intended as a substitute or proxy for,
individualized investment management or advice for the benefit of any purchaser or holder of the securities. The securities
have not been designed and will not be administered in a manner intended to reflect the individualized needs and objectives of
any purchaser or holder of the securities.
Each purchaser or holder of any securities acknowledges and agrees
that:
(i)
the purchaser or holder or its fiduciary has made and
shall make all investment decisions for the purchaser or holder and the purchaser or holder has not relied and shall not rely in
any way upon us or our affiliates to act as a fiduciary or adviser of the purchaser or holder with respect to (A) the design and
terms of the securities, (B) the purchaser or holder’s investment in the securities, or (C) the exercise of or failure to
exercise any rights we have under or with respect to the securities;
(ii)
we and our affiliates have acted
and will act solely for our own account in connection with (A) all transactions relating to the securities and (B) all hedging
transactions in connection with our obligations under the securities;
(iii)
any and all assets and positions
relating to hedging transactions by us or our affiliates are assets and positions of those entities and are not assets and positions
held for the benefit of the purchaser or holder;
(iv)
our interests are adverse to
the interests of the purchaser or holder; and
(v)
neither we nor any of our affiliates
is a fiduciary or adviser of the purchaser or holder in connection with any such assets, positions or transactions, and any information
that we or any of our affiliates may provide is not intended to be impartial investment advice.
Each purchaser and holder of these 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 of these 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.
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 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.
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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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 concerning 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 $ for each security
they sell.
MS & Co. is an affiliate of MSFL and a wholly-owned subsidiary
of Morgan Stanley, and it and other affiliates of ours expect to make a profit by selling, structuring and, when applicable, hedging
the Securities. When MS & Co. prices this offering of securities, including the maximum payment at maturity, it
will determine the economic terms of the securities such that for each security the estimated value on the pricing date will be
no lower than the minimum level described in “Investment Overview”
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beginning on page 2.
MS & Co. will conduct this offering in compliance with the
requirements of FINRA Rule 5121 of the Financial Industry Regulatory Authority, Inc., which is commonly referred to as FINRA, regarding
a FINRA member firm’s distribution of the securities of an affiliate and related conflicts of interest. MS &
Co. or any of our other affiliates may not make sales in this offering to any discretionary account. See “Supplemental
Information Concerning Plan of Distribution; Conflicts of Interest” and “Use of Proceeds and Hedging” in the
accompanying preliminary pricing supplement.
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This is a summary of the terms and conditions of the securities. We
encourage you to read the accompanying preliminary pricing supplement, prospectus supplement and prospectus for this offering,
which can be accessed via the hyperlinks on the front page of this document.
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How the Trigger Securities Work
Payoff Diagram
The payoff diagram below illustrates the payout on the securities
at maturity for a range of hypothetical percentage changes in the underlying commodity. The diagram is based on the
following terms:
Stated principal amount:
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$1,000 per security
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Hypothetical maximum payment at maturity:
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$1,400 per security (140.00% of the statement principal amount, the midpoint of the specified range)
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Trigger Securities Payoff Diagram
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How it works
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·
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Upside scenario. If
the final commodity price is greater than the initial commodity price, investors will receive at maturity the $1,000 stated principal
amount plus 100% of the appreciation of the underlying commodity above the initial commodity price over the term of the
securities, subject to the maximum payment at maturity of $1,400 per security.
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o
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If the underlying commodity appreciates 2%, the investor would receive a 2% return, or $1,020.00 per security.
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o
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If the underlying commodity appreciates 70%, the investor would receive only the maximum payment at maturity of $1,400 per
security, or 140.00% of the stated principal amount.
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·
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Par scenario. If
the final commodity price is less than or equal to the initial commodity price but greater than or equal to the trigger price,
investors will receive the stated principal amount of $1,000 per security.
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·
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Downside scenario. If
the final commodity price is less than the trigger price, investors will receive an amount that is less than the stated principal
amount by an amount that is proportionate to the percentage decrease of the underlying commodity from the initial commodity price
to the final commodity price. There is no minimum payment at maturity on the securities. Accordingly,
you could lose your entire initial investment in the securities.
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For example, if the underlying commodity depreciates 70% from the initial commodity price to the final commodity price, investors
would lose 70% of their principal and receive only $300 per security at maturity, or 30% of the stated principal amount.
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Payment at Maturity
At maturity, investors will receive for each $1,000 stated principal
amount of securities that they hold an amount in cash based on the performance of gold on the valuation date, determined as follows:
If the final commodity price is greater
than the initial commodity price:
$1,000 + ($1,000
× the commodity percent change), subject to the maximum payment at maturity
commodity percent change
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=
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final
commodity price – initial commodity price
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initial commodity price
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If the final commodity price is less than
or equal to the initial commodity price but greater than or equal to the trigger price, meaning the price of the underlying commodity
has remained unchanged or has declined from its initial price by no more than 20%:
the stated principal
amount of $1,000
If the final commodity price is less than
the trigger price, meaning the price of the underlying commodity has declined from its initial price by more than 20%:
$1,000 × the
commodity performance factor
commodity performance factor
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=
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final
commodity price
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initial commodity price
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Because the commodity performance factor will be less than
20% in this scenario, the payment at maturity will be less than $200 per security and could be zero. There is no minimum
payment at maturity on the securities. Accordingly, you could lose your entire initial investment in the securities.
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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 preliminary pricing supplement, prospectus supplement and prospectus. We
urge you to consult with your investment, legal, tax, accounting and other advisers before you invest in the securities.
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§
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The securities do not pay interest or guarantee
a return of any principal at maturity. The terms of the securities differ from those of ordinary debt securities
in that we will not pay you any interest and do not guarantee to pay you any 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
commodity price of the underlying commodity on the valuation date. If the final commodity price is less than the trigger
price, you will lose 1% of the stated principal amount of each security for every 1% that the final commodity price is less than
the initial commodity price. Accordingly, the payment at maturity may be less, and perhaps significantly less, than
the $1,000 stated principal amount per security. There is no minimum payment at maturity. Accordingly,
you could lose your entire investment in the securities. See “How the Trigger Securities Work” on page
10 above.
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§
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Your appreciation potential is limited. The appreciation potential of the securities will be limited by the maximum
payment at maturity of $1,375 to $1,425 per security, or 137.50% to 142.50% of the stated principal amount. The actual maximum
payment at maturity will be determined on the pricing date. The payment at maturity will never exceed the maximum payment at maturity
even if the final commodity price is substantially greater than the initial commodity price.
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§
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The securities are subject to our credit risk,
and any actual or anticipated changes to our credit ratings or credit spreads may adversely affect the market value of the securities. You
are dependent on our ability to pay all amounts due on the securities at maturity and therefore you are subject to our credit risk.
If we default on our obligations under the securities, your investment would be at risk and you could lose some or all of your
investment. As a result, the market value of the securities prior to maturity will be affected by changes in the market’s
view of our creditworthiness. Any actual or anticipated decline in our credit ratings or increase in the credit spreads charged
by the market for taking our credit risk is likely to adversely affect the market value of the securities.
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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 amount payable on the securities is not linked
to the value of the underlying commodity at any time other than the valuation date. The final commodity price will
be based on the commodity price on the valuation date, subject to adjustment for non-trading days and certain market disruption
events. Even if the price of the underlying commodity appreciates to a price greater than the initial commodity price
prior to the valuation date but then drops by the valuation date, the payment at maturity will be less, and may be significantly
less, than it would have been had the payment at maturity been linked to the price of the underlying commodity prior to such drop. Although
the actual price of the underlying commodity on the maturity date or at other times during the term of the securities may be higher
than the final commodity price, the payment at maturity will be based solely on the commodity price on the valuation date.
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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. We expect that generally the commodity price on any day will affect the value of the securities
more than any other single factor. However, because the payout on the securities is not directly correlated to the commodity
price, the securities will trade differently from gold. Other factors that may influence the value of the securities
include:
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·
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the market price of the underlying commodity and futures
contracts on the underlying commodity and the volatility (frequency and magnitude of changes in price) of such prices;
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·
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whether or not the price of the underlying commodity
is less than the trigger price;
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·
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trends of supply and demand for the underlying commodity
at any time, as well as the effects of speculation or any government actions that could affect the markets for the underlying commodity;
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interest and yield rates in the market;
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·
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geopolitical conditions and economic, financial, political,
regulatory or judicial events that affect the underlying commodity or commodities markets generally and which may affect the price
of the underlying commodity;
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·
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the time remaining until the maturity of the securities;
and
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·
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any actual or anticipated changes in our credit ratings
or credit spreads.
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Some or all of these factors will influence the price
you will receive if you sell your securities prior to maturity. For example, you may have to sell your securities at
a substantial loss if the price of the underlying commodity at the time of sale is below the trigger price or it is believed to
be likely to do so in light of the then current price of the underlying commodity.
You cannot predict the future performance of the underlying
commodity based on its historical performance. There can be no assurance that you will not suffer a loss on your initial
investment in the securities.
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§
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The return on the securities is linked to a single commodity, and
the price of gold may change unpredictably and affect the value of the securities in unforeseeable ways. Investments,
such as the securities, linked to the price of a single commodity, such as gold, are subject to sharp fluctuations in the prices
of the commodity over short periods of time for a variety of factors.
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The price of gold to which the return on the securities
is linked is the afternoon London gold price per troy ounce of gold for delivery in London through a member of the LBMA authorized
to effect such delivery. The market for gold bullion is global, and gold prices are subject to volatile price movements
over short periods of time. Specific factors affecting the price of gold include economic factors, including, among
other things, the structure of and confidence in the global monetary system, expectations of the future rate of inflation, the
relative strength of, and confidence in, the U.S. dollar (the currency in which the price of gold is generally quoted), interest
rates and gold borrowing and lending rates, and global or regional economic, financial, political, regulatory, judicial or other
events as well as wars and political and civil upheavals. Gold prices may also be affected by industry factors such
as industrial and jewelry demand, lending, sales and purchases of gold by the official sector, including central banks and other
governmental agencies and multilateral institutions that hold gold, sales of gold recycled from jewelry, as opposed to newly produced
gold, in particular as the result of financial crises, levels of gold production and production costs in major gold producing nations
such as South Africa, the United States and Australia, non-concurrent trading hours of gold markets and short-term changes in supply
and demand because of trading activities in the gold market. It is not possible to predict the aggregate effect of all
or any combination of these factors. See “Historical Information” on page 17 below.
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§
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Suspensions or disruptions of market trading in
commodity and related futures markets could adversely affect the price of the securities. The commodity markets
are subject to temporary distortions or other disruptions due to various factors, including the lack of liquidity in the markets,
the participation of speculators and government regulation and intervention. In addition, U.S. futures exchanges and
some foreign exchanges have regulations that limit the amount of fluctuation in futures contract prices which may occur during
a single business day. These limits are generally referred to as “daily price fluctuation limits” and the
maximum or minimum price of a contract on any given day as a result of these limits is referred to as a “limit price.” Once
the limit price has been reached in a particular contract, no trades may be made at a different price. Limit prices
have the effect of precluding trading in a particular contract or forcing the liquidation of contracts at disadvantageous times
or prices. These circumstances could adversely affect the value of the underlying commodity index, and, therefore, the
value of the securities.
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Single commodity prices tend to be more volatile
than, and may not correlate with, the prices of commodities generally. The payment at maturity on the securities is linked
exclusively to the price of gold and not to a diverse basket of commodities or a broad-based commodity index. The price
of gold may not correlate to the price of commodities generally and may diverge significantly from the prices of commodities generally. Because
the securities are linked to the price of a single commodity, they carry greater risk and may be more volatile than a security
linked to the prices of multiple commodities or a broad-based commodity index. The price of gold may be, and has recently been,
volatile, and we can give you no assurance that the volatility will lessen. See “Historical Information”
on page 17 below.
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Investing in the securities is not equivalent to
investing directly in the underlying commodity or in futures contracts or forward contracts on the underlying commodity. Investing
in the securities is not equivalent to investing in gold or in futures contracts or in forward contracts on gold. By
purchasing the securities, you do not purchase any entitlement to gold, or futures contracts or forward contracts on gold. Further,
by purchasing the securities, you are taking credit risk to us and not to any counter-party to futures contracts or forward contracts
on gold.
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§
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Legal and regulatory changes could adversely affect
the return on and value of your securities. Futures contracts and options on futures contracts, including those
related to the gold, are subject to extensive statutes, regulations, and margin requirements. The Commodity Futures Trading Commission,
commonly referred to as the “CFTC,” and the exchanges on which such futures contracts trade, are authorized to take
extraordinary actions in the event of a market emergency, including, for example, the retroactive implementation of speculative
position limits or higher margin requirements, the establishment of daily limits and the suspension of trading. Furthermore, certain
exchanges have regulations that limit the amount of fluctuations in futures contract prices that may occur during a single five-minute
trading period. These limits could adversely affect the market prices of relevant futures and options contracts and forward contracts.
The regulation of commodity transactions in the U.S. is subject to ongoing modification by government and judicial action. In addition,
various non-U.S. governments have expressed concern regarding the disruptive effects of speculative trading in the commodity markets
and the need to regulate the derivative markets in general. The effect on the value of the securities of any future regulatory
change is impossible to predict, but could be substantial and adverse to the interests of holders of the securities.
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For example, the Dodd-Frank Act, which was enacted
on July 21, 2010, requires the CFTC to establish limits on the amount of positions that may be held by any person in certain commodity
futures contracts and swaps, futures and options that are economically equivalent to such contracts. While the effects
of these or other regulatory developments are difficult to predict, when adopted, such rules may have the effect of making the
markets for commodities, commodity futures contracts, options on futures contracts and other related derivatives more volatile
and over time potentially less liquid. Such restrictions may force market participants, including us and our affiliates, or such
market participants may decide, to sell their positions in such futures contracts and other instruments subject to the limits.
If this broad market selling were to occur, it would likely lead to declines, possibly significant declines, in commodity prices,
in the price of such commodity futures contracts or instruments and potentially, the value of the securities.
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§
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There are risks relating to trading of commodities
on the London Bullion Market Association. Gold is traded on the London Bullion Market Association, which we refer
to as the LBMA. The prices of gold will be determined by reference to the London gold price reported by the LBMA. The
LBMA is a self-regulatory association of bullion market participants. Although all market-making members of the LBMA
are supervised by the Bank of England and are required to satisfy a capital adequacy test, the LBMA itself is not a regulated entity. If
the LBMA should cease operations, or if bullion trading should become subject to a value added tax or other tax or any other form
of regulation currently not in place, the role of LBMA prices as a global benchmark for the value of gold may be adversely affected. The
LBMA is a principals’ market which operates in a manner more closely analogous to over-the-counter physical commodity markets
than regulated futures markets, and certain features of U.S. futures contracts are not present in the context of LBMA trading. For
example, there are no daily price limits on the LBMA, which would otherwise restrict fluctuations in the prices of LBMA contracts. In
a declining market, it is possible that prices would continue to decline without limitation within a trading day or over a period
of trading days. In addition, there are currently proposals to replace the current process for determining the commodity
price for gold. If this were to change, we can give you no assurance that any new process will function as intended or that it
will generate the same price as would have been generated pursuant to the current process.
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§
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The securities will not be listed on any securities
exchange and secondary trading may be limited. Accordingly, you should be willing to hold your securities for the entire
3-year term of the securities. The securities will not be listed on any securities exchange. Therefore,
there may be little or no secondary market for the securities. MS & Co. may, but is not obligated to, make a market
in the securities and, if it once chooses to make a market, may cease doing so at any time. When it does make a market, it will
generally do so for transactions of routine secondary market size at prices based on its estimate of the current value of the securities,
taking into account its bid/offer spread, our credit spreads, market volatility, the notional size of the proposed sale, the cost
of unwinding any related hedging positions, the time remaining to maturity and the likelihood that it will be able to resell the
securities. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the
securities easily. Since other broker-dealers may not participate significantly
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in the secondary market for the securities, the price
at which you may be able to trade your securities is likely to depend on the price, if any, at which MS & Co. is willing to
transact. If, at any time, MS & Co. were to cease making a market in the securities, it is likely that there would
be no secondary market for the securities. Accordingly, you should be willing to hold your securities to maturity.
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§
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Hedging and trading activity by our affiliates
could potentially adversely affect the value of the securities. One or more of our affiliates and/or third-party
dealers expect to carry out hedging activities related to the securities (and possibly to other instruments linked to the underlying
commodity), including trading in related futures, forwards and/or options contracts on the underlying commodity as well as in other
instruments related to the underlying commodity. 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 underlying commodity and other financial instruments
related to the underlying commodity on a regular basis as part of their general broker-dealer, commodity trading, proprietary trading
and other businesses. Any of these hedging or trading activities on or prior to the pricing date could increase the
initial commodity price and, as a result, could increase the trigger price, which is the price at or above which the commodity
price must be on the valuation date so that you do not suffer a loss on your initial investment in the securities. Additionally,
such hedging or trading activities during the term of the securities could potentially affect the commodity price, including the
commodity price on the valuation date, and, accordingly, the amount of cash you will receive upon a sale of the securities or at
maturity, if any.
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§
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The rate we are willing to pay for securities of
this type, maturity and issuance size is likely to be lower than the rate implied by our secondary market credit spreads and advantageous
to us. Both the lower rate and the inclusion of costs associated with issuing, selling, structuring and hedging the
securities in the original issue price reduce the economic terms of the securities, cause the estimated value of the securities
to be less than the original issue price and will adversely affect secondary market prices. Assuming no change in
market conditions or any other relevant factors, the prices, if any, at which dealers, including MS & Co., may be willing to
purchase the securities in secondary market transactions will likely be significantly lower than the original issue price, because
secondary market prices will exclude the issuing, selling, structuring and hedging-related costs that are included in the original
issue price and borne by you and because the secondary market prices will reflect our secondary market credit spreads and the bid-offer
spread that any dealer would charge in a secondary market transaction of this type as well as other factors.
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The inclusion of the costs of issuing, selling, structuring
and hedging the securities in the original issue price and the lower rate we are willing to pay as issuer make the economic terms
of the securities less favorable to you than they otherwise would be.
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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.
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The calculation agent, which is a subsidiary of
Morgan Stanley and an affiliate of MSFL, will make determinations with respect to the securities. As calculation
agent, MSCG will determine the initial commodity price, the trigger price, the final commodity price and whether the final commodity
price is less than the initial commodity price or the trigger price, as applicable, on the valuation date, the commodity percent
change or the commodity performance factor (if applicable) and whether a market disruption event has occurred. Additionally,
the calculation agent will calculate the amount of cash, if any, you will receive at maturity. Any of these determinations
made by MSCG in its capacity as calculation agent, including with respect to the occurrence or non-occurrence of market disruption
events or calculation of the commodity price in the event of a market disruption event, may adversely affect the payout to you
at maturity. For further information regarding these types of determinations, see “Description of Securities—Payment
at Maturity,” “—Initial Commodity Price,” “—Initial
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Commodity Price,” “—Commodity Price,”
“—Commodity Percent Change,” “—Commodity Performance Factor,” “—Valuation Date,”
“—Trading Day,” “—Calculation Agent,” “—Market Disruption Event,” and “—Alternate
Exchange Calculation in Case of an Event of Default” in accompanying preliminary pricing supplement. In addition,
MS & Co. has determined the estimated value of the securities on the pricing date.
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§
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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
preliminary pricing supplement (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 preliminary pricing supplement, 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 preliminary pricing supplement). We do not plan to request a ruling from the IRS regarding the tax treatment
of the securities, and the IRS or a court may not agree with the tax treatment described in the Tax Disclosure Sections.
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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
|
Trigger Securities due December 1, 2022 Based on the Performance of Gold
Principal at Risk Securities
|
Historical Information
The following table sets forth the published high and low prices,
as well as end-of-quarter prices, for the underlying commodity for each quarter in the period from January 1, 2014 through November
5, 2019. The commodity price on November 5, 2019 was $1,488.95. We obtained the information in the table from Bloomberg Financial
Markets, without independent verification. The historical performance of the underlying commodity should not be taken as an indication
of its future performance.
Gold (in U.S. dollars per troy ounce)
|
High ($)
|
Low ($)
|
Period End ($)
|
2014
|
|
|
|
First Quarter
|
1,385.00
|
1,221.00
|
1,291.75
|
Second Quarter
|
1,325.75
|
1,242.75
|
1,315.00
|
Third Quarter
|
1,340.25
|
1,213.50
|
1,216.50
|
Fourth Quarter
|
1,250.25
|
1,142.00
|
1,206.00
|
2015
|
|
|
|
First Quarter
|
1,295.75
|
1,147.25
|
1,187.00
|
Second Quarter
|
1,225.00
|
1,164.60
|
1,171.00
|
Third Quarter
|
1,168.00
|
1,080.80
|
1,114.00
|
Fourth Quarter
|
1,184.25
|
1,049.40
|
1,060.00
|
2016
|
|
|
|
First Quarter
|
1,277.50
|
1,077.00
|
1,237.00
|
Second Quarter
|
1,324.55
|
1,212.10
|
1,320.75
|
Third Quarter
|
1,366.25
|
1,308.35
|
1,322.50
|
Fourth Quarter
|
1,313.30
|
1,125.70
|
1,145.90
|
2017
|
|
|
|
First Quarter
|
1,257.55
|
1,151.00
|
1,244.85
|
Second Quarter
|
1,293.50
|
1,220.40
|
1,242.25
|
Third Quarter
|
1,346.25
|
1,211.05
|
1,283.10
|
Fourth Quarter
|
1,303.30
|
1,240.90
|
1,291.00
|
2018
|
|
|
|
First Quarter
|
1,354.95
|
1,307.75
|
1,323.85
|
Second Quarter
|
1,351.45
|
1,250.45
|
1,250.45
|
Third Quarter
|
1,262.05
|
1,178.40
|
1,187.25
|
Fourth Quarter
|
1,279.00
|
1,185.55
|
1,279.00
|
2019
|
|
|
|
First Quarter
|
1,343.75
|
1,279.55
|
1,295.40
|
Second Quarter
|
1,431.40
|
1,269.50
|
1,409.00
|
Third Quarter
|
1,546.10
|
1,388.65
|
1,485.30
|
Fourth Quarter (through November 5, 2019)
|
1,517.10
|
1,473.45
|
1,488.95
|
|
|
|
|
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