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January 2017
Preliminary Terms No. 1,285
Registration Statement No. 333-200365
Dated January 20, 2017
Filed pursuant to Rule 433
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Fixed to Floating Rate Notes due 2027
Based on 3-Month USD LIBOR
As further described below, interest
will accrue and be payable on the notes quarterly, in arrears, (i) from the original issue date to January 30, 2020: at a rate
of 3.50% per annum and (ii) from January 30, 2020 to maturity: at a variable rate equal to 3-Month USD LIBOR
plus
1.25%,
subject to the minimum interest rate of 0.00% per annum and the maximum interest rate of 6.00% per annum.
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SUMMARY
TERMS
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Issuer:
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Morgan Stanley
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Aggregate principal amount:
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$ . May
be increased prior to the original issue date but we are not required to do so.
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Issue price:
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At variable prices
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Stated principal amount:
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$1,000 per note
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Pricing date:
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January , 2017
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Original issue date:
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January 30, 2017 ( business days after the
pricing date)
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Maturity date:
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January 30, 2027
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Interest accrual date:
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January 30, 2017
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Payment at maturity:
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The payment at maturity per note will be the stated principal amount plus accrued
and unpaid interest, if any
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Reference rate:
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3-Month USD LIBOR. Please see “Additional Provisions—Reference
Rate” below.
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Interest rate:
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From and including
the original issue date to but excluding January 30, 2020:
3.50% per annum
From and including
January 30, 2020 to but excluding the maturity date (the “floating interest rate period”):
Reference
rate
plus
1.25%; subject to the minimum interest rate and the maximum interest rate.
For the purpose
of determining the level of the reference rate applicable to an interest payment period, the level of the reference rate
will be determined two (2) London banking days prior to the related interest reset date at the start of such interest
payment period (each, an “interest determination date”).
Interest
for each interest payment period during the floating interest rate period is subject to the minimum interest rate of 0.00%
per annum and the maximum interest rate of 6.00% per annum.
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Interest payment period:
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Quarterly
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Interest payment period end dates:
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Unadjusted
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Interest payment dates:
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Each January 30, April 30, July 30 and October 30, beginning April 30, 2017;
provided
that if any such day is not a business day, that interest payment will be made on the next succeeding business
day and no adjustment will be made to any interest payment made on that succeeding business day.
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Interest reset dates:
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Each January 30, April 30, July 30 and October 30, beginning January 30, 2020;
provided
that such interest reset dates shall not be adjusted for non-business days.
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Day-count convention:
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30/360
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Minimum interest rate:
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0.00% per annum during the floating interest rate period
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Maximum interest rate:
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6.00% per annum during the floating interest rate period
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Redemption:
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Not applicable
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Specified currency:
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U.S. dollars
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CUSIP / ISIN:
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61760QKG8 / US61760QKG81
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Book-entry or certificated note:
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Book-entry
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Business day:
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New York
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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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Calculation agent:
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Morgan Stanley Capital Services LLC
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Trustee:
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The Bank of New York Mellon
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Estimated value on the pricing date:
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Approximately $973.90 per note, or within $20.00 of that estimate. See
“The Notes” on page 2.
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Commissions and issue price:
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Price to public
(1)(2)
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Agent’s commissions
(2)
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Proceeds to issuer
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Per note
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At variable prices
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$
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$
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Total
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At variable prices
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$
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$
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(1)
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The
notes will be offered from time to time in one or more negotiated transactions at varying
prices to be determined at the time of each sale, which may be at market prices prevailing,
at prices related to such prevailing prices or at negotiated prices; provided, however,
that such price will not be less than $990 per note and will not be more than $1,000
per note. See “Risk Factors—The price you pay for the notes may be higher
than the prices paid by other investors.”
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(2)
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Morgan
Stanley or one of our affiliates will pay varying discounts and commissions to dealers,
including Morgan Stanley Wealth Management (an affiliate of the agent) and their financial
advisors, of up to $ per note depending on market conditions. See “Supplemental
Information Concerning Plan of Distribution; Conflicts of Interest.” For additional
information, see “Plan of Distribution (Conflicts of Interest)” in the accompanying
prospectus supplement.
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You should read this document
together with the related prospectus supplement and prospectus, each of which can be accessed via the hyperlinks below, before
you decide to invest.
Prospectus Supplement dated January 11, 2017
Prospectus dated February 16, 2016
The notes 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.
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
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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.
Morgan Stanley
Fixed to Floating Rate Notes due 2027
Based on 3-Month USD LIBOR
The Notes
The notes offered are debt securities of Morgan Stanley. From
the original issue date until January 30, 2020, interest on the notes will accrue and be payable on the notes quarterly, in arrears,
at 3.50% per annum, and thereafter, during the floating interest rate period, interest on the notes will accrue and be payable
on the notes quarterly, in arrears, at a variable rate equal to 3-Month USD LIBOR
plus
1.25%, subject to the minimum interest
rate of 0.00% per annum and the maximum interest rate of 6.00% per annum. We describe the basic features of these notes in the
sections of the accompanying prospectus called “Description of Debt Securities—Floating Rate Debt Securities”
and prospectus supplement called “Description of Notes,” subject to and as modified by the provisions described below.
All payments on the notes are subject to the credit risk of Morgan Stanley.
The stated principal amount of each note is $1,000, and the issue
price is variable. This price includes costs associated with issuing and selling the notes, which are borne by you, and, consequently,
the estimated value of the notes on the pricing date will be less than the issue price. We estimate that the value of each note
on the pricing date will be approximately $973.90, or within $20.00 of that estimate. Our estimate of the value of the notes as
determined on the pricing date will be set forth in the final pricing supplement.
The price at which MS & Co. purchases the notes in the secondary
market, absent changes in market conditions, including those related to interest rates and LIBOR, may vary from, and be lower than,
the estimated value on the pricing date. MS & Co. may, but is not obligated to, make a market in the notes and, if it once
chooses to make a market, may cease doing so at any time.
Additional Provisions
Reference Rate
“LIBOR” as defined in the accompanying prospectus
in the section called “Description of Debt Securities—Floating Rate Debt Securities” and “—Base Rates”
with an index maturity of 3 months and an index currency of U.S. dollars and as displayed on Reuters Page LIBOR01.
Morgan Stanley
Fixed to Floating Rate Notes due 2027
Based on 3-Month USD LIBOR
Risk Factors
The notes involve risks not associated with an investment
in ordinary floating rate notes. An investment in the notes entails significant risks not associated with similar investments in
a conventional debt security, including, but not limited to, fluctuations in the reference rate, and other events that are difficult
to predict and beyond the issuer’s control. This section describes the most significant risks relating to the notes. For
a complete list of risk factors, please see the accompanying prospectus supplement and prospectus.
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The historical performance of the reference rate is not an indication of future performance.
The historical performance of the reference rate should not be taken as an indication of future performance during the term
of the notes. Changes in the levels of the reference rate will affect the trading price of the notes, but it is impossible to predict
whether such levels will rise or fall.
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§
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The amount of interest payable on the notes for each interest payment period during the floating
interest rate period is capped.
The interest rate on the notes for each interest payment period during the floating interest
rate period is capped at the maximum interest rate of 6.00% per annum (equal to a maximum quarterly interest payment of $15.00
for each $1,000 stated principal amount of notes).
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§
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Investors 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 notes.
Investors are dependent on our ability to pay
all amounts due on the notes on interest payment dates and at maturity and therefore investors are subject to our credit risk and
to changes in the market’s view of our creditworthiness. The notes are not guaranteed by any other entity. If we default
on our obligations under the notes, your investment would be at risk and you could lose some or all of your investment. As a result,
the market value of the notes 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 value of the notes.
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The price at which the notes may be sold prior to maturity will depend on a number of factors and may be substantially less
than the amount for which they were originally purchased.
Some of these factors include, but are not limited to: (i) actual
or anticipated changes in the level of the reference rate, (ii) volatility of the level of the reference rate, (iii) changes in
interest and yield rates, (iv) any actual or anticipated changes in our credit ratings or credit spreads and (v) time remaining
to maturity.
Generally, the longer the time remaining to maturity, the more the market price of the
notes will be affected by the factors described in the preceding sentence. This can lead to significant adverse changes in the
market price of securities like the notes.
Depending on the actual or anticipated level of the reference rate, the market
value of the notes is expected to decrease and you may receive substantially less than 100% of the issue price if you are able
to sell your notes prior to maturity. In addition, any secondary market prices may differ from values determined by pricing models
used by MS & Co., as a result of dealer discounts, mark-ups or other transaction costs.
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§
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The price you pay for the notes may be higher than the prices paid by other investors.
The agent proposes to offer the
notes from time to time for sale to investors in one or more negotiated transactions, or otherwise, at market prices prevailing
at the time of sale, at prices related to then-prevailing prices, at negotiated prices, or otherwise. Accordingly, there is a risk
that the price you pay for the notes will be higher than the prices paid by other investors based on the date and time you make
your purchase, from whom you purchase the notes (e.g., directly from the agent or through a broker or dealer), any related transaction
cost (e.g., any brokerage commission), whether you hold your notes in a brokerage account, a fiduciary or fee-based account or
another type of account and other market factors.
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§
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The notes will not be listed on any securities exchange and secondary trading may be limited.
The notes will not be listed on any securities exchange. Therefore, there may be little or no secondary market for the
notes. MS & Co. may, but is not obligated to, make a market in the notes and, if it once chooses to make a market, may cease
doing so at any time.
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§
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The issuer, its subsidiaries or affiliates may publish research that could affect the market
value of the notes.
The issuer or one or more of its affiliates may, at present or in the future, publish research reports
with respect to movements in interest rates generally or the reference rate specifically. This research is modified from time to
time without notice and may express opinions or provide recommendations that are inconsistent with purchasing or holding the notes.
Any of these activities may affect the market value of the notes.
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Morgan Stanley
Fixed to Floating Rate Notes due 2027
Based on 3-Month USD LIBOR
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§
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The calculation agent, which is a subsidiary of the issuer, will make determinations with
respect to the notes.
Any of these determinations made by the calculation agent may adversely affect the payout to investors.
Moreover, certain determinations made by the calculation agent may require it to exercise discretion and make subjective judgments,
such as with respect to the reference rate. These potentially subjective determinations may adversely affect the payout to you
on the notes. For further information regarding these types of determinations, see “Description of Debt Securities―Base
Rates―LIBOR Debt Securities” and related definitions in the accompanying prospectus.
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Supplemental Information Concerning Plan of Distribution;
Conflicts of Interest
We expect to deliver the notes against payment therefor in New
York, New York on January 30, 2017, which will be the scheduled business day following the date of the pricing of the notes. Under
Rule 15c6-1 of the Exchange Act, trades in the secondary market generally are required to settle in three business days, unless
the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade notes on the date of pricing
or on or prior to the third business day prior to the original issue date will be required to specify alternative settlement arrangements
to prevent a failed settlement.
Morgan Stanley or one of our affiliates will
pay varying discounts and commissions to dealers, including Morgan Stanley Smith Barney LLC (“Morgan Stanley Wealth Management”)
and their financial advisors, of up to $ per note depending on market conditions. The agent may distribute the notes through Morgan
Stanley Wealth Management, as selected dealer, or other dealers, which may include Morgan Stanley & Co. International plc (“MSIP”)
and Bank Morgan Stanley AG. Morgan Stanley Wealth Management, MSIP and Bank Morgan Stanley AG are affiliates of Morgan Stanley.
MS & Co. is our wholly owned subsidiary. 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.
Acceleration Amount in Case of an Event of Default
In case an event of default with respect to the notes shall have
occurred and be continuing, the amount declared due and payable per note upon any acceleration of the notes shall be an amount
in cash equal to the stated principal amount plus accrued and unpaid interest.
Contact Information
Morgan Stanley Wealth Management clients may contact their local
Morgan Stanley branch office or our principal executive offices at 1585 Broadway, New York, New York 10036 (telephone number (866)
477-4776). All other clients may contact their local brokerage representative.
Morgan Stanley
Fixed to Floating Rate Notes due 2027
Based on 3-Month USD LIBOR
Tax Considerations
In the opinion of our counsel, Davis Polk & Wardwell LLP,
the notes will be treated as “variable rate debt instruments” for U.S. federal tax purposes. The notes will be treated
as providing for a single fixed rate followed by a single qualified floating rate (“QFR”), as described in the sections
of the accompanying prospectus supplement called “United States Federal Taxation―Tax Consequences to U.S. Holders―Notes―Floating
Rate Notes―General” and “―Floating Rate Notes that Provide for Multiple Rates.” Under applicable
Treasury Regulations, in order to determine the amount of qualified stated interest (“QSI”) and original issue discount
(“OID”) in respect of the notes, an equivalent fixed rate debt instrument must be constructed. The equivalent fixed
rate debt instrument is constructed in the following manner: (i) first, the initial fixed rate is converted to a QFR that would
preserve the fair market value of the notes, and (ii) second, each QFR (including the QFR determined under (i) above) is converted
to a fixed rate substitute (which will generally be the value of that QFR as of the issue date of the notes). The rules under “United
States Federal Taxation―Tax Consequences to U.S. Holders―Notes―Discount Notes―General” must be applied
to the equivalent fixed rate debt instrument to determine the amounts of QSI and OID on the notes. Under this method, the notes
may be issued with OID.
A U.S. holder is required to include any QSI in income in accordance
with the U.S. holder’s regular method of accounting for U.S. federal income tax purposes. U.S. holders will be required to
include OID in income for U.S. federal income tax purposes as it accrues, in accordance with a constant yield method based on a
compounding of interest. QSI allocable to an accrual period must be increased (or decreased) by the amount, if any, which the interest
actually accrued or paid during an accrual period (including the fixed rate payments made during the initial period) exceeds (or
is less than) the interest assumed to be accrued or paid during the accrual period under the equivalent fixed rate debt instrument.
If you are a non-U.S. holder, please read the section of the
accompanying prospectus supplement called “United States Federal Taxation—Tax Consequences to Non-U.S. Holders.”
Both U.S. and non-U.S. holders should read the section of the
accompanying prospectus supplement entitled “United States Federal Taxation.” The discussion under “United States
Federal Taxation – FATCA Legislation” in the accompanying prospectus supplement will apply to the notes, except that,
under an Internal Revenue Service notice, withholding under FATCA will not apply to payments of gross proceeds (other than any
amount treated as interest) of any disposition of the notes before January 1, 2019.
You should consult your tax adviser regarding all aspects
of the U.S. federal tax consequences of an investment in the notes, as well as 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 prospectus 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 notes.
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